Legal opinion: Global mobility of employees

Jonathan Exten-Wright, Carl Soan and Lynda Finan, DLA Piper’s global mobility unit, consider some of the key issues that arise from international employee mobility, and the careful strategic planning required ahead of any move.

It is vital that a company’s HR team is well aware of all the issues and challenges that can arise when planning secondments or permanent moves for their members of staff. These issues need to be addressed on a case-by-case basis and with a knowledge of each relevant country’s tax, immigration and employment laws and culture.

Secondment or local employment?

Tax and employment issues often influence the choice between secondment by the home employer, or local employment with the host employer. Generally speaking, the longer the posting the more likely localisation will be preferred, but secondment is often more appealing to, and is usually expected by, those who are to be moving abroad.


Employers should consider what benefits are to be offered. These could include: medical benefits; travel expenses; accommodation; holiday; pension; outbound and repatriation travel costs; shipment of household goods; and destination services such as local orientation, home or school search and banking set-up assistance. They should also consider what the effect of the posting will be on commission and bonuses.

It is important to consider whether existing remuneration levels will be preserved or remuneration will be “localised”. Much depends on the length of the posting, the seniority of the employee, the significance of his or her role and the tax implications.


Subject to the tax implications, an employer may wish to preserve the value of the remuneration package by tax equalisation. This involves the employer paying any additional taxation arising as a result of the assignment. Equalisation payments may themselves be subject to tax and social security contributions (as in the UK), so the potential cost needs to be taken into account.

An inter-company agreement will usually be put in place between the home and host employers. This will need to be carefully considered to avoid adverse tax and VAT complications.

Entering into a local contract

If the employee enters into a local contract with the host employer, both home and host country’s tax regimes may apply depending on the length of stay and the sources of earnings during the posting. Localisation may be a cheaper option by removing the need to tax equalise.

What are the critical tax issues?

Tailored tax advice will be needed from the home and host countries because of varying tax and social security regimes.

Employers should consider:

  • the different factors affecting the tax and social security position (eg the nature, length and start and end dates of the posting/employment, and the number of days spent in/out of the host country);
  • the tax and social security treatment of different types of reward, opportunities for mitigating costs, and tax reliefs available for expatriates in the host country; and
  • the tax and social security withholding obligations in both countries.

Key terms when drafting a contract

Some key contractual considerations that any company seeking to relocate employees needs to consider are:

  • Is a claw-back provision requiring employees to repay costs if they leave early appropriate?
  • Are the employees’ existing post-termination covenants still appropriate and enforceable taking into account which countries’ laws will apply in the event of a dispute?
  • Which law will apply to the contract? Host country mandatory laws may still apply to “trump” contractual terms, and these need to be understood.
  • Which courts will hear any future dispute? The so-called legal jurisdiction may be specified in the contract, but will local courts respect this choice of forum? For example, if an employer wishes to sue an employee for breach of his or her employment contract, an employee domiciled for the purposes of employment in a European member state is entitled to be sued in that country regardless of any contrary provision in the contract. Such employees can sue their employer in the member state in which the employer is domiciled or in the member state in which he or she habitually carries out his or her work.

What should the employer anticipate when the posting ends?

Obviously, practical issues will arise such as what relocation and/or repatriation costs the employer will cover, and at what level and salary the employee will return.

Termination of a local contract may trigger claims locally, which could result in mandatory compensation. The employer should consider including in the contract a power to recall the employee, instead of terminating the contract.

The tax treatment of any termination payment will need to be considered in both home and host countries.

Employers should not forget that, aside from the legal and tax implications that must be considered, there is an important role to be played by HR teams in preparing staff for secondment and the cultural issues they may face.

Jonathan Exten-Wright, Carl Soan and Lynda Finan, DLA Piper’s global mobility unit

XpertHR International

XpertHR International is a valuable HR tool for anyone responsible for looking after staff based outside the UK. XpertHR International covers basic employment law for key multinational areas, including recruitment and selection, pay and benefits, employment rights and contracts of employment.

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