Terminating Jobs Overseas? You could be exposed to hefty severance liabilities, if you don’t plan ahead. — VYoma Nair Terminating jobs is always a difficult situation but when you dismissal is considered a misuse of the employer’s right to have to do it overseas, the process gets far trickier. The con- dismiss and void. cept of “employment at will” is unique to the U.S. and world- wide there are laws and procedures, which if not adhered to, Brazil could lead to substantial damages awarded in favor of the Brazilian law provides significant benefits to the employee employee. Knowing the fine print can help companies plan on termination of employment. The amounts payable depend ahead and save on the often heavy severance costs. on whether or not the employer has a “just-cause” for termi- nation. “Just-cause” is defined in the legislation. Netherlands Dutch rules on termination of employees are unique in All employees in Brazil participate in the FGTS – a Fund Europe in imposing a priori control over dismissals. Effec- Dependent on Length of Service. Employers are required to tively, this means that any employer wanting to dismiss an contribute 8% of the employee’s monthly salary to the fund. employee who is on an open-ended contract must have the If “just-cause” is not established, the employer must pay a permission of the Central Organization of Work and Income penalty of 40% of the accumulated balance in the fund and (CWI) or a rescission of the contract by a judge. Even where a an inflation adjustment. An additional 10% fine may be levied judge agrees to the rescission, severance pay is due. by the Courts. For an employee over the age of 50, this could amount to China more than two times his or her annual salary. Severance pay is due for termination (amongst other rea- sons) caused by restructuring or difficulties in business Japan operations. This is one of the main causes for employee ter- Theoretically, under Japanese civil law, it is not necessary to minations today. The payments, however, are not punitive, have a valid reason for a dismissal to be justified by law. An severance payment being one month’s salary for each year employer may dismiss workers at any time, provided notice of service, with half a month’s salary for each partial year. requirements are adhered to. However, companies should However, if the employee earns three times or more than the check as any collective agreements in force often list rea- average monthly wage of the region, then the compensation sons, which constitute grounds for dismissal. is capped at three times the average monthly wage up to a maximum of 12 months. In addition, Labor Standards Law (LSL) has the concept of a dismissal lacking “objectively rational grounds” and For more information on a Workforce Reduction Assess- not being “appropriate in general societal terms”. If the ment or Workforce Retention Assessment, please visit: employee can show that it falls into these categories, the www.globaloutsourceexperts.com Protecting You Overseas with an Integrated Solution for HR, Finance, Tax and Legal. Experience the Nair & Co. Difference. Visit www.nair-co.com or Call (239) 948 9820 (EST-South) | (781) 239 8135 (EST-North) | (919) 996 9859 (EST-East) | (408) 515 6887 (PST) Nair & Co. provides businesses an integrated solution geared to making your company’s thrust to expanding business overseas less risky, stress free and more strategic in the finance, tax, HR, compliance and legal arenas. Specialized in working with the unique challenges of U.S.-based technology companies, Nair & Co. has headquarters in the U.K. and offices in India, China, U.S.A. and Japan and acts for nearly 700 foreign operations in over 40 countries. Nair & Co. employs highly qualified international specialists as your one-point-of-contact client service director to support your international registration, tax, accounting, compliance, HR and payroll needs. Our unrivalled knowledge base, attention to detail and superior work ethics protect your company’s operations more effectively and save you time and money. For more information, including awards won, visit our web site at www.nair-co.com.