An increasing number of Australian companies are sending employees on overseas secondments and assignments, often within the Asia-Pacific region. Cross-border employment raises a number of legal issues that need to be properly addressed in order to ensure that an international secondment is a success for all stakeholders.
Drawing on Norton Rose Australia's expertise in providing employment, regulatory and tax advice for employers with an international workforce, Stuart Kollmorgen, Employment Law Partner, has identified the key employment issues that arise for HR professionals tasked with arranging and managing an international assignment as:
- contract conditions
- taxation, and
- anti-corrupt practices.
Some key contractual issues that should be addressed up-front are:
- What happens to the employee's Australian employment contract while the assignment is on foot – is termination or suspension more appropriate?
- Will Australian leave entitlements continue to accrue in respect of service performed in a foreign country?
- Does the employer have a right to end the assignment early and what is an appropriate notice of termination of the arrangement - where, for example, a short notice period will adversely affect the employee's immediate family who may also have arrangements in place for work and schooling in the host country?
- What will happen if the employee returns to Australia after an assignment ends – is the business prepared to guarantee a position for the employee?
- What financial benefits will be provided to the employee - typically including periodic flights for home visits, relocation costs and Living Away From Home Allowances?
- Do workplace policies relating to matters such as anti-discrimination and occupational health and safety obligations continue to apply to the employee during the assignment?
- Do the assignment arrangements (including termination benefits), meet local laws?
Some businesses do not formalise the assignment arrangement, which can lead to confusion and dispute. This is particularly the case when the employer does not establish the right to end the assignment prematurely or where inadequate procedures are in place for managing employees who do not perform as expected.
Taxation tends to be a significant issue in respect of a long term assignment beyond six months. As foreign employment income earned by most Australian resident tax payers is taxable under the Australian tax system, an employee on assignment may be faced with double taxation where they are also required to pay local tax on their employment income. Employers therefore need to obtain expert advice on matters such as:
- local tax laws
- double tax arrangements, and
- tax effective corporate arrangements.
Often employers do not realise that their own obligations in relation to payroll tax and workers' compensation may change when they send an employee on an overseas assignment. Factors such as whether the employee's wages are paid into an Australian or foreign bank account and the duration of the assignment will be relevant to determining whether an employer is required to make these contributions in respect of the assignee's employment. On the other hand, liability to pay fringe benefits tax and superannuation will hinge on whether the employee is considered to remain an Australian resident for tax purposes. Again, expert advice is crucial to ensuring that your company is paying the right taxes.
Anti corrupt practices
This issue is often overlooked by both parties. There is a growing list of Asia-Pacific countries that have recently introduced anti-bribery laws in relation to local officials and statutes with wider reach such as US Foreign Corrupt Practices, UK Anti-Bribery and/or Australian Criminal Code may apply. The UK Bribery Act has extra territorial effect. The offence of failing to prevent bribery applies to conduct outside the UK for an organisation that carries on a business, or part of a business, within the UK. This means that an Australian company can commit the offence of failing to implement "adequate procedures" to stop corruption in relation to the systems it has in place in a foreign country. The conduct itself does not need to be in any way connected with the UK.
Actively educating employees about anti-corruption laws in the assignment destination and introducing company policies that prohibit such practices will assist assigned employees to understand the limits of "facilitation payments" and to avoid unintentionally breaching Australian or local anti-bribery laws with potentially disastrous consequences. Norton Rose's Business Ethics and Anti-Corruption Group is able to assist you in assessing all of these matters and can provide detailed advice in relation to the potential implications of the Act upon your organisation. The group has expertise both in Australia and in other parts of the globe. For more information on the group click here.
An overseas assignment may benefit both the employee and the business long after the assignment ends. It is important that the issues canvassed here are considered and addressed if a business is to maximise the benefits and avoid common pitfalls.
It is essential that good advice is sought early on particularly for those businesses that want to establish secondment programs. The Norton Rose Group employment team can assist, by providing a point of contact in Australia with access to our offices and affiliates through the Asia-Pacific region.
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.