Global Assignments That Work! Survey Results Revealed
Many of our clients were able to join us at our Expatriate Employment Arrangements forums held across Australia in May.
We hosted Peter Talibart, the Head of Norton Rose's global Employment practice who joined us to provide an international perspective to the discussion. Peter is employment counsel to major multinationals and financial institutions on strategic cross-border employment issues. He specialises in all aspects of cross-border employment law, including corporate restructuring, mergers and acquisitions, corporate governance (employment) and TUPE (that is, the European transfer of undertakings Protocol) and outsourcing. Peter sits on both the Employment Panel of the Confederation of British Industry, and is a member of the Global Forum for Cross-Border Human Resource Experts. He was joined by employment and tax experts from Norton Rose Australia.
We are now able to reveal the results of our national client survey Workplace Pulse conducted at the sessions.
Suspension of Australian Contract
75% of Australian employers suspend the Australian contract for the duration of the overseas assignment and intend to resume the Australian contract when the employee returns - with 76% covering repatriation costs back to Australia.
At the forum, Employment Partner Stuart Kollmorgen advised employers to take practical steps to ensure they are putting in place global assignments that work and are understood by employer and employee. He said: "Australian employers cannot contract out of local laws. For instance, if the employment ends while the employee is overseas and the employee does not return to Australia, employers should identify in advance that the termination benefits that will be provided meet local laws."
In the case of Australian employees being transferred on assignment overseas, it is necessary to identify what will happen to the existing Australian employment contract. There are two choices: termination, where the Australian relationship/contract is brought to an end and the parties settle up their obligations to each other at that time; and suspension, where the Australian relationship/contract is not terminated, but its operation is suspended for the duration of the overseas assignment and continues after the overseas assignment ends.
It is unsurprising that most employers opt for the suspension option. However, giving the employee a right of repatriation to Australia and an ongoing contract presents a raft of other issues that may arise. For instance, is annual and long service leave accrued across the period overseas? Also, what happens if no role is available in Australia following the end of the overseas assignment?
If the choice is termination, it needs to be a clean break, as the employer does not want the employee suing back in an Australian Court for what occurred overseas.
Terms and Conditions
Most Australian employees continue to receive and accrue Australian entitlements while overseas (60% receiving Australian annual leave and personal (sick) leave, 58% long service leave, and 56% having superannuation contributions made to their Australian fund).
David Cross, Employment Partner, observed that: "there is the wider issue of brand protection and commercial prudence in the terms of global assignment contracts, which is leading to a convergence of terms across national jurisdictions. Whilst convergence to a set of global employment standards progresses are real – they are taking place at the level of "alternative" or "private" law."
In the meantime, regard must still be had to the law requirements in the place where the employee is going. Australian employers are aware of this. If the employment ends while the employee is overseas and the employee does not return to Australia, 50% know whether the termination benefits that they provide will meet local laws.
Peter Talibart outlined the development of international employment law, and described the United Nations program of rules governing how people are treated in a working environment, which represents the international consensus on minimum best practices and, once ratified by countries, become binding legal obligations.
A concerning statistic is that 49% of Australian employers have no policy on anti-corrupt practices, and 50% of Australian employers do not provide advice to employees seconded or assigned overseas about anti-corruption laws. This can place the employee in a position where they may inadvertently breach Australian law or overseas law.
Further, under the UK Bribery Act, there is a new offence of failing to prevent bribery, and defines bribery as "intending to induce another person to perform improperly one of their functions in their position of trust and responsibility". All employers, particularly those who do business in the UK, should be taking steps to manage this risk, including having a "living" policy and top-to-bottom commitment to anti-corrupt practices, and educating and training employees.
Employment Partner Jason Noakes observed that bribery and corruption is moving into the employment sphere, with many countries introducing laws prohibiting and providing penalties for bribery of local officials. He said: "this has led to the introduction of company policies that prohibit bribery of local officials and employee information sessions and advice to employees seconded or assigned overseas about local anti-corruption laws. While everyone understands about the brown paper bag, there is now a focus on disproportionate corporate entertainment, resulting in the extension of policies to cover gifts and entertainment."
Employers are generally aware (67% indicated awareness) that they may need to pay more to keep Australian resident employees working overseas in the same after-tax position. Employers have been keeping abreast of tax changes, 76% understanding that foreign employment income of most Australian resident taxpayers became taxable in Australia from 1 July 2009.
This change of tax position has led Australian employers to change arrangements, such as making a foreign related company the employer - but has not generally led Australian employers to prefer to hire non-Australian residents to work in the foreign country (only 34% opting for this approach).
Tax Partner, Andrew Spalding noted: "Anecdotal evidence suggests that this change has meant Australian employers are paying more to keep Australian resident employees working overseas in the same after-tax position by readjusting remuneration or contract entitlements so that Australian resident employees working overseas are no worse off." Our survey now provides clear market information to support this.
As far as incoming employees are concerned, Australia still has pulling power. 68% of attendees plan to second or assign overseas-based employees to Australia, mostly in the immediate future (71% in the following 6 months). Leanne Nickels, Employment Partner in Perth, was not surprised that this trend was more pronounced in Western Australia with a higher proportion (86%) of survey respondents in Perth planning to bring overseas based employees to Western Australia.
The most common form of visa (78%) used by our clients remains a Section 457 business migration long stay visa.
How to create Global Assignments That Work!
Employers can create Global Assignments that work by developing practical document tools.
For outgoing employees:
- letter of suspension (or termination) of the Australian contract
- assignment contract that complies with local law - and (where relevant) also identifies Australian terms and conditions that the employer and employee agree will continue across the period overseas - typically, Australian annual leave, personal (sick) leave, and superannuation contributions to an Australian fundtax advice, considering in particular the tax residency position - noting that foreign employment income of most Australian resident taxpayers is taxable in Australia
- anti-bribery and corruption compliance program.
For incoming employees:
- a comprehensive contract for incoming employees that complies with Australian law and deals with issues that may arise in Australia such as appropriate tax treatment and superannuation contributions, consequences of early termination by the employee, repatriation and relocation entitlements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.