HR in Europe

Your Top Questions Answered

Are you considering expansion into Europe?

Employment law and HR norms in Europe are complex. Laws and regulations differ significantly even within EU nations, and even minor missteps can leave your business exposed to major legal and financial liabilities. In this webinar, our HR experts will offer valuable operational insights and best practices and answer your questions on hiring, onboarding, employment contracts, employment law, benefits, payroll, termination and more.

Agenda:
• Employment Law Overview
• Hiring & Employment Contracts
• Work-Time Regulations
• Employee Benefits
• Data Privacy Requirements
• Local Quirks
• Payroll
• Terminations
• Q&A

Webinar Transcription

Ryan: Hello everyone, and welcome to our webinar: Human Resources in Europe – Your Top Questions Answered.
During this webinar, our experts will provide an overview of the keys to successful HR in Europe, followed by an extended period for Q&A. Many of you have provided questions during the registration process, but should any arise during the webinar, please feel free to enter them in the chat. Now let us introduce our speakers.

Ryan: Our first speaker is Kym Sanderson. Kym has considerable experience supporting companies with their HR needs in Europe. In previous roles, she has worked as part of European and international HR teams, as well as HR advisory functions. During her time working at Tesla, she helped rapidly expand their European operations. Her areas of expertise are EMEA employment law, acquired rights, and contract standardization. Joining Kym will be Suraj Sharma. Suraj is an experienced HR professional who specializes in employment contracts, benefits implementation, integration, and mergers and acquisitions. He has spent several years assisting multinational companies in various cross-functional capacities, and currently supports the HR needs of companies in over 40 countries worldwide. Now, I will pass the time over to Kym and Suraj to discuss our first topic – Understanding your Hiring Options.

Kym: Thank you, Ryan, and welcome to the webinar, I know when clients are looking to expand across Europe, there are three main options and people consider all of them. So let us talk through them all. The first one is looking at whether you can hire someone as an independent contractor. So, what this essentially means is engaging somebody on an independent contractor or a consultancy agreement. A lot of clients look at doing it, and there are a lot of pitfalls. So, the added bonus to this one is you are engaging directly with someone you are not incurring any of the tax or Social Security liabilities. But that is also the biggest downside to them. What tends to happen is a client will find a great person and say, “Hey, let us engage on a consultancy basis.” And that professional is working for you full-time, they are on a company email, and you let them have a holiday, perhaps even some sick time if something happens. And the moment you start doing that you have already treated them like an employee. And all I would say is for anyone who is looking to engage an independent contractor is, look at the rules of the country that you are working in, they can be very specific to that country, as to whether this is a good option for you or not. The other part is and in consultancy agreements, you do tend to see this a lot. You get the right to substitution; you have different invoicing terms. So, you just need to be aware when you are going into this. What the benefits are? Which, to be fair, it always seems when you pay someone the money, and they are responsible for their tax and social security, but in practice, you may well just be essentially setting them up as a pseudo employee. And that means, should that person part ways with you or you part ways with them. They could launch a potential claim against you and say that “Hey, they have been an employee all along. And we have seen it happen. So just really ensure that you have guidance there. Want to add anything on that one, Suraj?

Suraj: I think you have covered it well, Kym. The only thing I would add there like Kym was mentioning about the risks, the main risk here just going to summarize that point is treating the employee as an employee rather than as an independent contractor. So ultimately, if they are an independent contractor, they should be treating their work independently, meaning that they are not getting direction from the company as to when they do their work, how they do the work, and how they get paid for their work. They really should be getting an invoice being sent to you from their consulting company, rather than from themselves as an individual. So, like is mentioned on the slide as well. It is also a challenge to protect your IP because you do not have a risk typically with these individuals as an employee. And then that PE risk from a corporate perspective is one of the larger risks that we see. Because, you know, if you have an independent contractor who you hired for five-plus years, you are now talking about a PE risk that goes back five-plus years. In addition to that, you are also going to have your employment risk that goes back five-plus years. It is important to understand and be mindful that an independent contractor should not be a substitution for doing things the right way, the legally compliant way. If you are going to be looking at an independent contractor, you should be treating that as an actual independent contractor and not as a way to quickly hire an employee and treat them as an employee.

Kym: Thanks, Suraj. The next option is engaging someone as an employee. So, making them your direct hire, there are a couple of ways to do this. In some countries, you can set up a payroll registration, in other countries, that is not possible and so it requires you to incorporate them. This means they are going to be the same as your employees, as opposed to your domestic market, the best way to describe it. There are different ways to hire, whether that is putting someone on a full-time contract, part-time, or fixed term. I suppose the concept of regular or exempt does not exist in Europe. But when you are looking to engage someone on a contract, the first thing I suppose to mention is that the contract is going to be for that country. Europe is not a homogenous mass, very similar to how the different states in the US have different laws. Every single country in Europe has different laws. You are going to need a different contract for each country that you are looking at hiring somebody in.
You cannot just kind of go “Oh, yes, UK great, we use that contract in Germany.” The other consideration is a lot of the employment contracts have to be based on the local language. You can always use English so that you can understand it. And most employment contracts do have a fairly standard form of you know, start date, what the job role is, etc. And the main benefit to hiring people directly, they are your employees, you can direct their work, give them promotions, have commissions, all of that good stuff. You can have benefit schemes if you have got a headcount. I suppose the biggest drawback to direct hires is they can be very expensive. The cost of hiring somebody on a contract means you are going to be paying employers tax, like corporate tax, it depends on what you are doing in that country. So, I suppose it is that total loading cost of what is it going to cause me to have this employee there.
The other downside, of course, most people do prefer to be employees, which means they have a strong relationship with the company, they are buying into the company ethos. The biggest drawback compared as opposed to people saying as independent contractors are, there is a lot of employment law in Europe, it is not the case of you can engage someone very quickly or part ways if it is not working out. So, if you are expanding into a country, you do need to understand the implications of how the employment law is set up there and what your obligations are as an employer, because it gets very complicated very quickly. Suraj?

Suraj: I think that one thing you are going to hear us mention a lot in this webinar is going to be with regards to doing the right research ahead of time. Europe is a jurisdiction that is very hard to rush into things. And it is hard once you are there to correct maybe mistakes or things that you were not aware of earlier, retroactively. It is very important to understand whichever country you are going into, you want to be aware, ahead of time. And I understand it is going to be hard for a lot of businesses, but our best practice or pro tip is before you even start recruiting in that country, understand what kind of contracts you are going to be offering, what kind of contracts can you offer, so full-time contracts versus part-time contracts, you will have different requirements for those. Similarly, fixed-term contracts, you are going to have regulations around when you cannot use a fixed-term contract or after how many fixed-term contract renewals does that contract then become an indefinite term contract. So, you are going to have those considerations you have to be cognizant of before you start to hire in those countries.
Additionally, understanding what are your required policies to put in place? So, in the UK, as an example, you are going to have a grievance policy. You need to have in place for the employee to review when you give them their contract or upon request that they received their contract. Understanding in those countries where do you have required policies; you have to put in place versus where do you not need to have a full employee handbook. Understanding those questions ahead of time is also important. What we are going to be kind of driving home throughout this webinar, and you will hear us repeat this often is to be prepared, do the research ahead of time, it is going to make your life so much easier. Because once inevitably, something happens, an employee is going to separate from the company, or you are going to rapidly expand into eight or nine countries in a matter of a couple of weeks, you want to be prepared so that you have less of a chance of making any mistakes that might cost you further down the line.

Kym: Absolutely. The third and final option is working alongside a PEO and EOR company. PEO tends to be the term that we use more now, to be honest. The way that this works is you engage a company that hires essentially on your behalf. It means that you are not establishing a presence there and it means that your professional is going to have a compliant employment contract, and they are going to be paying their tax and Social Security. And everything is then essentially governed by the agreements between you and the PEO. It works well in those employees, professionals are compliant, which means they have an employer, everything is directed through that PEO company. They are getting paid monthly, you are not having to think “Gosh, what currency do we need to pay this person in?” The downside, I suppose, is a PEO is not a cheap option. Because you are going to be paying your PEO company fees to process that payroll. But it is still considerably cheaper than getting caught for having a pseudo employee or setting up your entity for just one person. Because then you are into all sorts of corporate compliance, which is nowhere near my area of expertise. Another benefit, the PEO simply is just the ease of doing it. And how quickly because PEO companies such as us will have, we have contracts, etc., there that we can populate and work alongside with you quite quickly to ensure that your professional gets what they are looking for on a salary basis.
What would you like to add, Suraj, whilst I grab some water?

Suraj: No worries, Kym. Yes, I think that covers it perfectly. The PEO is going to be your speed to hire, speed to market, that is going to be the option where, setting up an entity may take you four to six weeks and peer registrations and getting your bank account set up and all of that. That is a lot of upfront expense, and also a lot of upfront time. And typically, when you are looking to expand into a country for the first time, you are not going to be given eight-plus weeks or you know whatever that might be to get up and running. So that PEO is a great option when you are exploring markets for the first time, you want to hire your first salesperson or you want to hire your first business development person in the country to see if that market is going to work for you. The PEO is a great option. Typically, you are going to see it be an option until you reach a significant enough headcount to justify that setup cost. So, what we see on our side a lot of times is clients will use a PEO for a year or two while they are exploring the market and then in the background, in parallel, they are setting up their entity once they realize that this is going to be an area where they want to establish their operations more formally.
So, it is going to give you the max amount of flexibility to explore a market, get in there quickly, understand if this is something that is someplace that you want to be long term. And then you can make your next decisions about your direct hire process. Or if you want to stay on the PEO as well, that is where you can make that next decision.

Kym: Now we are on to one of the fun ones. So, employment law in Europe, a very brief overview because we need a webinar for each country that will probably go eight hours or so. The first main point to explain and I know a lot of you who are listening to this may well know this anyway. But at-will employment does not exist in Europe. The notion that you can hire someone and dismiss them, I suppose quite quickly, if it is not working out is not easy or practical in all of Europe, again, really varies on the country. But what this means is employees do have a lot more rights the moment they are engaged in an employment contract. The employment contract is going to be a legally binding document. And because in several countries, you have to file that with the authorities, whether that is with the labor administration or Social Security before somebody starts. So, you are recognized as that person’s employer. And notice periods, I suppose the main one that you would notice if you were from the US that at-will or two weeks’ notice. Yes, I suppose the notice periods in Europe can start at zero in some countries through to up to six months, very, very quickly, depending on the length of tenure. The checks that are done before somebody starts, so criminal checks have become a lot more standard across Europe. And some countries, it was still very much frowned upon, if you asked to do a background check. And an employee would be like, “Oh, my gosh, why are you checking this out?” Because it is just not seemed to be the done thing. But with the expansion of US companies, it is certainly becoming a bit more prevalent. The one thing to know, about background checks is that the level of checks that you can do is very much restricted, depending on the type of country that you are in. So once criminal checks can be done in several countries. And immigration checks always have to be done to ensure that someone has the right to work, regardless of the status of the European Economic Area, and you are moving backward and forward. And whether you can check things like finances, or, I suppose anything that is perceived to be a threat to somebody’s privacy does not happen in Europe. So, a criminal check is probably the extent that you can do. Most people would have their exam certificates to be able to produce what you have asked.
The other parts that you see in Europe, and I know I have mentioned this with contracts before. So, I suppose in this example, we are just going to take it that somebody is an employee, so whether they are an employee on a PEO, or via your entity, everything is written, there is no such thing as a verbal contract, because the moment you made a verbal contract, you have pretty much written it anyway. The whole notion is that it does not exist, as it were. Employment contracts generally have to be issued, either on day one or in some cases, up to 30 days, absolute latest. Best practice would always be that before somebody starts, they have a signed, compliant employment contract. And I suppose one of the biggest contrasts to explain and having done this for several years, what we call a contract in Europe is pretty much the US version of an offer letter, except it is a lot more legally binding. So, we have seen clients who have issued the US offer letters, and they have been issued from the US entity, they have confirmed the name, the job title. Now, that is not a legally compliant contract in the country, it certainly would not suffice on a go-forward basis. But if you do not convert what you have issued as an offer letter into something legally binding, then that employee has recourse against you, because it has not been executed properly.
So, one thing I always say to clients is, have you issued them an offer letter, even putting something on email and saying, “Hey, we are going to offer you this role on this amount of money? We will follow up with a contract that can be legally binding in Europe.” Suraj, what would you like to add to this one?
Suraj:
I think you covered everything well, Kym, the only thing I would add on this one like Kym was mentioning earlier is with regards to the onboarding process. We will get to the onboarding process in more detail and just a few minutes here, but, the main consideration for employment law, I would say in Europe is what is covered on the slide here, which is not similar to the US in most ways. And also, within the EU, each country implements its employing protections differently. So, you may notice some similarities between countries, in particular, all the countries are very employee-centric when it comes to protections for employees. So as an employer, your main responsibility is to follow the letter of the law as closely as physically possible, because your lease so to speak is very short in terms of ensuring that the employees are treated fairly under the various employment legislation in each country. So, if you are going to be a multi-national country, in the EU in particular, you will have to be mindful of each country’s laws. You will not be able to apply a generic law or generic policy in each country. And that I think is probably the biggest learning curve that we see for a lot of clients, which is you will not be able to do a global policy for various terms like vacation, for example, sick leave or maternity leave. Because each country is going to have its minimum standards you have to follow.
So, I would keep that in mind as well, it kind of goes back to our general mantra of research before you go into these countries, because you want to ensure that you are setting yourself up to be successful and in compliance.

Kym: Thank you.
Notice entitlements I know, I touched on briefly before. One thing I suppose to make clear in Europe is the idea of an apology. Because I have done HR for a long time and I always gave to, I suppose, the more jaded version, where most people are looking to hire, I am already considering how difficult it could be on termination. Notice entitlements in Europe, vary widely, it will genuinely be no notice at all. But I would say in Europe that would generally be in the probation period. And even then, it is going to be on a very limited time. So, it is going to be the first couple of months than most. Notice periods extend by tenure and they also extend by collective bargaining agreement, which is mentioned below. Ending your contracts in Europe, your notice entitlements are going to be very important. And all of these, kind of, link together, which is why they are on this slide. But a works council you will, in some countries, have to establish once you have reached a certain headcount depends on the country, really does. But collective bargaining agreements, you could be tied into a collective bargaining agreement, without necessarily knowing it even exists just by the nature of the type of business that you have in that country. So, for example, any sort of tech firm in France is always going to be enrolled in Syntech, or Sontec, they have their website, which is great.
And you then get the employment law as well as that. It varies hugely, the main thing, I think, with collective bargaining agreements is they are the equivalent to trade unions, but you are not dealing with the negotiation side of it. So, you are going to have to abide by whatever that collective bargaining agreement says. Predominantly, they will give you an additional day’s holiday, additional paid sickness entitlement, in some cases it is additional pension contributions, depending on the level of employee. Once you expand and start getting a bigger headcount, that is when the works council side comes into it, which then does lead on to the whole termination side. So, say, for instance, it is not working out with your employee in XYZ country. The first thing in Europe, you are always going to need is a lot of evidence as to what you have done to try and correct this. A PIP process does exist in Europe, but it certainly is very different in the way that it is implemented. For instance, the onus is always going to be on the employer to show that they have done absolutely everything to improve that person’s performance. And the reason I focus on this is because, salespeople are normally the first people who are hired into our country, and it tends to be that they have either overachieved their objectives or say they have only hit 50%. And you want to part ways with them. The amount of evidence and the termination process varies hugely, I will be incredibly frank and say, in Europe, the way that most people part company will be with a settlement agreement that used to be called compromise agreements, the US version is a release. You can of course terminate. But I suppose the reason I am just laboring this is I have seen so many clients make this mistake of doing it, they have not worked out, we want to give them notice. So, you cannot necessarily, in a lot of these countries just give notice. It is not the case of just writing a letter sending it to them, some countries are and then they are gone. In some countries, you have to go to court to even part ways with someone. It is not an easy process. So, we just always want clients to go in with open eyes. Instead of thinking, “Yes, this is great.” And of course, it is. It is brilliant because you are expanding but it is what comes next.
Other great fun and I suppose not games, but certainly in Europe is the general data protection regulations. Most countries in Europe already had data regulations that were in place. However, GDPR essentially pulled them all together, it was an EU directive, and every member state had to do it, it still applies in the UK, regardless of Brexit. And this is the absolute standard of what you must adhere to. So, this is ensuring that you have the consent from employees to keep the data that you need from them to pay them. And it is not implicit consent, everything has to be explicit consent. So, you will see forms saying, like,” Oh, we are going to ask you to maintain the stature on your age, sex, race, salary, etc., it must be on file.” You must check the data protection laws in each country, every single country has its version of the, I suppose, in the UK, it is the Information Commissioner’s Office, who will regulate and if there are any breaches, they have folks who it has to be reported into. Each country has its version of the, I suppose, in the UK it is the information commissioner’s office who will regulate, and if there are any breaches, they are the folks who have to be reported into. Each country has its version of that.
One thing that does make Europe easier, at least, to some extent is the big parts of legislation, like GDPR, are European directives that have to be implemented into the member state law. Of course, not all countries in Europe are members of the European Union or the European Economic Area, there is a difference, I will not go into it. But just understanding that we do have lots of similarities in the countries. But we also have a huge amount of differences.
Over to you, Suraj.

Suraj: I think Kym you covered everything again, very thoroughly on this slide. The only thing I would want to add is just one little summary point, which is, again, apart from this doing your research, and this does sound very cynical but I think as HR professionals, we have to always be speaking about these things. When it comes to hiring employees, you always have to keep in mind what will happen when they eventually separate. And so, ensuring you have a very strong, compliant contract that protects the company is very important. Each country will have its contracts and its contract requirements. So, ensure that you are working with the local council or local experts to draft that locally compliant contract that offers you the greatest amount of protection afforded under the law, like I mentioned earlier, the law is very employee-centric. And so, your main protection is going to be not only what you actually do as an employer in terms of your day-to-day operations, but what your contract is as well. And how your contract protects you. And then, also understanding the process in which employees should be separated from meaning how you treat them during that process. And also, what are your local requirements for terminations or separation. So, understanding your severance payment requirements, keeping in mind your requirements for the notice period, as an employer, you have those requirements as well. So, ensuring that you are taking care of the employees from that perspective is also an investment in your protection when it comes to ultimately separating from their employment.

Kym: The working time regulations have been in place for several years they were implemented into European law. Gosh! Back in the late 90s. We are not going to labor over the slide. I think the one thing I will say with the European regulations is the UK is the only one who kept opt-out. It is fine. But what I think the main one to understand is Europe has a lot more of a right to disconnect culture. In certain countries that are enshrined in law that an employee cannot be on call 24/7, you know, they should not answer emails at 10-11 p.m., everyone has the right to family time. So, there are several ways that you have to track and ensure compliance. So, what this essentially means is your employees are going to be doing timesheets in several countries to ensure that they are meeting the minimum rest periods, not the maximum working hours that you can do but the minimum rest periods and also the holidays, etc. must be tracked. So, one of the things that you will see with working time regulations and again, it is a slight deviation on this but where holiday days must be taken because it is the use it or lose it in some countries.
To understand the working time regulations again, it comes from an EU directive. Years and years and years ago now, gosh, it is almost 25 years. But the kind of expectation of someone being online at 7 a.m. and doing till 10 p.m. Some professions obviously will require or ask that, but I would say compared to certainly how things are in the US there is much more of a right to downtime culture, and I do say that as a Brit, and I will let Suraj as our resident US Professional comment on that one.

Suraj: Yes, that is a great point, Kym. The US working culture is not necessarily compatible with the EU working culture in terms of the mandatory rest periods. As Kym mentioned earlier in the webinar, there is not this carryover of the concept of exempt versus non-exempt employees. So even if you are having a highly comped employee who you are paying a fixed salary every month, that individual will one still likely be eligible for overtime, there are certain exemptions to that rule. Those exemptions are really on a case-by-case basis based on the employee seniority and their level or not seniority sorry, their level within the organization, and what responsibilities they have. There is a possible way to work around that up to a certain limit every week or every month depending on local country’s legislations, but also the important piece about their 31:48 right to disconnect as important. Some countries have an implied right to disconnect. So that is those countries where you have to have a timesheet of when you are on the clock essentially working for the company. That is how you are going to track your working time and determine when overtime is required to be paid. Then you have other countries like France, where you have actual legislation related to the right to disconnect, which is where the employee has a right after the end of their working hours to disconnect from their email, to some from their phone and not be reachable from the employer. So, it is important to understand that even though you do have an employee who, if they were in the US would be a non-exempt employee or an exempt employee, you would, you may still need to track their working time to ensure that you are meeting your obligations as an employer to give them their rest periods within their shift. Additionally, they are going to be rest periods within the week or working days. So many countries are going to say that after the employee ends or works on a Monday, they cannot start work on Tuesday until a certain number of hours have elapsed. So, you want to keep that in mind as well.

Kym: Talking about employee benefits in Europe is very different from, I suppose, the way the US is set up and I am not going to speak a lot on it because it is not my area of expertise. And if we need to, I am sure, Suraj can. Because European culture is much more, I suppose employee-centric, socialist-centric, however, you wish to say it. There are, I suppose, a lot more statutory benefits that folks are enrolled in and, I use the word folk so clearly, I am becoming Americanized. Statutory benefits in most countries are paying into the national health of that country. So that is the state provision of health care. So not paying into schemes like Cigna and I do not know any other big US providers. So, they are all the benefits that an employee receives from the state that they are contributing to monthly.
There’s a big variation on them, depending entirely on the country. And then, as an employer, you do not get any option on those you are paying into them, which then leads on to supplemental benefits. So supplemental benefits are much more on the lines of private medical, gym memberships, because “Oh, gosh, all of that nice good stuff, I suppose.” Even meal vouchers which can be statutory in some places, Supplemental benefits in Europe do vary hugely. As Suraj touched on earlier, having a global policy on benefits does end up being quite difficult. Some countries, Germany and the Netherlands confer like you need to have or an employee has to have their private insurance. But the obligation is not on the employer to pay for those, it is a standard thing that everyone has. Other than Germany where it is a half contribution, but never mind. It is the fact that the employee has to do it. So other supplemental benefits, I mean, you can take what you are offering in the US and go, we want to offer this here. So, whether that is dental, medical, I do not know what other good stuff free candy on a Friday. Goes back to the whole research thing. It is working out what is best for you. Now, with supplemental benefits, I think the main one to touch on is, if you set up your entity, you are going to need, generally, to have a minimum headcount in that country to source the benefits provider. What tends to be much more common when expanding in a country is including an allowance that allows the employee themselves to purchase their benefits. That comes with a note of caution because once it is in the contract, it is going to be hard to not pay that even when you put your benefits scheme in place.
And other parts of supplemental benefits other than the headcount, the cost just vary, it is not going to be these hot apples for pears thing, you are going to have to work out what works for you. We or lots of other providers would be able to advise as to what are the country norms, what is completely normal in one country will seem bizarre to somebody outside of that country, like getting paid to travel to work, you get your mileage reimbursement in some countries. It is not even a supplemental benefit, it is something that you just have to do, which leads to mandatory benefits. The reason that these default, a mandatory benefit is something that you as an employer have to have in place. But you get to choose your provider in several cases. To explain what I mean by that, I suppose a little bit better. A mandatory benefit could be a pension in the UK. In the UK, we have a workplace pension provision, it has been put in place well over the last decade, and now each company, when set up must have a workplace pension. The government requires you to do it. But you can go out to a pension provider of your choosing, depending on your research, and ask them to set it up for you. Other examples of mandatory benefits are health insurance. So, I know, I just mentioned about in Germany, like the health insurance that people have, if an employee does not have something enrolled, then you would automatically enroll them in their state provision.
What would you like to add on benefits Suraj? Once you have finished your mouthful of water, apologies.

Suraj: No worries, Kym. So again, I think in terms of benefits, it does come down to your research part of it. So as Kym mentioned, your stat benefits are set up, generally through your payroll, your payroll provider, because those are benefits that are paid via payroll tax deductions. So those, like Kym was mentioning, will vary by country. But typically, they are going to include your state-run health system as your typical one. And those benefits may also include non-medical benefits as well. So, you will have different leave policies that will fall under that like some countries have disability leave policies, which may include some level of compensation paid to the employee. You may also be having policies like maternity, paternity, and parental leave as well. So those are going to be different examples of your staff benefits that you are as an employer in that country, just by the means of employing an individual in that country are obligated to provide the employees.
For your supplemental benefit, those are completely up to you. Those are your choice of providing benefits above and beyond. And in terms of doing your research and in this capacity, it is important to understand what is customary to provide in that country. It is important to understand in what countries is the stat benefit. Do they need to meet the customary requirements of what an employee may expect to receive? And then for your mandatory benefits exactly like Kym mentioned just to kind of reiterate here, these are benefits that the government is going to require you to put in place but you get to choose your provider, who will provide those benefits to the employees.

Ryan: All right, it looks like reached the period where we are going to do an extended Q&A. Thank you, Kym and Suraj, for all the information you provided thus far.

So, diving in the first question is What are the top mistakes companies make regarding HR when they expand into the UK? How can they be avoided?

Kym: The top mistake that people make is thinking it is going to be the same as their domestic market and I think we have covered this in length and by domestic I am referring to the States, obviously presuming that most people listening are from there. It is a fact that in the UK, a contract has to be issued on day one. So, you also have to have even Suraj touch on this agreement’s policy or disciplinary policy. They have to be in place, it is not negotiable. It is like a mandatory policy that again is misled by statute. How to avoid mistakes? Realize an approach that each country that you go into is a very different country and each entity is going to be very different. So again, this does come back to the research side, avoiding mistakes, plan, plan, plan, plan, plan. What tends to happen is when clients first expand into a market, they rely too heavily on the person who they have identified to hire as to what are the norms and what should be expected there. So, I think a common one in the UK. The statutory holiday here is 5.6 weeks. And to explain that better it is 20 days plus eight days public holiday. So, here you can either put your holiday entitlement to be paid as companies mandate it. If you do not know the country what will happen is an employee who you are hiring could go “Well, everyone gets 25 days.” Well, they do here like it is a fairly standard 25-day holiday allowance. But you can avoid those sorts of mistakes by doing that research first. Anything to add on that one Suraj?

Suraj: I think the UK is right in your wheelhouse Kym. So, I think you covered that one perfectly.

Kym: Why, thank you!

Ryan: All right, so moving on to the next question. Are there any specific HR requirements for remote workers in Europe?

Kym: Yes, and again it depends entirely on the country. So, with, and I suppose, this trend happened a lot quicker over the restrictions that came in place throughout the pandemic which is still ongoing and is leading to different types of working. A lot of remote workers in Europe, if you are designating their home as their place of work then one, their contract must be issued with their home as their place of work, so you would not be able to have it as you will work out of a random address that does not necessarily exist. So, if you are having someone who is based at home, then different countries when they changed their legislation for Covid, and some of this existed before. So, one, you may end up compensating your employee for using their home as your place of work for them. And that can be monetary, you could be paying towards their house insurance for the change of use, I suppose, into making it business. They would also have potentially home-office agreements. So, as you can see, I am working from home, Suraj is working from home. But that comes with other liabilities because you know, for instance, the way I am sat like I am at work. If I was in an office there would be a specific chair. You may well have a facilities department who would come around and do a desk assessment and go, are you looking at your laptop or sitting the correct way to do it. Now just because someone is working from home those, I suppose, entitlements but also compliance still exists on your side, because it may well be that an employee could ask for a desk assessment at home and then you would be looking into an occupational health provision or a health and safety provider to go and check their workspace.

Other parts, you could be paying towards someone’s electric, someone’s heating. Whether that is an allowance, whether that is mandated you will see in some contracts. And Spanish contracts have been interesting with this because they push legislation through quite quickly. So, you have to stipulate the percentage of the employee’s house that they are using for work and you are including different allowances because they are using their domestic electric supply for private vs business use. So again, this one does come back to, it depends on the country. And it is ensuring that they may not be based in your office but whilst they are working for you what they do, like at their desk, is your responsibility so if they need light turning on then you might be buying that light for them. It is more about having a reasonable policy on this of course it is not to go out and go “Yes, an employee can buy whatever desk chair they want” and you still do it within the parameters of whatever your expenses were. But it is a consideration to bear in mind having an office would be expensive and setting someone up to work from home. Yes, it will be cheaper but it is still not going to be cost-free. You are not just paying someone a salary and that is the end of that entitlement.

Suraj: And I think just adding on, as Kym was mentioning, other countries are going to have more specific regulations. So, your general policy should be one that you are treating your employees’ work from home as similarly as you are treating your employees who work in an office. If your employees in the office or employees are getting a work phone as an example then you would have a similar reimbursement or allowance policy for your work from home employees because even though they are working remotely the work that they are doing is similar or the same as those who are working in your office. Especially for those companies who are switching to a hybrid model now due to, you know, health concerns you do want to keep in mind that your hybrid model cannot disadvantage other employees who work in one location or another. I think the other thing to keep in mind as well as in countries where there are specific legislations or requirements so as Kym was mentioning Spain has a work from home allowance that the government has, mentioned is a requirement to provide to employees to work from home. Also, you may have health and safety requirements in countries like Romania where you have to have a health provider go to the employee’s house or you are going to have the requirement to have a video teleconference appointment where a provider gives the employee training in home-office ergonomics. That is another thing that you know may seem out of sorts to us, to our stateside, but it is a requirement in these countries to have these. So, I would say overarching theme though just to make sure that you are treating all of your employees equally and then in those countries where you do have those specific requirements be aware of them and make sure that you are doing your due diligence to put those in place before the employee starts. A lot of times those requirements are going to be from the date of hire so if you do not have that health and safety training before the employee starts then you would not comply with those situations.

Ryan: Great! Moving forward, I think, Suraj I will address this question to you. So, how do onboarding and offboarding requirements in Europe differ from the US?

Suraj: They do differ in a lot of different ways. So, you will have your general comparability so, you know, determining the right to work and collecting your onboarding document. So those are going to be your documents that payroll needs to set up an employee and payroll to get paid. So, bank details, personal details, tax forms, all of that are generally the same. Now the documents will differ but the process is generally the same where you have the biggest difference is timelines to get employees onboarded so a lot of the countries particularly those that have a socialized health care system, you do have to register employees with the social office in these countries. Those registration timelines will vary wildly depending on the country. As an example, countries like the UK tend to be pretty fast, you can give, you know, the government office 24 to 48 hours at the most at like peak holiday times. But generally, you are talking about 24 hours before an employee start date you have to register them with the social office. What I mean by registered with the social office is you are linking the employee’s tax ID with your corporate tax ID. And that way the government knows when you are deducting taxes from their payroll and you are depositing taxes to the government for your payroll taxes, who to allocate, those tax contributions for. So those registrations sometimes take longer.
In countries like Spain, you are looking at three to five working days. Italy you are looking at again five or so working days, Poland you are looking at, you know, eight working days and that is because you have additional steps that you may have to do before you even do the registration. Those are referred to as our pre-hire requirements. Pre-hire requirements in many countries or I do not want to say many but in a handful of countries in Europe, you are going to be looking at the pre-hire medical examination, so fitness to work examinations, those become mandatory in certain countries, I will use Poland as an example there, where an employee has to go to a clinic, see a doctor and get signed off that they are fit to work. And that is important because if you do not have those tests done, if you do not know those tests exist, those employees are not working, and they are not compliant with the local employment legislation.
So that is an important consideration for onboarding. For offboarding, it is essentially that process in reverse. So, you do have your normal offboarding procedure, termination documents seem to be signed; the payment terms may differ. In some countries, you may have to pay the employee within a certain number of days after their final working date. And that may not align with your payroll process. So, you may need to have consideration around that about processing off-cycle payrolls to ensure that you are in compliance there. Additionally, you are going to have to deregister employees after their final working days. What this means for you practically as an employer is, if you do not have all of your boxes checked, and you do register an employee, it is very hard to re-register them to make any corrections. So, you have to make sure that you have completed all of your off-boarding steps before you do register the employee for Social Security because re-registering them is essentially rehiring the employee from the beginning. So that is, I think, the main consideration. It is not as simple as activating or deactivating a payroll system and the system will take care of itself. It is submitting applications to government offices so that they have visibility into what you as an employer are doing in that country.

Ryan: Great! Kym, is there anything you want to add there?

Kym: Well, no, absolutely beautiful.

Ryan: What is the best way to keep up with ever-changing employment laws in Europe? Are there sources that cover all countries? And are there any major changes on the horizon for 2022?

Kym: The best way to keep up with all ever and changing employment laws is to, in the nicest way, sign up for someone, either a law firm or a different provision who have a network, who send out updates on this employment law, you will get changes every month for different countries.
The long task is to are there any sources that cover all countries? Yes, and no, there are providers who say that they will, you know, cover those updates, etc. But you may find out after the case, you are always working retrospectively. And any major changes on the horizon, very difficult, because they are all different countries. So, I am not aware that there are any pending big, European economic, or like EU directors that need to be implemented. But the answer is, it can change quite quickly. And certainly, the legislation was pushed through quite quickly in regards to the pandemic. Countries who have previously never offered furlough entitlements, push that through, literally in the matter of a couple of months, which in the scope of the law is quick. I think as Suraj and I were saying on the webinar, it comes down to doing as much research as possible.

Ryan: Great. Next up, if we were to hire a US citizen living in Europe, will they be subject to US or Europe HR laws.

Kym: They will be subject to the laws of the country in which they are employed. So, if you have a US national who is, for example, working in France, then they are most likely going to be on a French employment contract. It is the law of the country in which they are working, that would be applicable. I carry out that with the fact it may be on secondment but once someone is in a country for more than six months, that kind of is the cutoff that we use, they need to be on a localized contract and paying the correct tax and the Social Security. If it goes on for much longer, then you could get in serious trouble, because they need to be localized.

Ryan: Thank you for the insight there, Kym. The next question is what should we consider when hiring a candidate that has a visa or other citizenship?

Kym: The most important thing to consider is what sorts of tracking systems do you have in place? If it is an employer-sponsored visa, then you must have, the word that is normally used in law on this is robust, you must have robust tracking procedures that show that you are looking at that visa and ensuring that you stay in compliance. The other part is most visas in Europe tend to be issued either on a one-year, three-year, or five-year basis. Again, there are country variations on that. It is ensuring that that employee has the right to work. Also bear in mind that all of the documents that they provide are going to be in the language of that country. So, you may well be incurring costs quite quickly to ensure that you have the translation to fully understand what that means. Suraj, you love visas and immigration, do you have anything you would like to offer on that one?

Suraj: Yes, there are a couple of considerations here. So, the first and foremost thing is, again, understanding what the requirements are. In many cases, you may have employer-specific requirements when you go out to try to hire a foreign worker. In a handful of European countries, you will need to make sure that your local entity is registered and is approved by the immigration authorities to hire and sponsor foreign workers. That is going to be, kind of, your first thing to check off of your list here. Additionally, like Kym was mentioning, there are a lot of visa types in Europe as well. And they vary based off of where the employee is relocating from, what nationality they are, and what skills and qualifications they have as well. Depending on those additional factors, which from my perspective, it is always important to do a visa assessment before you go down this route.
With those factors in consideration, you may have varying costs and timelines to get visas in place. It is not as simple for non-European nationals to work in Europe, there are several steps that must be taken in the home country before that individual can relocate to Europe. So, you could be looking at a timeline that is as short as four weeks. But that would be extremely out of the ordinary. Typically, you are going to be looking at a timeline, that is eight weeks at minimum. And in some countries, depending on where the individual is relocating from, you could be looking at steps to take in the existing country that could take you three to four months to complete. Your hiring timeline is a lot lengthier when you are looking to hire an individual with a visa or other citizenship. The good news is if you have an individual who is a resident, and a citizen of a country in the European Economic Area, they can work in other European Economic Area countries without requiring an additional visa. And that freedom of mobility and freedom to work is a great benefit of hiring employees in Europe in particular.

Ryan: Thank you for the detail there. The next question is kind of around Covid. So how has COVID-19 affected European HR policies and law, and then the guidelines for work in the office? And then on top of that, are there any guidelines on whether HR can track COVID-19 vaccinations?

Kym: Covid affected HR policies and law in Europe to the extent, I suppose, very similar to the US where it was much more work from home. In a lot of cases that was implemented very quickly, and employees did not necessarily have I suppose the equipment in the proper setup. This kind of goes back to the health and safety that we were discussing in the webinar. So, the main changes were the very quick push through of furlough pay and also home working and how that works in practice, but also linking that into the right to disconnect. And the moment your home becomes your workplace, it is a lot harder to log off. And the guidelines for working in an office vary per country again. Some countries are now very much into well, everyone is double vaccinated so please go back into the office. Much more common at the moment it has been moved to hybrid working, you still got those with responsibilities, where isolation is having to be done. Guidelines in the office still generally, I suppose exist with either hot-desking, lots of sanitizing, but they are much more on a company level. Not a lot was forced through into law really on that.
Tracking Covid vaccination status, quite a contentious topic and I do understand the question. The answer to this is there is no definitive answer, which unfortunately is probably the best answer that I can give. In certain industries, there is the obligation to disclose if you are vaccinated or not. I am coming at this; I suppose more from the UK standpoint. As a company, you can, in theory, make it a practice that you are asking and this again is just the UK that employees are vaccinated. However, this does come with a very large caveat that says you must have a genuine reason for wanting that. And the rights to privacy is very much enshrined in European law. You need to have a genuine reason to request like, are your employees vaccinated? Are they not realistically an employer. Painful as it can be, it is not necessarily to do with you, I suppose the anti-Vax movement is all over the place, some people are happy to be vaccinated, those who are not, I think before requesting that status, it would be the due diligence, that particular country to understand why you require that information and what you are going to use that information for, which does very much closely link to the GDPR that we were discussing previously.

Ryan: Great, so moving on. What are the best practices for employee compensation? Are there regulations for paying individual bonuses or a cap on bonus amounts, as a percent of base salary?

Kym: Again, hard to answer for European general because there are still different regulations in the country. Best practices for employee compensation, I suppose the best practice is also always to ensure that you are paying people on time. And all European employment contracts will stipulate the day on which you are to be paid, whether it is the last working day. Payroll in Europe is generally once a month, which is very different from the bi-weekly cycle that you have in the US.

Are there any regulations for paying bonuses? Well, this comes down to the contract. So contractual wording on bonuses tends to be much more along the lines of a bonus may be applicable. And keeping it as brief as that I think one thing to mention is that the moment you start making regular payments in Europe in general, then that can be seen as part of the contract via customer practice. So there is not necessarily a regulation that says you need to pay out a bonus, it is just always the supporting evidence. So, whether it is based on company performance and individual performance. It is how you write that into a contract and as diligent companies who are looking to expand, you would, of course, have done that alongside employment lawyers in each country.

Caps on bonus amounts as a percentage of salary, not that I am aware of. Certainly, I know it is not in the UK, it may be the case in other countries.

Ryan: Thank you, Kym.
The next question is could you provide us with some information on TUPE.

Kym: TUPE is such a broad concept that it is hard to say like information on TUPE. So briefly, TUPE stands for the Transfer of Undertakings (Protection of Employment). This is European legislation that was enacted into the member states. What it means in practice is if a company is buying another and this is just a very broad example, then those employees cannot be disadvantaged by the fact that their company has been sold. It also applies in the provision of a service transfer. So, say, for instance, one company is managing IT outsourcing, that is moved to another company, those employees have the right to transfer to the new company. Anything where TUPE is involved, you need legal advice. Even as someone who has been doing TUPE for many, many years, I will still always pass information past legal to ensure there are different ways that it is done, you start hearing lots of statements such as what are the measures? What is the ELI, the legislation does change? The UK updates were a few years ago to reduce the parameters on it.
That is the kind of most brief but I suppose broad overview I can get on TUPE without knowing much more about a situation.

Ryan: The next question, I think we touched on a little bit in the hiring portion. But what are some rules around placing someone on a performance improvement plan? Is there a requirement on the amount of time for a PIP?

Kym: So, placing someone on a performance improvement plan, generally, the structure in which it is done where you stipulate the objectives and what the employee needs to improve upon does not change. The main, I suppose, is not a rule, but as always, it comes down to documentation. If you are experiencing issues with someone’s performance, what tends to happen generally is the issues have been ongoing before well, at least six months before HR tends to get involved. It is only once you stop documenting it that the PIP is documented as it were. Anything verbal just does not count. It is a trail of emails and objectors to show the correction that needs to be made. In regards to is the required amount of time for PIP, though, this comes down to one of these wonderful legal concepts, the role of what is reasonable.
My UK example again, is, you would to do a robust procedure, it would be at least one month, you then convene a disciplinary, you then put them back on a PIP, you then have another disciplinary, you then put them back on a PIP. It works like that reasonably; you must show that you have given them ample time to improve their performance. I think the absolute minimum I would ever say would be three months, it varies by country, some cases, they will expect you to have sent employees on training courses because the onus is much more on the employer to demonstrate why that person is failing. And it is not seen as a failure on the behalf of the employee. He is seen as a failure on behalf of the company because you have not trained your employee up well enough.

Ryan: Thank you for the information there. The next step is how does hiring the UK employees in the EU work now due to Brexit?

Kym: It is painfully difficult is the honest answer. After Brexit and article 50, you had a time, so you have to be a UK citizen or resident in a country on that 31st of December 2020 date. Most people are not, what that essentially means now is if you want to wish to hire a UK national in Europe, they need to go through the same visa process that anyone else would go through. It is no longer the case that you can offer a Brit a job in Germany, Sweden, you know, any of the European Economic Area countries, and they can start. You are going to be looking at a timeline of probably a couple of months at least so that an individual can obtain a visa. The loss of freedom of movement is one of the saddest things about Brexit.

Ryan: Thank you for the information there.

Our next question is can you provide some information on the new 30% ruling in the Netherlands?

Kym: 30% ruling in the Netherlands has been established for several years. So, what this is, employees who are moving to the Netherlands to take up a job there. The most recent change was to reduce it from ten years down to five. Anyone who now applies for a 30% ruling would only receive that benefit for five years. The crux of the matter is that person must have been hired from outside in the Netherlands or via a transfer, you cannot necessarily move to the Netherlands apply for a job and go “I would like to apply for the 30% ruling now.” It is a great benefit for those working in the Netherlands, the taxation can be seen as quite high, again, it depends on your basis of comparison. But that is the main change, it is to reduce the timeframe that is applicable for it used to be for 10 years.

Ryan: Next up is what are the German personnel privacy laws? What cannot be maintained in our HRIS?

Kym: So, the German laws come off the back of GDPR. This is the fact that your employees and, I am just speaking to employees, this does apply for any data that you maintain or process. They must give explicit consent for what is being maintained and processed for them. What cannot you maintain in your HRIS? it depends on what you are asking, and why you want that information on file. So, if you need someone’s name, their address to process payroll, great. Do you need to know that person’s maiden name? Do you need to know their marital status? It is all on the basis of what information do you legitimately need to hold to maintain that.
I suppose it is also with encryption. So, under GDPR if you are going to be processing data outside of the European Economic Area, you must also have explicit consent. I guess the answer is you can maintain whatever information you need. It is on you as an employer to justify why you need to hold it with the explicit consent of an employee.

Ryan: Next up is does each employment contract needs to be its language? Does this mean that for example, in the Netherlands, the contract should be in Dutch?

Kym: To answer the Dutch one here, specifically a Dutch contract can be in English, as long as both parties understand English and sign that document is legally binding, there is no need to have that issued in Dutch. It does not apply to other countries across Europe, you will see a lot more common that the contract will be issued in the local language with the English being provided as a side translation. The best practice would always be to have it in the language of employment because it avoids any ambiguity. Understandably, as HR professionals, you are not going to know every European language, I wish I did. But I suppose in the event of a dispute, what you do not ever want to have to happen is someone go “Well, I signed the contract in English and it was not presented to me in Dutch. And I do not understand this.” Not specific to the Netherlands. But I have had that happen before where all documents were issued in English legally acceptable and then it is a case of an employee going, “But I do not understand.” So, I would always advise having it as a dual language contract, wherever possible.

Ryan: Thank you, Kym.
Next up is what circumstances lead to Work Council involvement/ compliance requirements? Is it affected by company size in the country, certain roles (exempt or versus non-exempt), or other variables?

Kym: Work Council tends to be involved once you reach a certain headcount, or the employees request that they form one. Again, depends on the country, but generally is much more to do with what is your headcount there? Not certain roles, in particular, I think certainly the more blue-collar roles, or manual, I suppose to put it more into European vernacular, it probably would come up a bit more. The exempt/non -exempt I know we covered in the webinar, does not exist in Europe. Like, you could have your CEO who would be entitled perhaps to overtime payments. And more common is you can have a CBA but no works council.

Ryan: Great. So, moving forward I think these are the last three questions. The first of which is does working for a US company in Europe with any statements or specific region associated reputations?

Kym: That is a really interesting question. Can it? Yes. But I suppose what this comes down to is almost the national stereotypes of like, the French romantic, the Italians, or Berbers. The Germans are very pedantic. It is all these kinds of ridiculous stereotypes that people have in their heads. And of course, I am not saying any of those countries or nationalities are like that they are just generally stated stereotypes.
The world is small. Certainly, I think we all realize that even more with the pandemic because everyone was working from home. And I think one of the best things about working internationally is meeting all of those different people. I think the biggest stigma if I am ever going to address one is the expectation that people go, “Well, that is how it works here. So why cannot we do it there?” And hopefully, over the course of the webinar demonstrated each country is different. You can have different state rules between California, Texas, I do not know pick your state, exactly the same as it is in Europe.

Ryan: The next question is kind of again, drawn from some trends we are seeing in the US. So are we seeing the same trend in Europe that we are seeing in the US regarding the great resignation?

Kym: To some extent, yes. So, where everyone has been working from home for a lot of time people are reassessing. It is very much an employee’s market in Europe. It is everyone evaluating and working out what works for them. Resignations are picking up I noticed it amongst our clients. And I think the feedback to that is it depends on how companies have worked with their employees throughout the pandemic. So yeah, the trend is worldwide. And it is not just limited to Europe either. We are certainly seeing it across APAC, too.

Ryan: Great. And then the final question now I will just as quickly to the both of you, Kym and Suraj. What one piece of advice would you give to a company just entering European markets?

Kym: My one piece of advice is and I will jump in and beat Suraj to this, do your research, understand what you are getting into. So do not just think, “Oh, this is what we want to do, we are going to do this. And this is what we do here. And it is going to work there.” Research, research research, I cannot labor enough, understand what that country is and what your compliance and the expectations are going to be.

Suraj: Kym, you stole my piece of advice, I think is something on the fly here. But what I would add to that as one piece of advice is, once you do your research and understand what your requirements are, please do ensure that you are trying to follow those requirements as closely as you possibly can. I know some things are business decisions and other things are HR decisions. But when it comes to employment law in particular, that should not be a business decision that you are choosing to follow or choosing not to. Europe is a very, the EU in general, but European employment law as we have mentioned, the webinar is very employee-centric employee-facing. So, any areas where you can minimize your risk by simply following the letter of the law is highly recommended. The cost and time commitment to go back and try to fix things or if in the event, they do go wrong and you have to now deal with the consequences can be very time-consuming. But I think even more important than that, from a business perspective can be very expensive in terms of fines or incorrect payments that you have made to employees, things of that nature. So not only do your research but please ensure that you are communicating within your organization about what your requirements are and why they are so important and that you must be following them to minimize your risk as a business.

Ryan: Thank you both for your answers there.
It looks like we have reached the end of our Q&A. We want to say thank you very much for the insights to you, Kym and Suraj. And thank you to all the attendees for your questions. We appreciate everyone’s participation and hope you all have a good rest of your day.

Panelists

Kym Sanderson

Senior Director, HR

Kym has considerable experience supporting companies with their HR needs in Europe. In previous roles, she has worked as part of European and international HR teams, as well as in HR advisory functions. During her time working at Tesla, she helped rapidly expand their European operations. Her areas of expertise are EMEA employment law, acquired rights, and contract standardization.

Suraj Sharma

Senior Director, HR

Suraj is an experienced HR professional who specializes in employment contracts, benefits implementation, immigration, and mergers and acquisitions. He has spent several years assisting multinational companies in various cross functional capacities, and currently supports the HR needs of companies in over 40 countries worldwide.

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