International labor

Scope

Companies might hire workers from other countries, or send workers to conduct business internationally.

Regulatory citations

• None

Key definitions

• Expatriate: Workers that are sent on an international assignment.
• Local national: Employees that a host company hires abroad for jobs in the abroad country.

Summary of requirements

Types of international workers. International workers can be grouped into two broad categories:

1. Expatriates. An example of an expatriate would be a corporate safety manager with a U.S. company who primarily works at the corporate headquarters in the U.S. However, when a new facility is opened in another country, the safety manager goes to the other company to oversee startup. This assignment could last for months at a time or could be one, long extended period of time.
2. Local nationals. As opposed to expatriates, local nationals are employees a host company hires abroad for jobs in the abroad country. A Spanish national hired to work in Madrid at an American-owned hotel is an example of a local national.

Companies need to be cautious when employing individuals from other countries. Just because that country may not have laws prohibiting certain practices, U.S. laws may still play a role.

Compensation. Expatriates are often the focus of compensation issues. Companies sometimes try to develop company-wide pay scales, regardless of location. This can lead to problems, as the cost of living and economy varies from country to country.

There are various approaches to solving this problem. Some include:

• Employer pays difference between home country and work country costs,
• Payments for housing to the host country are standardized,
• Employer offers several options that expatriate can choose from, or
• Expatriates are paid in currency of home and host country.

Where expatriates are concerned, many companies choose to provide higher compensation to the expatriates living in another country, even though they may be employed at a job title similar to a worker receiving lower compensation. This can create low morale in the home workplace and needs to be addressed. This also can create problems when the worker repatriates to the home country; the home salary needs to stay competitive.

Benefits. Another area where international work creates complex issues is benefits. Again, different countries have different histories and expectations concerning benefits. For instance, in the U.S. there is a sizeable social security program; in some other countries there is hardly any coverage. In others, coverage is more extensive. Other benefit areas that may create differences include:

• Retirement plans — Many countries have local laws mandating retirement benefits. . .and age.
• Health care — Many countries have government-funded or supported health care, as opposed to private health care.
• Vacations — Some countries mandate vacations, in others this is voluntary.
• Holidays — National holidays will not be the same in all countries.

International laws. There are many laws influencing international labor. Not unlike the American system of federal, state, and local laws, international law has many facets:

• The international country’s law
• Regional law (the European Union for instance)
• The U.S. law (even though companies operate in France, they may still have responsibilities under U.S. law as well.)

Safety and security. Safety and security is a major concern where international work is involved. Obviously, the risk varies depending on the country. So, it is wise to perform a risk assessment before sending workers to another country.

And, security isn’t the only concern. Safety from the standpoint of disease, immunization, etc., must also be considered. When sending a worker to another country (or when they return home), make certain all health issues are addressed.

Family. When workers are sent to another country, the strain on family is often the greatest challenge. Particularly, if it is a long-term assignment, and the worker’s family accompanies him/her to the foreign country, it is crucial that you address their needs. From an HR standpoint, this just makes it easier for the expatriate to perform efficiently and at the highest level.

Immigration. If your company is planning to send workers to another country, or accept workers from another country, make sure you know all the rules for entering, working in, and exiting the country. For instance, in the U.S., employers may hire only persons who may legally work in the U.S., i.e., citizens and nationals of the U.S. and aliens authorized to work in the U.S. The employer must:

• Verify the identity and employment eligibility of anyone to be hired, which includes completing the Employment Eligibility Verification Form (I-9).
• Keep each I-9 on file for at least three years, or one year after employment ends, whichever is longer.

Communication. The longer a worker is in a foreign country, the more important it is for him/her to receive communication from home, both general news and work-related. This communication is becoming increasingly easier with e-mail and the Internet. Be aware, however, that all countries are not “wired” the same, so plan ahead for communication needs when sending an employee to work in another country.

Also, communication can cause problems where local nationals are concerned. Unless you have a management staff onsite who is well-versed on the local country’s culture, there could be difficulties communicating with local nationals.

Knowledge. Naturally, you want to make sure that all workers have the necessary knowledge and skill to work in whatever country they are in. However, you also want to make sure you capture the knowledge and skills these workers acquire while in other countries. This way, you don’t have to reinvent the wheel each time you send a worker to a particular country.

Cost-savings for expatriates. It’s probably no surprise that companies who send workers to other countries to perform work assignments do so at a considerable cost. However, there are some ways to make the assignment less costly:

• Have the worker contribute toward the cost of housing. It is not unreasonable to ask the worker to contribute what a normal worker would pay for housing if they weren’t on the expatriate assignment.
• Eliminate excessive bonus salary. It’s fine to pay international workers more money, particularly if they are in a “hardship” assignment (a security or safety risk). However, it generally isn’t necessary to pay an enormous bonus just for the mere fact the worker is working in another country.
• Pay housing costs directly. This may help you avoid having the cost enter the tax cycle (which means you would have to make up the cost to the employee). Many employers find it useful to charge a flat housing fee to the worker to offset the costs.
• Check on paying for storage of household items rather than shipping them to the worker in another country.
• Check industry norms for expatriate work. This data changes constantly, so keep up to speed. Check cost-of-living indexes frequently also.
• Use shorter assignments where possible. These are generally cheaper than longer-term assignments. Keeping an assignment under 12 months may help with tax concerns. Also, shorter assignments usually eliminate peripheral costs, such as moving the worker’s family.
• Choose the right person for expatriate work. Not everyone will be suited for work in another country. While there may be no set-in-stone formula for determining who will thrive in an expatriate role, you should employ some screening mechanism. And, above all, remind workers that while it may seem glamorous to work in another country, it is not a vacation; it is work.

Conclusions. It is impossible to identify all the scenarios and issues a company will encounter when dealing with international labor. Each country and each work arrangement will have specific rules and issues. So, if you have an international work situation, or plan to enter into such a situation, it is best to check the local laws of the other country, and the laws in your home country, and come up with a plan of action.

And, remember, you should ask yourself the same questions about international law as you do about U.S. and state law:

• Are job descriptions required?
• What benefits are required?
• Are there termination laws?
• Are there tax incentives?
• Are there child labor considerations?
• Are certain jobs restricted?