The topic of employee termination or dismissal is probably one of the most sensitive and trying subjects when it comes to employment. Adding a plethora of various country-specific regulations and protocols makes an already difficult situation even worse. That being said, every global employer will have to address this topic and know how to proceed to ensure a smooth dismissal. Here is some of what you need to know when tackling the global terminations process.
Latin America and Europe are viewed as extremely protective of employee rights particularly when it comes to terminating employment. Not only must an employer have built a strong case for termination (if involuntary or due to redundancy), but they must also know to take into account what is outlined in the Collective Bargaining Agreement (CBA) or dictated by a Union or Worker’s Council. Terms and conditions may vary heavily, depending on what is regulated by the CBA. Many employers throughout Europe and Latin America work with labor lawyers throughout a termination to ensure that they are taking all of the appropriate measures to handle the termination as per the employment contract and CBA. In many cases, there must be an official sign off in agreement for the termination. It is not unusual for a third party to provide a signature as well, this is the case in Italy. If all of the proper measures are not taken to handle the termination, the employee has the upper-hand and can take the employer before the local authorities.
Upon termination of employment, an employee will often receive a compensation package made up of a number of different components, thus employers must be aware of their obligations around the globe. Some of the universal components are: Salary due up until last day of work, unused or accrued vacation time, and any severance due. Many countries have additional payment components that are unique and would need to be paid out at the time of termination such as:
TFR (Tratttamento Di Fine Rapporto) – Italy
End of Service Benefit – UAE and Saudi Arabia
Long Service Leave – Australia
Gratuity Payment – India
Many countries have requirements to pay terminated employees all compensation due within a very short time frame, at times 48 hours after termination. This requires HR to be heavily involved in the termination process. Payroll also needs to be involved to ensure the final net pay is delivered to the terminated employee’s bank account within the time frame specified, which means an off-cycle payment may be required. Many countries around the world require the employee to be paid on the last day of work or within 7 days of the last days of employment such as in France or Vietnam. It is important that you are aware of each countries requirement for payment upon termination.
Upon delivery of termination payment, the final step may include a production of a termination statement or document that is to be provided to the employee and/or authorities as required. It is important that you are aware of each countries requirement for such documents. Here is a list of a few from around the world:
UK – P45
Spain – Finiquito
Mexico and Bolivia – Finiquito
Hong Kong – IR56F
Singapore – IR21 (non-Singapore citizens)
Although there may be procedural differences and various complexities around the world, global terminations are not a topic to address lightly. It is important that you as an employer understand the nuances and requirements that you are obligated to follow and Celergo can ensure from a payroll perspective we handle the matter with utmost care and accuracy.
**This article is for informational purposes only. It is not intended to constitute legal advice.