Global Employment Laws To Be Aware Of: A Guide For Startups

Employment contracts

Employment contracts are non-negotiable for all workplaces, but ensuring they are compliant with local laws is particularly important. Some countries specify the inclusion of particular clauses, they may have unique terms, or there could be formatting requirements to follow — and businesses need to ensure that the contracts that they produce are fully adherent to these types of regional regulations. Take a look at some examples below.

Mandatory clauses

Different jurisdictions require specific clauses to be included in employment contracts. For instance, probation periods may vary significantly — some countries may not allow probationary periods at all, while others may have a limit on their duration. Additionally, notice periods can differ in some regions, and occasionally, they might not be specified in an employment contract.

One notable example is that if you’re hiring in the US, employees don’t often have to give advance warning to their employer that they’re planning on leaving their role, unless it is subject to any legal restrictions. When hiring in the UK, many notice periods run on the duration that the employee has spent working in the position, adding successive weeks for longer periods of service. Portugal and Poland both adopt a similar approach to the UK, but in India, there’s a minimum notice period of one month as per the Industrial Disputes Act of 1947.

At-will employment

In some countries, such as the US, at-will employment allows employers to terminate employees without cause. Conversely, in many European countries, employees have access to stronger protections against dismissal, necessitating clear justifications for terminations.

Language and format

Often, contracts must be written in the local language and adhere to specific formatting guidelines to be legally enforceable. This is another crucial factor that requires careful consideration, and it’s also part of a broader localization strategy that businesses must account for. Producing contracts in the local language (or dual-language) is a necessity if you will be hiring employees in Egypt, Mali, Nigeria, Columbia or Ukraine. In other regions, there’s no requirement for the contract or amendments to be made in the local language, as long as both parties understand what is being outlined.

If an employment contract isn’t produced in the local language despite regulations, one of the main consequences is that it can’t be produced as evidence in a court of law.

Employee benefits

Many countries take different approaches to employee benefits packages, and often socio-economic and cultural factors dictate what is and isn’t catered to. Providing employee benefits is a key part of attracting talent, but they need to account for this type of diversity too.

Mandatory benefits

Some countries mandate benefits into their employment laws such as healthcare and insurance, paid leave and parental leave. For instance, many European nations have robust social welfare systems that require employers to contribute to health insurance and pension schemes, but in other parts of the world this isn’t the case.

Your global benefits program needs to meet minimum standards in the territory that you’re hiring in, so understanding mandatory requirements is a must.

Voluntary benefits

Going beyond mandatory benefits, startups could also consider offering voluntary benefits. This tends to be more focused on wellness and accessibility; some examples include childcare schemes, access to mental health support, discounted/free gym memberships or professional development opportunities. Voluntary benefits can be an asset to overseas employment where startups may be targeting a highly competitive job market, and they serve to build a sense of culture within dispersed workforces.

Cultural expectations

Understanding cultural norms regarding work-life balance and employee expectations is vital. For example, in some countries, employees may prioritise vacation days over monetary bonuses, while in others, the reverse may be true.

The ability of your startup to resonate with international talent is dependent on the localization efforts that you make, so familiarising yourself with this is fundamental. Look at international and cultural holidays, working practices and ethical standards in the territory that you’re hiring in, and find ways to ensure your offering caters to this.

Taxation

Navigating personal tax for both employees and employers can be a complex issue, as there are different global standards and obligations for employee tax. The percentage of income tax paid by employees varies around the world, and all employers have to comply with this.

Payroll taxes

Different countries have varying regulations regarding payroll taxes, which can include social security contributions, unemployment insurance and local taxes. Startups must understand the specific rates and reporting requirements for each jurisdiction where they operate.

Tax treaties

Many countries have tax treaties that can impact the taxation of cross-border employees; for example, the UK enforces a double tax (where an employee/business is taxed on the same income or transaction in more than one jurisdiction) treaty with:

– France – Italy – Cyprus – Belgium – Canada – The United States – Malta – Spain – Ireland – Portugal

Understanding these treaties can help to avoid double taxation, and ensure compliance with both local and international tax laws.

Employee vs contractor status

Misclassifying employees as independent contractors can have some hefty legal and financial consequences. Each country has its criteria for determining employment status, and it’s crucial to understand these differences to mitigate risks. In the UK, IR35 is an example of this and many international governments use a similar premise to assess individuals and their respective employment status to determine their tax classification.