This Webcast Will Begin Shortly

(1)

This Webcast Will Begin Shortly

If you have any technical problems with the Webcast or

the streaming audio, please contact us via email at:

[email protected]

Thank You!

(2)

Seconding employees to Europe – The Essentials

18 October 2011

Presented By:

Sophie Maes

Claeys & Engels, Ius Laboris Belgium

Valeria Morosini

Toffoletto e Soci, Ius Laboris Italy

Liz Kilcoyne

(3)

Let’s meet Tom Frey

• HR manager of US multinational company with

several EU subsidiaries

• Group carrying out worldwide restructuring program

• US employees from US company (“Home

employer”) to be sent to EU subsidiaries (“Host

country”) to help implement restructuring locally

• Assignment periods: between 2 months and 2 years

(6)

How to structure the assignment?

6

Secondment arrangement Expatriation / transfer to local subsidiary

What is this? Employee remains in service of US company under US employment contract

Employee enters into service of local subsidiary under local employment contract

Advantages US Social Security if Social Security Agreement exists

US employment law protection No dismissal in case of repatriation

Disadvantages/ Risks

Conditions of Social Security Agreement to be met

Mandatory minimum local laws

Risk of de facto employment contract with Host country

More expensive local Social Security More protective and less flexible local employment laws

Risk of dismissal compensation in case of repatriation

(7)

EU social security charges

- Annual gross salary of EUR 100,000

7

Employer contribution Employee contribution Total Charges

Belgium 35,000 13,070 48,070

Cyprus 10,800 6,800 17,600

Czech Republic 24,720 8,000 32,720

France 45,810 20,439 66,249

Germany 11,644 11,243 22,887

Ireland 10,750 3,735 14,485

Italy 33,000 9,190 42,190

Luxembourg 13,790 12,374 26,166

Poland 18,480 13,710 32,190

Portugal 23,750 11,000 34,750

Spain 12,792 2,461 15,252

The Netherlands 7,320 13,006 20,326

(8)

Conclusion:

• Secondment arrangement is preferred option in our

case study

• Checklist to prepare secondment to Europe

• Action points to reduce risks

(9)

Checklist – key issues

(1) Immigration

•  US nationals need permission to work in each EU state

–  Work permits are still a national matter so separate work permit needed for each EU state, conditions vary from country to country

•  US nationals are allowed to enter the Schengen Area for maximum

90 days in any 6 months period with a US passport - other nationalities may need Schengen visa

–  [Schengen Area = Austria, Belgium, Denmark, Finland, France, Germany,

Iceland, Italy, Greece, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Estonia, Czech Republic, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia and Switzerland ]

•  In some EU states, for stays of more than 3 months a residence permit is needed (in other EU countries residence permit included in the "work visa"; in

(10)

Checklist - key issues

(2) Social Security

•  Check if Social Security Agreement with relevant country

•  Apply for certificate of coverage

(3) Taxes

•  Employees seconded for more than 183 days, earnings likely

to be taxable in the Host country

•  In some countries special tax regimes for expatriates exist (for

example Belgium, Cyprus, Denmark, Spain, the Netherlands,

…)

(12)

Checklist - key issues

(3) Taxes

Significant differences in level of income tax on salary in different countries

Example: resident with spouse and two dependent children, taxes due (EUR) on annual gross income of EUR 100,000 (2011 rates)

12

Belgium Cyprus Czech Republic

Denmark France Germany Ireland

33,954 20,160 15,827 52,000 11,200 22,159 26,462

Italy Lux Poland Portugal Spain The

Netherlands UK

(13)

Checklist - key issues

(4) Beware prohibited lease of employees creating employment contract with local subsidiary

In some countries the fact that employee receives instructions from

the local subsidiary may trigger prohibited lease of personnel

creating employment contract with local subsidiary.

[ Solution to reduce risk: service level agreement or a tripartite

intra-group secondment agreement (for example Belgium, France, Portugal, Italy)

(14)

Checklist - key issues

(5) Jurisdiction and applicable law Jurisdiction

•  Can employee sue Home employer before employment

tribunals/courts of Host country?

[  Yes, if employee is considered habitually working in Host

country Applicable law

•  Can US employee claim Host country employment protection?

[ Yes, if employee is considered habitually working in

Host country s/he may also claim the employment laws of the Host country

(15)

15

Checklist - key issues

(5) Jurisdiction and applicable law

When is employee considered habitually working in the Host country?

•  Country where “essential part of duties” performed

•  3 principles

Ä habitual vs temporary => (global duration of employment)

Ä intention of parties => repatriation clause / return guarantee

Ä more closely connected to => social security, tax

equalization, place of signature, language in employment contract, currency and place of salary payment, pension plan, benefit plans, etc.

To consider when organizing the

(16)

Checklist – key issues

(4) Applicable law

Even if the Host country has not become habitual place of work

some mandatory minimum local employment laws may still

apply from the first day of the secondment.

Are usually part of the core rights:

–  local minimum pay rates

–  local maximum working hours and minimum rest periods

–  local minimum paid annual leave

–  local public holidays (but not in the Netherlands and UK)

–  local discrimination laws

(18)

Checklist - key issues

(5) Applicable law

–  local health & safety rules

–  local rules on hiring out of workers, in particular the

supply of worker by temporary employment undertakings (but not in Denmark, Finland, Norway, Ireland, UK, Italy)

In some countries also:

–  local dismissal rules (for example Germany, Greece,

Ireland, Norway, Poland and Portugal)

–  local rules on employment documents (Austria, Belgium,

Finland, Germany, Greece, Ireland, Luxemburg, Norway and the UK)

(19)

Action points – before, during and

ending secondment

19

Before secondment: Well-drafted "assignment letter" Letterhead of Home employer

Limited period "temporary"

Repatriation and return guarantee

Maintenance of Home employer employment contract Authority of Home employer

Choice of law

Home country pension plan/benefits plan/tax equalization/currency

Signature of service level agreement or tripartite secondment agreement (some EU countries) Execution of assignment letter in Home country

No double benefits

No acquired rights (expat allowances) Right to early termination

(20)

Action points – before, during and

ending secondment

20

During secondment

Decisions on salary, bonuses, career developments, appraisals, disciplinary issues, dismissal etc by Home employer ONLY

To be communicated on Home employer letterhead and signed by Home employer

Ending secondment

Repatriation by Home employer ONLY

Repatriation in similar or equivalent position with same salary and responsibilities Have employee sign repatriation letter for approval

(21)

Conclusion

•  Prepare assignment in advance

•  Put necessary contractual documents in place to minimise the

risk of the Host country employment laws applying and an

employment contract existing between the employee and Host company (relevant in some EU countries only)

•  Respect secondment arrangement during and when ending

secondment

(22)

Sophie Maes

Lawyer – Partner

[email protected]

Claeys & Engels

Ius Laboris Belgium

Lawyers Vorstlaan 280

1160 Brussels - Belgium Tel. +32 2 761 46 08 Fax +32 2 761 46 70

[email protected] www.claeysengels.be

www.iuslaboris.com

Valeria Morosini

Lawyer - Partner

[email protected]

Toffoletto e Soci

Ius Laboris Italy

Lawyers

Via Rovello, 12 20122 Milano - Italy Tel. +39 02 72 14 41 Fax +39 02 72 14 45 00

[email protected] www.toffoletto.it

www.iuslaboris.com

22

Liz Kilcoyne

Lawyer - Senior Associate

[email protected]

Lewis Silkin LLP

Ius Laboris United Kingdom

Lawyers

5 Chancery Lane Clifford’s Inn

London EC4A 1BL – United Kingdom Tel. +44 20 7074 8000

Fax +44 20 7864 1200

[email protected] www.lewissilkin.com

www.iuslaboris.com

(23)

Thank you for attending another presentation from

ACC’s Desktop Learning Webcasts

Please be sure to complete the evaluation form for this program as your comments and ideas are helpful in planning future programs. If you have questions about this or future webcasts, please contact

ACC at webcast@acc.com

This and other ACC webcasts have been recorded and are available, for one year after the presentation date, as archived webcasts at

This Webcast Will Begin Shortly