International Employment and Operational Considerations Transcription
Tallin: Hello everyone, welcome to today’s webinar – Covid-19: International Employment and Operational Considerations. My name is Tallin Johnson and I am going to be hosting the webinar on behalf of Global Upside and just to go over a few housekeeping items before we get started with the actual webinar.
We are recording the webinar, and we will be providing both the recording and a copy of the slide deck to you upon completion of the webinar via email. And we do want to encourage you to send us any questions that you have throughout the webinar via our chat window at any time that you have. Our panelists will work to answer any questions that you have during our q&a which will be at the end of the webinar.
So, again, feel free to send any questions that you have. And additionally, please feel free to share any comments, feedback, and questions that you have with firstname.lastname@example.org.
It is now my pleasure to introduce our panelists to the webinar. So first I would like to introduce Andrew Wilson, who is the VP of private equity and M&A at Global Upside. Andrew is an English chartered accountant and has extensive international experience working in London, Lagos Nigeria, Caracas, Venezuela, and San Francisco with Price Waterhouse Cooper. He worked at Oracle establishing their first 25 International subsidiaries. He spent 10 years as a CFO with public and private companies in charge of Finance, Human Resources, Payroll, and benefits.
During that time, he built four international networks. At global upside, he has led engagements in electronic manufacturing and software that involved the Big Four accounting firms and several international law firms. His areas of expertise include international employment law, human resources, payroll and benefits, finance, and operations support.
Now it is my pleasure to introduce Kym Sanderson. She is the director of Human Resources at Global Upside. Kym possesses considerable experience in international HR. In previous roles, she has worked as part of internal international HR teams, as well as in HR advisory functions. While working with Tesla, she helped rapidly expand their European operations. She applies this experience when partnering with Bay area companies to assist with global expansion and merger and acquisition activities. Her area of expertise is EMEA employment law. She also specializes in acquired rights and contract standardization.
It is now time to pass over to Andrew and Kym.
Andrew: Thank you, everyone, and thank you for sharing this experience with us today. Obviously, a difficult period of time for everyone, and our thoughts and prayers that go out to, obviously the sick and the recently passed doctors, nurses, and first-time responders. And this webinar is meant to address some of the practical issues that are going on during these difficult times as we consider how to react to COVID-19 and what is going on in the world at the moment.
So, very much this is somewhat European purpose because they led the situation central responding to COVID-19 and its effects on businesses and employment in terms of putting in safety nets on what is going on in the world, and they have a lot of the infrastructure in place, as well as in South America with the existing social safety nets to support this. In terms of obviously have the sick pay and responding if those people are aspects of it.
There are extensive support schemes in place already, in terms of providing for sick pay during these periods of time and supporting workers as they are taking the ill and force to take time off work. These have been changed as we have gone through this crisis in terms of the fact that they have accelerated a lot of the waiting periods in terms of previously there have been anything from three days to 10 days waiting period for these to take effect. And a lot of the governments have basically said you can apply and receive immediately sick pay in terms of what can be provided to support you during this time.
There is also the concept of preventative leave or sick pay that is been introduced where people who are elderly, certain age groups as well as pregnant women are entitled to take leaves of work and if that forces them into a situation that they cannot work from home and telecommute then they are also entitled to call sick pay during those periods of time. The other aspects that is very prevalent in Europe, and came out of the 2008 financial shock and its effects on businesses that they think were forced to lay off workers for temporary periods of time which could be extensive was introduced in Germany during that time where they have a concept of short term work.
In the US, you might consider this to be more associated with furloughs or temporary layoffs. And it is very much a scheme, which accommodates trying to maintain employment during these periods of time, where people are being forced to have substantially reduced time, in terms of working out or being totally laid off during these periods of time, and the shorter work schemes are very much regulated. They have extensive rules that they are situations where your companies cannot unilaterally put in place for short type work or these furloughs.
There is a whole regulation around this and you do have to apply from government, in terms of what you can do to get approved, and the governments have schemes in place where they will reimburse you for specific employees if you can prove that there is considerable loss of hours as in the operational requirements, as well as the personal requirements, have been met. And it is something where you do have to apply for the government and get approval, for in terms of the reimbursements. The reimbursements can vary from anything from 70% to the employments up to 100% in certain countries like Norway and Sweden where they’ve implemented schemes that can provide that 90 to 100 % of the employment.
It does have to be obviously a substantial loss of time during these periods. So, that is why governments are talking about reversing anything from 70 to 80% so obviously you are talking about going deeper into the time that these employees could work for you during that time. And they just have to apply to a portion of the substantial portion of the workforce, and there are different rules out there about what represents a substantial portion. It does not have to apply to all employees, so you are in a situation wherein you have essential workers that need to continue to work during this period, but you want to lay off other people then, suddenly that type of speed can be put in place. And then obviously companies are talking about vacation PTO RTT entitlements where employees do have accumulated PTO vacation time and forcing them to take that off during this period in exchange for continuing the employment. But obviously, the emphasis is that it is something that has to be mutually agreed with employees, you cannot unilaterally enforce it.
Many of the European and South American countries do have extensive unemployment pay and benefits schemes. These again have been accelerated by local governments in terms of the entitlements and the waiting periods. And so there are provisions in place to provide that. But in terms of the overall gist of this is that what the governments are trying to do is obviously to try and maintain employment wherever possible recognizing that this will pass and this will be a situation which is temporary and they hope that everything will come back to put those people back to full-time employment as soon as possible.
So, the thing to remember in all of this is that what the European governments and the South American governments are starting to do is modify existing programs and put more programs in place, and they are coming out with small business loans and additional systems to try and make sure that companies survive during this period recognize that this can be a cash crunch and the emphasis in all cases is trying to maintain employments and put things in place.
So, it is all about, retention measures, even if you do have to reduce people’s time or lay them off completely temporarily. But it is so heavily regulated to qualify for the government assistance, you have to make sure that you follow due process, you follow notifications to the employees and what is been done, you have to meet the operational requirements and you do have to apply for the government agencies. They have discussed accelerating what is going on in terms of the providing new compensation that you will be entitled to the reimbursement for these short-time work or as they call it, trans partial activity periods, but the emphasis right now is that, you do have to apply, have to get approval, have to have met the requirements and that it is all about trying to maintain their ongoing employment and it is temporary, in all claims cases.
We will be discussing a little bit about border closures and immigration during the seminar as well. And a lot of it is around the fact that if you are in the country, and you have work permits and visas and are entitled to work in the country, then right now the emphasis is that you can stay in the country and a lot of the immigration authorities are willing to extend the period of time and without having to apply for the extension recognizing that a lot of the government departments that normally do this in place. It is unfortunate if you are outside of the country that border closures and preventative measures are being put in place, or a lot to do with which countries you might have been present in prior to wanting to come home. And in those situations are being very strict, in terms of what is going on. So, overall that is kind of a recent introduction here high-level summary.
Kym Did you have any additional comments?
Kym: Hi Andrew, my main comment at the moment is essentially just schemes are being implemented and changing constantly. The UK scheme, for instance, was announced as going live at the beginning of April for applications and has already stated that it will be pushed to the end of April. So one thing just bear in mind for this is things are changing rapidly, and this webinar will be very much a snapshot in time of what we know, at this moment in time to try and give as much guidance and assistance and support as we can.
So I’m now going to talk around a little bit more in regard to temporary layoffs short term work and the government support. The main thing that I would like to make clear with this is temporary layoffs in the US are a lot simpler. I know, not all of our clients on US-based, but I knew predominantly they are and I know you are used to working with an at-will employment model, as we’ve been aware of where we’ve been setting stuff up the notice periods, etc. that you have in Europe, they don’t necessarily permit temporary layoffs. Now some countries are putting in place legislation that will perhaps permit that, but again, that is not subject to change. And my advice to anyone who is even considering this is to reach out and speak to us about it. The employees don’t have to agree to this, whilst the company can be in dire financial difficulties may even be saying to us, we don’t know how we’re going to be able to pay our April or May salaries.
That doesn’t actually, in Europe, on the whole, give you the right to suspend payments, it is all going to had to be mutually negotiated and agreed.
Europe is under the same sort of lockdown that is happening in many places and people are generally very aware of the impact and, trying to work with their employers to try to get through this realize that there will be light at the end of the tunnel.
The sick pay provisions that are being modified; Andrew referred to this briefly just now. In the UK, for example, the waiting period for statutory sick pay has been removed. Statutory sick pay is not a huge amount it is less than 100 pounds a week. But these small concessions that governments are doing not just here but in other countries in order to try and support. The points to discuss in regard to how layoffs work. it is very difficult to cover this because in so many countries it is not, we can do this straight away. So even if you work on reducing someone’s salary, or applying for any of the government schemes, then hopefully you all are much more thinking along the lines of how long this last and what support will is there.
I would say having looked at the government schemes that are published the initial support is available, essentially for three months which would cover the majority of the lockdown. Again, as Andrew said, the applications to make use of these schemes are lots of the details are still not yet, as public, and still have not been published. But what I’ve seen so far will be very much along the lines of, you will have to demonstrate if you are applying for government assistance in regards to financial support in order to meet your salary and actual payroll requirements, then you would need to demonstrate that the employees have been legally furloughed that they have agreed to this, and if that country permits to whether you know you are looking at other sorts of temporary variations.
There is obviously a number of other impacts in regards to the school are closing, many countries, that are in the US, people might be unable to work at the moment due to the fact that they have their children at home, and that obviously leads to a little bit more of a difficult situation and my guidance sometimes very much along the lines of the entire world is in this boat, and it is working how best to support now whether that would be that working the hours around, working around childcare, trying to do the homeschooling. Essentially my message and this is the only way to get through any employment legislation in Europe is very much intensive. We are in this together, not just from a business perspective but between employers and employees, it is going to be, not making very partial drastic decisions, and not waiting, because that waiting is not necessarily acceptable in some situations or people might not have the cash flow, but realizing that, as Andrew said, that we are hoping that this situation is temporary but trying to do what we can.
Meantime, do you have anything you want to comment on the Andrew?
Andrew: Couple of things as Kym’s alluding to, in terms of the whole process and as we were discussing before they are operational and personal requirements you have to meet regions in Europe. You have to also consider also work councils and collective bargaining agreements and also the provisions of the employment contract to put in place with the employees. Obviously, when it comes to South America and Asia, you have to consider the union implication so there are lots of different aspects of that perspective. And then again that the preparedness of the countries to be able to implement these schemes and start the reimbursement processes, does vary widely and as I said, Germany has had a fairly robust scheme and place since it was originally enacted in 2008, and it was well defined by 2011 but with their particular process, they guarantee a response, whether they are going to pay you the money within 48 hours, whereas right now the UK scheme is still in process, and they are hoping to be able to have the scheme in place by the end of April.
And then in terms of funding, obviously as Kim has alluded to if you are in cash flow situations, and you are expecting this to be stopped flowing straight away. Here in America when we talk about the regional emergency that was put in place, the funds they are hoping will be available in three to four weeks. In these situations as well you are saying that you are the when can you expect funds to flow to you is going to be varying from country to country and so they are agreeing to approve it.
If you get approval to provide this type of support, but it will take some time for you to receive the funds so there is a lot of operational considerations here, in terms of how you go about this. And that we will discuss in the next section. These operational considerations can be a lot easier to deal with than some of the considerations if you are having to think beyond this in terms of saying that you cannot support your employees so we will definitely deal with without the next slide.
So this goes back to a lot of the considerations internationally, in terms of the extensive employment protections that are provided. And just to reiterate the US is the only country in the world that has this concept of at-will employment and you do not have to have good cause for terminating anyone. Obviously, the service protections are in place in terms of the age of the employee or various aspects of whether they are pregnant or whether they have disabilities that specific protects and support for people like that. But otherwise, you can furlough workers and can terminate workers without good cause. This is totally different internationally, where labor laws and statutory requirements are very much agreed with us as a heavy emphasis on protecting the employees, and making sure that the rights and terms and conditions of employment, are respected by accounting company and things are following the due process in terms of employment agreements.
So, in most countries, they do require that you have employment agreements with your employees. They do define very clearly what their entitlements are what the terms and conditions of employment are, and often they define what they are entitled to in terms of the termination process and what goes on there so as I said, it is at-will employment in the US. In most international countries, especially in Europe and in South America there is this concept that you have to have good cause for terminating someone. So you have to demonstrate that up the cause with the termination and your documentation has all been put in place to make that happen. And of course, could cause varies. it is very different from country to country. But so, even with terminating with a good cause, it does create entitlements to severance pay and notice periods. So, immediately that you are employing someone internationally and you are entering into an employment agreement with those employees they have vested rights. Now, these vested rights can be very dependent upon the type of contract that you enter into which Kym is going to discuss in the next slide. In terms of why a lot of employees, particularly in Europe and South America are employed on temporary contracts rather than on fixed-term or permanent contracts. Immediately upon entering into an employment agreement rights start vesting to the employee. And in terms of those rights, they have the entitlements to anything that is defined in the terms and conditions of the employment contract, as well as the labor laws immediately you are into a situation where, as we discussed, you have to have good cause to terminate anyone. So anything that you change in terms of the T’s and C’s can create what are called constructive discharge. And what you might consider over here to be minor in terms of changing the terms and conditions of employment so it may not be compensated. Obviously we are talking right now that would you be reducing people’s compensation, forcing them to take care of vacation PTO, terminating their benefits for a period of time which has saved the company money anything that is changing their terms and conditions of employment can be considered willful misconduct.
And in terms of being willful misconduct there, you are saying that creating an environment, changing the terms and conditions that is forcing the employee to leave, and trying to force the employee to leave without being entitled to severance pay notice period. Not all the benefits and the thing to remember in all of this is that, again, it is not at one corner like the US, and in some European countries in creating constructive discharge that entitles the employees to severance pay and notice periods, you can end up in situations that they have entitlements to months if not years of severance pay that is dictated through things like the employment agreement, sort of works councils, through collective bargaining agreements, as well as union entitlements, that they may have. And then in South America, in particular, you have a whole system of labor tribunals and courts that adjudicates, in terms of what the entitlements are and oftentimes, typically in South America but even in countries like Spain and Italy, you have to go through a process with the courts to make sure that the severance pay that you are paying out, and the benefits and the notice periods that are being given are reasonable in terms of how the employment has been terminated.
So very important to remember this, in terms of anything you are planning to do because these employees have rights, and you have to follow due process. In all cases, we recommend that, as Kym discussed, a mutually agreed negotiation with an employee, depending on how you go about it is the best way to go. And the other thing to remember in all of this is that the less you put in writing in terms of the process, which can be deemed to be varying the terms and conditions of employment is better from the perspective that it may be used in evidence against you. So, again, the employment agreements, modified by everything else is what dictates.
The other thing, to also, remember is that company policies that vary the terms to the benefit of the employee can do come into play as well. We have been in situations where we have discovered that companies that agreed on different circumstances to do things like pay two to three times, the separate amounts that were the minimum settlement amounts, which were due to the employee. And it was done in particular circumstance however, it was deemed that it applied to all subsequent terminations so that entitlements were enhanced by that. So, concepted vested rights and constructive discharge demonstrable evidence determinate policy, this can be operational. In terms of the fact that you have circumstances that the company’s survival is threatened or considering sort of the viability of maintenance of different countries where you have to follow a process. There are legal requirements in terms of providing notice going through notice periods and actions can be individual or collective obviously when you are talking about workforce reductions or reductions in force that are collective. If you are talking about short-time work, or temporary furloughs the collective as we discussed in South America and in some European countries, there has to be core applications done, Brazil has very stringent requirements in terms of submitting and getting approval for anything to do with workforce reductions and terminations prior to engaging with the employee and companies that are claiming to be in financial distress and have to do something about that can have their financials, they can have their operational justification scrutinized, and if it is that it was inadequate then the employee will be entitled to more consideration as a result of that in terms of severance pay.
Kym, do you have any other comments on this?
Kym: My main comment is the notice periods that we have certainly in the European countries also much longer than people are perhaps used to notice periods can vary here from one week, up until about three months, and someone can automatically acquire three months’ notice from the moment they pass their probation period. So, the other one that I have seen this week is from an employee’s perspective is much more along the lines of, they can understand that their employer is in trouble, but employees obviously the moment you start speaking to them about this stuff, start to panic and what can start appears to be quite a gentle conversation can very quickly go south when people, be like they are pointing out to you well, you still have to pay me my notice you still have to pay me my severance, and of course from a commercial side that is very difficult when you are thinking, if we are going to have the money in order to go through with this. It is very very difficult.
I’m now just going to talk over certain local labor laws, notice periods, minimum redundancy and severance payments Andrew has discussed this but the one thing to bear in mind and I did just say this on the previous slide, is the current situation with COVID does not make someone’s employment contract, non-void, and you can have discussions with an employee etc. But ultimately, you cannot unilaterally impose on someone what is the situation is, and also at this point any sort of precedent in the company in regard to what notice periods you have perhaps agreed as company policy, written documents. So whether some companies have previously been offering a month salary feature service, all that stuff will come into play. The one consideration to very much point out in regard to the notifications time periods, and the actual contractual notice period.
A lot of time in employment contracts, it will stipulate, you are entitled to two months, three months, whatever amount notice in regard to termination. That also doesn’t take into account the due process that must be followed and any sort of enhanced payments that will be produced, so this is what Andrew was saying in regard to any sort of CBA considerations. The requirements do vary widely from each country and it is not just based on someone’s individual employment contract, it can also be the number of employees you have in the country, and certain countries will also take into account the economic circumstances that you have in other countries. So, you may not be able to say, we only need to do this in this country, because it varies so much depending on which country you are looking at. At the moment, having watched this crisis unfold from unemployment site, and none of us have seen anything like this even back to the previous recession.
If you, on the side of caution at the moment, and have the cash flow to do so then, we do not know when everything is going to more likely return to normal. And the last thing I would want to see clients do would be to jump into a redundancy program and see all the notifications, the paperwork that you have to go through in order to do that.
And then when everyone is able to return to work in however many few weeks, months, however long that will be, people obviously then having that very bad will towards their employer and thinking the first thing they did when this happened was they just wanted to make us redundant or lay us off. And as Andrew alluded to, on the previous slide, for those who are perhaps more inexperienced as it were with some EMEA terminations. It is quite rare in Europe, that any termination is not done through a mutual agreement, there are many reasons for this and the main one is the ongoing risk of legal action. Different countries have different time periods, whereby you can raise a claim.
The UK has a very short time period in which you can raise that claim with the arbitration bodies, but other countries, it does not just go from a couple of months, it is a couple of years. So that is when you should terminations are much more favored. Regardless of the cash rate that you have at the time, and the time that may be needed for a mutual termination to follow a full redundancy process in a country can take a number of weeks, by the time you have sent letters to people, engaged with any works councils who need to speak to you made any sort of applications and spoken to any counsel that you have within your companies.
So Europe is never simple, and the payments that are made to employees, the statutory payment everything that can be cost reducing what statutory payments are. Some countries, for an example, in Denmark once you are employed for six months there is no recourse to huge amounts of redundancy pay but you are entitled three months’ notice, so that is immediately a larger cost, that you have to bear in mind. Any other payments that are due and another example in France, there is outplacement support if you start making people redundant, and those schemes ongoing. And the Social Security system that is available in Europe is a lot more robust. But ultimately, that is an entitlement that people would be looking at and kind of getting my normal salary wouldn’t replicate that. And there are huge waiting times across all of Europe. Because, understandably, at the moment, people are looking into what other claims they can make. Any mutual agreement that you go through with an employee or we could negotiate on your behalf. And because it just varies so much from country to country that certainly if anyone does have any of their own advice, they want to be caught speaking a bit more detail to put a finger in the air and start giving numbers will be very difficult at this moment in time.
Do you want to add to that Andrew?
Andrew: As Kym said that, obviously, mutual agreements as we previously discussed, you can certainly discuss the overall situation of the company. And, how the crisis, is affecting you specifically in things that you may have taken actions here, in terms of what is going on. Again, mutual agreements emphasize putting in writing handbooks specific to the employee, especially in the context that may be considered they are varying the terms and conditions of employment. You should have to consider, and in some senses, mutual agreement and discussing things with personnel in European countries is definitely the way to go. And if you do contractual agreements then, make sure that you will put it in writing and get it signed off by the employee before taking any actions in terms of making payments or dictating guardian leaves or notice periods. Again, in South America, a lot of it is governed by labor tribunals or labor courts, and there is a whole process they that you have to go through in terms of making it happen. So that you have to prepare and do everything but the emphasis right now is obviously to the governments are emphasizing to try and keep employees to get through this and look for the upside, and in terms of both from the government’s perspective as well as the employees, but if you do intend to continue to do business in European countries is very much a confidence and moral issue in terms of what is going on. And it may obviously have implications in terms of the government’s for consideration of you, and the future as you continue to do business. There, as well as the employees as well as even your customers, very much, different social attitudes in terms of things going on.
Kym: So, before starting any negotiation with any employees the first consideration is to understand what type of contract, employees have. There are different options in Europe, as there are indeed worldwide. So, first one will be temporary contracts. That would be your either very short term contracts, whether that is on a rolling ongoing basis or whether that would be a zero-hours contract or in many jobs depending on the countries, those sorts of employees will still have rights, even though there is a defined, perhaps end-date to those contracts, which does lead more neatly onto fixed-term employees. Fixed-term employees in Europe, are people who have been employed for a set period of time, and in order to not renew their contract, in many cases, you do have to get them, with notice that their contract will not be renewed. In the best-case scenario on a fixed-term contract, you are able to terminate the contract early it depends on how it has been drafted.
In some countries, if a fixed-term contract has been offered, then, to a large extent an employer is obligated to pay to the end of that contract. So, that situation can be difficult. There are certain countries where I have always recommended to employ people on fixed-term contracts just because the nature of the employment law in that country. Any sort of indefinite contracts so they have different names whether you call it an indefinite contract, a permanent contract. Certain countries have different acronyms that they use. If you are unable to continue to employ them, due to the situation of COVID, then it will essentially either come down to a redundancy situation following that due process a furlough effect is permitted in that country or in mutual termination. They are very much the only options. The situation with COVID, as I said earlier, that contract even though it is an employment contract does still remain intact. And if an employer is unable to pay salary or is unable to meet their minimum obligations and does not go through a mutual termination process, then, ultimately it would end up with legal action being taken against you.
It is a very stressful time, and certainly, from a client-side and also from an employee side people are obviously very panicked and very upset. Certainly, as everyone listening to this webcast will appreciate this has essentially been everything that I have been looking at for the last few weeks, and it is very hard to work through with clients and employees who are going where is my next money coming from, and that comes from both situations but from just the legal perspective that contract is still there, it does still have to be paid. And this goes back to the delayed side of things that we were talking about previously. Any of the changes that you made to contracts, then regardless of the duration of that contract, they still need to be agreed. Yes, it would be so much easier to be able to dismiss or layoff your temporary workers depending on the country, but if someone is in possession of a contract that has no end-date, or has a fixed end-date that is however many months in the future, then that modification has to be agreed, but it would be very much in a country by country basis as to whether you can amend that contract.
And again this goes back to the fact that we were hoping that this will be over shortly so I would always urge caution with any sort of action with this because, do you want to jump potentially then create a worse problem, later down the line.
Do you want to add more there Andrew?
Andrew: A couple of points in there well said about obviously stressful times.
And a lot of concerned employees out there when you are working in remote environments, which do not facilitate that communication and understanding what is happening in the headquarters and what the discussions are. It does create a lot of stress in terms of what is going on.
And there are two things here one is that obviously the employment agreement is typical with your local legal entity. That legal entity has liability in the country that it is incorporated in and those employment agreements do stand against that legal entity, so as Kym said, those rights that exist even if the company is in a situation where it does not have the cash flow, that the obligations are still going to accrue to. The legal entity in that country and allow action against that legal entity in that country. So for the one perspective obviously the legal entity is providing some legal distance from the corporate headquarters because it is in the country but your ability to do business, and those liabilities and those court cases are going to continue as you move forward. The other thing to remember in these circumstances if you are a company that has taken advantage of you employing people through professional employment organizations or employer records. Then the consideration there is obviously the employer, employees and those countries that are not your employees. They are the employees of the PEO or the employer of record they have entered into the employment agreements, the operational circumstances and personal circumstances, affecting those employees are not considered to be aligned with your business because they are employed by the PEO, and it is up to the PEO to take action if anything with the employees but the justification in terms of things like short time work and temporary layoffs is a lot harder because they are not specifically associated with your business.
The PEO has to justify it and you do have to consider in the PEO’s case that they again have to take action, whether it is individual or collectively treating their workforce the same. So you may have employees with that PEO and have circumstances which you are trying to put into effect in terms of, you know, the overall circumstances of your corporation. However, it is the PEO that you have to work with taking actions because they are not sitting in the circumstances, have been able to provide justification as you do.
Do you have any more comments on a PEO perspective Kym?
Kym: Yes, the main one was a PEO is, as Andrew said, that relationship does become very intertwined. Because you have an employee who is working for a client, but is employed by a PEO, and my main piece of guidance there is, you absolutely have to work with the PEO provider for this because there will be a number of contracts. It is not just the contract you know that you signed with the PEO it is the contract with the employee. And whilst clients would want to treat any employees on a PEO in the same way as the payroll employees, by issuing letters and, including them in communications, it is very difficult to do so because ultimately they are not an employee of your entity. Also, from a PEO perspective, as Andrew mentioned, they are treating employees on PEO fairly and equitably is quite difficult when you have a number of clients who perhaps are employed by the same entity, and the repercussions of one client, saying, this is what we want to do, and taking action then immediately afterwards going okay we’ve done this or another client saying that it is very hard. Anyone who has any employees on a PEO who you are considering the fact that you may not be able to pay or you may need to make them redundant or you are wishing to consider to furlough them, so that you are treating them the same as you know your payroll employees. You have to work the PEO provider because ultimately, at best, you will be able to resolve it and an employee would be able to be valued or would move on or in worst case scenarios then there could be, serious legal ramifications not just for the end client, the PEO but also the employee.
Andrew: And it is important to remember that it is mutual discussion that the PEO has to have with the employee, as opposed to the company and the company needs to be very careful in terms of any communications because they are employees of the PEO. And they look to the PEO to come to the mutual agreements and to have the discussions the employee may understand that there are economic problems that the company’s experiencing.
However, in terms of the legal relationship with the PEO, and that is what governs, it will cause issues to the PEO if there is any direct communications further again of varying the terms and conditions of employment, and how that may be represented by the employee. So to some extent the legal liabilities going to those with the PEO. But usually the indemnification agreements between the PEO and the client, as it relates to how they have employed the person. So, again, be careful in terms of how you do that.
So the next slide is talking about collective bargaining agreements, work councils and unions. And as we discussed earlier on in the webinar collective bargaining agreements, works councils and unions can vary the terms and conditions of the original employment agreement, often to the benefit of the employee.
So that they seem to remember that collective bargaining agreements are very prevalent in Europe, that they can apply in South America and Asia as well. And they can be either industry wide, at times when you incorporate a legal entity they require you to elect for a particular collective bargaining agreement, or they can be company specific but usually they do affect industries or they do affect classes of workers in terms of what their entitlements are, and the collective bargaining agreements, does discuss items such as work rules and titles to holidays, vacation leaves, benefits, statutory and supplemental benefits high formats that you have to put in place. So again it varies and typically enhance the terms and conditions of employment to the employees, and also does usually address that statutory, severance pay, or redundancy pay and set the minimum. So in these circumstances it does modify it. It has to be addressed in terms of any situation where you are planning, even the short time work or the temporary layoffs, as well as, potentially terminate employees so those variations need to be taken account in terms of what is going on. Unions, and this is more prevalent in South America, and then to some extent in Asia, and in Europe. that, again union representation, unions are can be company specific or be industry specific. They often have very strict rules again that to modify the terms and conditions of employment, require consultation and agreements with the unions in terms of actions that you may be taking, and again often this can be very simple changes to terms and conditions of employment.
As it relates to vacation, leaves benefits, anything that could be deemed to be a change that could be deemed willful in terms of forcing someone to leave the company and do the constructive discharge. So there is a whole consultation process, that depends on if you are unionized, and who we consult with, in terms of what goes on there. More typically in Europe we do have works councils as well that govern particular industries this usually depends on the number of employees that you have whether the employees have been, can either elect their own works council or be subject to be able to join an existing works council and there is a process there in terms of what goes on and what you are entitled to.
The other thing to remember when we are talking about collective bargaining into works council and unions as well is that specially when it comes to things like the severance termination processes or what would considered to be constructive discharge the rules do vary in each country, the labor laws and the entitlements. In a situation where if you have a certain number of employees and you are going through that type of process, that you are forced to go through consultation period and often the employees can elect representatives that can represent them and there is whole process in terms of the representation and consultation process where you cannot take any action until that has all been agreed. And in some countries they may require you, like the UK or the US, to have to hire an attorney for the employee to consult with them in terms of what their rights are to make sure they are not taking advantage. So, very important in that perspective.
Kym, do you have any other comments on that?
Kym: My main comment on unions in Europe is an employer does not need to recognize union for an employee to be represented by union membership is very much based on an individual basis and a lot of countries will, when you are having the meetings, allow you to bring a trade union representative with you. So it is just one thing to bear in mind plus with a multiple notification meeting, some countries do have the requirement that is done in-person.
To quite know how that one is going to work with the COVID impact, but the legal requirements are still there. With collective bargaining agreements my main consideration is collective bargaining agreements is just understanding that certainly most of them would allow different categorizations in employees so you could have employees who are entitled to different notice periods depending on the job levels.
There is someone who is more junior maybe entitled to less severance than someone who is more senior, but you may not even see this in their contract. It will essentially refer to the CBA and works councils any of them is in place is, if an employer or client is large enough to have a works council implies this – he is very much trying to maintain that relationship because you may not be able to proceed any further unless you have a works council agreement.
Tallin: We want to thank our panelists for their time today. Thank you, Andrew, and thank you Kym for your time. We did have a few questions that came through during the webinar that we wanted to get to.
So, let me read those, so the first one was:
1. How are local labor laws effected and what employment protection is provided internationally?
Kym: To some extent at the moment, they are not. There has been no suspension of employment internationally. In countries, there are government measures that are essentially there to assist and support employers. But there is a waiting period on those. So nothing has changed labor law-wise, in regard to making redundancies any easier, if anything, I would say, justifying redundancies at this moment in time with the level of quite unprecedented economic support that is been put in place in Europe. It would be quite hard to justify redundancy over a furlough if that is permitted in that country. And what employment protection is provided internationally. A lot is the honest answer. Realistically, you are going to be paying a notice period, a severance payment. And any sort of indemnity if you have to terminate someone and their contract. As part of this worldwide situation, it is a very hard one to balance from a commercial side as to the amounts that you will have to pay to the employee. As Andrew said earlier, the local entity will still be liable. And if due process is not followed, then that entity will be potentially challenged.
Tallin: Alright, thank you, Kym.
So the next question. We will take a couple more questions and then end the webinar because we are running out of time here.
But the next question that we had was:
What loans are available for small businesses during the COVID-19 crisis?
Andrew: So many countries have approved, as we have here in the US, small business loans to companies. The mechanics, as we have here in the states are still in process in terms of applying for those loans and the entitlements in terms of what you can do with those loans. Many of the countries that are making provision in the loans that if the loans are being used to offset labor costs, specifically, that they may be forgiven. And I say maybe it is specifically in legislation to say that labor costs would be forgiven, but it is not specific in terms of, what those labor costs consist of, and in justifying them. But so many countries have approved packages to provide to small and even medium sized businesses do that and there is whole process in place to make that happen.
Tallin: Okay, great. Thanks, Andrew.
And then the last question that we will cover right now is: Please discuss the impact of business loans and tax exemptions versus furloughs?
Andrew: So it ends and it is in summarizing, obviously to opt for small business loans and you have a lot of the extension of casts to companies to try and stay in business and the right to offsets, specifically labor costs and not having to repay those loans. But because a lot of the legislation is still in process and the mechanics are still in process that it is changing on a day by day, not hourly basis. A lot of the countries have put in different roles of taxes at the moment. So be the payroll taxes or VAT, GST, HST. So deferral of payments, there is not been some discussion of tax holidays, but there hasn’t been anything specific. Right now the emphasis of the government is around trying to help companies preserve cash flow and then providing them with either the ability to go to the temporary layoffs or the short time work or basically take the loans. So that is the way that they see helping companies with liquidity to stay in business. But it is naturally being focused on alleviating them of having to pay taxes at this time, it is more of the former.
Tallin: Great. Thanks, Andrew. And we’ve run out of time. We did have some other questions come in that we were not able to answer. So we will be sending out responses to those questions to the individuals in-person. We want to thank our panelists for their time today.
Thank you, Andrew, and thank you Kym for your time.
And again, if you have any questions, we encourage you to send those over to email@example.com or you can call us directly on our phone number listed here.
Just as a reminder, we will be sending out a copy of the webinar with a copy of the slide deck to all those who have registered for the webinar. And we want to thank everybody for, for arriving and listening in and hope everyone is staying safe and well and again during this hard time, we hope that this information is helpful and please reach out with any questions that you have.