It may seem surprising that even though the UK economy remains uncertain and continues to be challenging for companies, the number of international assignments is increasing. Indeed, Ernst & Young’s survey1, in which 520 global companies participated, predicts that during 2013-14, short-term assignments will increase by 20%, and long-term assignments by 11%. But it is in fact the economic climate that is fuelling an increase in assignments, as companies are increasingly directing new investment and talent in growth and emerging markets, and expansion into new markets is now the primary reason for cross-border mobility.
Overseas assignments raise many legal and practical issues, and assignments to emerging markets raise new challenges. This article looks at the key UK employment law issues as well as highlighting some of the practical issues which can arise with international assignments in high risk jurisdictions and emerging markets.
Planning ahead and thinking about what could go wrong is the key to getting the contractual arrangements right and reducing the risk of having to face unexpected liabilities if things do go wrong.
At the outset, you will need to check the employee’s contract to establish whether you have a contractual right to assign the employee away from their normal place of work - and if so, whether the ‘mobility clause’ covers the location where the employee will be assigned. The job description and ‘duties clause’ must also be wide enough to cover the work the assignee will be required to do. But even if there is a contractual right to assign the employee, you must act reasonably and in accordance with the implied term of trust and confidence, which means consulting with the employee about the proposed assignment in reasonable time.
The employer and the host entity can agree who will bear which costs under the assignment, including liabilities to the assignee, and liabilities which arise from the assignee’s acts or omissions. This, along with any indemnities and provision for how the assignee will be managed during the assignment period, should be recorded in an assignment agreement. When agreeing these terms, you should bear in mind that assignees may be entitled to bring an unfair dismissal and/ or a discrimination claim, provided they can show that they have a strong connection with Great Britain.
There are various ex pat arrangements available for the assignee – whether it is appropriate to use a secondment agreement or a local employment contract, or for the assignee to be employed under more than one contract, will depend on the particular situation. Regardless of what agreement you use, some of the key issues you will need to consider are:
- Does the employee need immigration approval for the assignment? If so, the assignment agreement should be conditional upon obtaining and retaining such approval.
- Who will manage the employee during the assignment, in relation to the supervision of work, approving holidays, carrying out appraisals and disciplinary procedures?
- Should the employee be offered any further benefits (e.g. contributions to relocation costs, tax equalisation payments, housing costs, international medical cover or other insurance cover)?
- Will you continue to make all contractual payments to the employee during the assignment (e.g. commission, expenses, relocation expenses and bonus payments) - and in what currency will the employee be paid?
- Will the employee still be within the scope of automatic enrolment into a pension scheme?
- If the assignment is to a country outside the European Economic Area, do you need additional data protection provisions?
- Are there any local law requirements you need to provide for? We would advise taking local advice in each case.
- Do you need to include any additional protection in terms of confidentiality, restrictive covenants or ownership of intellectual property created during the assignment? You will need to check that these are enforceable under local laws and decide whether the host entity needs direct protection.
- How long will the assignment last – and who can terminate the agreement, and in what circumstances?
High risk jurisdictions
High risk jurisdictions present particular challenges. Employers owe a legal duty to their UK employees to ensure, so far as reasonably practicable, their health, safety and welfare. If employers are in breach of that duty, this can have significant implications because there are both civil and criminal sanctions, and directors potentially face prison sentences, disqualification and fines. In addition, corporations, directors and managers risk significant reputational damage if they are found to have breached their duty of care to employees.
Sending employees to work in a dangerous place will potentially put their health and safety at risk, so you must carry out a formal written risk assessment of the proposed assignment. But what can you do if the risk assessment concludes that there is not a health and safety risk, and yet the employee refuses to go on the assignment? You cannot force an employee to put themselves in a situation which they reasonably believe is dangerous - and dismissing an employee who refuses to go on an assignment to a high risk jurisdiction would almost certainly amount to an unfair dismissal, absent an irrational or unreasonable fear of the risks of going there. While an employee’s genuine concern about safety risks is likely to be considered reasonable, if their concern is unreasonable, this would be a disciplinary issue.
Additional steps you should take to comply with your health and safety obligations include providing comprehensive insurance cover for the assignee, giving them a thorough country briefing at the beginning of their assignment, and carrying out ongoing monitoring of the political situation and keeping the assignee informed of any developing risks. And, if there is an emergency, you must provide adequate support and assistance to the assignee and their family.
Assignments to emerging markets raise different challenges for organisations and assignees. In addition to the usual issues, assignees often face difficult security issues, less developed housing and schools, as well as cultural, political and religious differences which they need to attune to. Potential assignees should be briefed about local laws and customs at an early stage, so they can make an informed decision about whether, in light of their religious beliefs and lifestyle, they want to take up a particular assignment. These briefings should be given to every potential assignee and not just those with personal characteristics (such as a particular religious belief) which may make the assignment difficult. Not offering an assignment to an employee because of a protected characteristic (such as disability, religion or belief, gender reassignment or sexual orientation) could amount to discrimination, so careful management of the selection process is key.
An issue which can be difficult to manage is the extent to which you need to accommodate the sensitivities of the host country employees. Management issues will arise if a senior manager with no background in a particular country is parachuted in, without first being trained in cultural issues, customs, and management style. The position is more complex where a manager has direct reports in multiple countries which have different laws and cultures. For them, the training should involve up-skilling in the differing legal regimes and customs.
Although initially the assignee may think that the benefits package seems very attractive, they may not think so once they have taken into account the costs of relocating and living overseas, and more significantly, the personal cost of living abroad in terms of the impact this has on their personal life. Assignees find it difficult being away from their friends and family for an extended period of time but often the most significant issue for them is dealing with the impact the assignment has on their partner, in terms of what they have had to give up: their career and their support network of family and friends. Personal issues are the principal reason for failed assignments so it is vital that organisations provide continued support to assignees and their partners. According to the E&Y survey, for more than 1 in 12 companies, at least 11% of their international assignees returned before the end of their assignments, at huge cost to these organisations.
Although with international assignments, and particularly those in emerging markets or in high risk areas, there will inevitably be a strong focus on risk management, it is easy to get to a position where you are managing assignments purely on a risk management basis, rather than looking at how you can make the assignment a positive experience for the assignee and the organisation. There are significant benefits to be gained from these assignments but to achieve this, and to reduce the risk of failed assignments, the personal angle must not be overlooked.