Some statutory benefits may seem obvious, such as mandatory paid time off requirements and varying health care contributions, but don’t assume that each benefit will be the same in every country. In fact, many of these withholdings vary greatly across borders. We’ll cover the basics below, but when in doubt, it’s always a good idea to rely on a payroll partner or international consultant to help guide your operations overseas.
Though you’ll likely be working with a team of skilled employees, it’s important to consider the requirements for minimum wage in each of your operating locations. As you might predict, minimum wage requirements are vastly different across the spectrum of nations. For example, in Canada, similar to the United States, the minimum wage is determined by both federal and provincial statutes. While in Greece, the minimum wage is set as a daily and monthly wage that is determined by employment type and established by the National General government. So, it is important to determine in advance if minimum wage will affect your employees based on both their location and type of work.
As you may already know, termination requirements overseas are typically very stringent, relative to the USA. In many countries, contracts dictate the length of employment, payment and employment type. You cannot terminate employees at will. These strict requirements lead to the possibility of having to make severance payments, otherwise known as termination payments. The nature of these payments, as with everything else related to statutory benefits, varies by country.
When terminating an employee, it’s important to consider if the country in which your organization is operating mandates the payout of employees by a standard fee, a specific portion of their salary, or other payment structures that can be determined by agreements with unions and other labor organizations. Plus, it is likely that your organization will need to make additional payments towards statutory benefits like health care and pensions for terminating employees
In many foreign markets, employers are required by labor law to provide employees with a minimum paid time off for holidays throughout the work year. For example, in the United Arab Emirates, an employee is entitled to a certain amount of paid leave for each year of service, equal to at least two calendar days per month for an employee who has more than six months’ service but less than one year’s service, and 30 calendar days per year for an employee with more than one year of service. Outside of holidays, many countries also require minimum paid time off for sick leave.
This is not uncommon across the world. But it is easy to lose track or miscalculate vacation days. It is one of the top 3 errors that we see regularly in global payroll. So, ensure that your team is prepared to navigate paid time off accurately and efficiently throughout the year with resources and plans that prepare everyone for these requirements.
There are a number of countries with generous maternity — and sometimes paternity — leave benefits. Many of these plans are governed by the federal government, but some countries require an employer to pitch-in with assistance. In either situation, it’s important to plan for these types of long leaves from a staffing and resources standpoint. In Finland, for example, expecting mothers can start their maternity leave seven weeks before their estimated due date. After the birth of their child, the government covers 16 additional weeks of paid leave through a maternity grant, regardless of the mother’s employment situation. Finland also offers eight weeks of paid paternity leave.
If you have temporary team members or agency workers on staff in your international operations, don’t assume that they’re not subject to the same statutory benefits that your permanent employees receive. In China, for example, all employees no matter their status are subject to the statutory benefits determined by labor law, which also includes severance pay and time off.
As mentioned, not all benefits are straightforward. There are a number of nuances to understand when entering new markets. One example includes the required 13th-month salary, also known as the Christmas Bonus, in Brazil. For each 12 months of a calendar year that an employee in Brazil works, they are eligible to receive an additional one-month salary, usually paid half in November and half in December of each year.
Also, in India, one’s annual salary is typically broken into many different allowances and/or components with various tax treatments. These allowances include some unusual (to Americans) benefits for ordinary employees, which you can learn more about in this post.
In addition, many organizations are offering unique benefits such as volunteer stipends, unlimited paid time off, and remote working privileges to give themselves an edge in the marketplace. While these may not be required by law, they may be required to attract the best talent, as industries and local employment markets become more and more competitive.
If you have any questions for us on payroll around the globe, please feel free to contact our team. We are here to help!