Global HR Hot Topic - May 2013: Individual Employment Dismissal Obligations Outside the US

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Challenge:

Overseas, dismissing an individual employee gets complex and is heavily regulated. Dismissal mandates under foreign law tend to fall into three broad categories: dismissal procedures, pre-termination notice and severance pay/wrongful termination awards.

US employers accustomed to American-style employment-at-will face a significant challenge when dismissing an overseas employee who enjoys generous protections under employee-friendly foreign legal regimes. Before “pulling the trigger” on a dismissal abroad, an employer needs to understand and comply with a number of specific dismissal obligations under foreign law. Here we inventory the seven types of laws that overseas jurisdictions impose on employers dismissing individual employees. We group these types of laws into three broad categories: dismissal procedures, pre-termination notice, and severance pay/wrongful termination awards.

But even before unpacking what these various foreign dismissal obligations are, a US-based multinational that needs to dismiss an employee abroad often first asks how much the layoff will cost. Laws in most countries impose rules on no-cause firings that force employers to pay some sort of severance pay. How much it costs to dismiss a given employee abroad tends to link to the employee’s final pay rate and length of service, and no-cause termination pay outside the US tends to run highest where pay rates are highest. Severance costs are most expensive where targeted staff is long-tenured and high-compensated; severance costs are cheapest where an employee is short-tenured and low-paid. But there are exceptions: A few high-wage jurisdictions such as Singapore and Switzerland impose relatively light statutory severance pay obligations. And occasionally a short tenured low-paid overseas employee makes out an expensive dismissal claim under a theory like “moral harassment.”

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