Challenge: Opening a company office or operation in a new country can expose a bewildering cluster of employment law issues.


Launching business operations in a new country is daunting, because of all the unknown aspects of local human resources law. This is a checklist of the questions to ask. (Answers, of course, vary by target jurisdiction.) The list is broken down into the six stages of starting up foreign operations — (1) Business structure and contracting; (2) Benefits/compensation; (3) Expatriates; and (4) Local-hire issues (covered in January's and February's Global HR Hot Topic) and, addressed here, (5) Written employment contracts and (6) HR administration.


Pointer: Tackle human resources matters in the new country head-on, using a checklist.


Stage 5: Written employment contracts

  • Contractual document: Laws in many countries often require signing some employment contract or agreed-offer letter or, at least, giving employees written "statements of employment terms and conditions." Even where not mandated, written employment contracts outside the US can protect employers by disproving employees' claims about the oral employment arrangement. In many countries, a broad employment contract can also play the role that employee handbooks play in the US. Rather than transplant a US job offer form letter with a US employment-at-will clause, use an organic in-country form contract, or modify a US form appropriately. A new in-country start-up should add in a right to assign the relationship to an entity incorporated later (in case of any corporate shuffle), plus a right to change the place of work (in case of an office move).
  • Probation: Employee probation periods, where available, can offer employers flexibility during a short period from rigid restrictions against firing. But understand the limits: In Japan, for example, even a probationary employee is not employed at-will.
  • Fixed-term: Fixed-term employment contracts, rolled over for successive terms as necessary, can also offer flexibility. But most countries restrict serial roll over of consecutive fixed-term contracts. China has complex new rules in this regard.
  • Job titles: Analogous to the US-law distinction between "exempt" and "nonexempt" employees, employment rights outside the US can tie into job position. Bestowing a title like "Managing Director" can affect whether some host-country employment laws, agency powers and "sectoral" collective agreements reach an employee. Account for this.
  • Restrictive covenants: If non-compete/confidentiality/non-solicit restrictions are important, get a locally-enforceable clause. Never transplant a restrictive covenant clause from abroad, because enforceability turns on national law. Many countries require paying extra consideration in exchange for non-compete obligations.
  • Employee inventions: Japan, Argentina and some other countries grant generous rights to employees who develop and register intellectual property — even while working on the clock. Ensure employment contracts quantify and contain any such exposure.
  • Mandatory retirement clause: In most countries — even many with age-discrimination laws — mandatory retirement remains legal and widespread. (In October 2007, the EU Court of Justice affirmed that forced retirement does not violate the EU age-discrimination prohibition in Directive 2000/78.) If mandatory retirement makes business sense for a new in-country operation and is consistent with the code of conduct, be sure to build any retirement mandate into individual employment contracts, from the beginning.

Stage 6: HR administration

  • Handbook/policies: Bringing employees on board in a new country requires having an HR structure in place, which means policies. A US-style employee handbook is often a bad substitute for organic in-country policies. Instead, issue locally-required HR mandates, such as the "work rules" of Japan and Korea. Use any locally advisable HR forms, such as the UK's overtime opt-out.
  • Translations: English is not quite the lingua franca it may seem to be. Laws in some jurisdictions mandate that HR communications be in the local language. Even where there are no such laws, local-language HR communications promote comprehension and enforceability.
  • Compliance: Comply with host-country labor/employment laws affecting "on-boarding" employees, such as mandates as to hours; breaks; holidays/vacations; weekend closings; paid days off; parental leave. In Europe, it is illegal to withhold benefits from part timers. If the new start-up operation has no in-country office as yet, learn applicable laws regarding working at home.
  • Employee representatives: US "union avoidance" strategies are rarely exportable. Overseas, worker representatives (trade unions, works councils) are ubiquitous and "sectoral" collective agreements often reach even non-signatory employers. In countries like Mexico, it may actually make sense to invite in an acceptable union. Tailor a collective employee strategy.
  • Data: Data laws in many places restrict transmitting employee data out of country, even to an employer's own headquarters. Implement compliant practices, such as European Union "model contractual clauses."
  • In-country insights: The best "ounce of prevention" is learning from the mistakes of those who went in before you. When gathering answers to the questions on this checklist, ask in-country contacts a catch-all question: "Which HR and compliance mistakes do you most often see made by companies coming in from abroad?"