Companies use Employer of Record (EOR) services to streamline their international hiring processes. By doing so, businesses can manage employees in different countries without setting up a local entity. However, when it comes to terminating a worker under an EOR arrangement, clients must follow specific protocols in partnership with their EOR provider to avoid legal risks and ensure compliance. Here’s a breakdown of the key responsibilities for clients in such situations:
1. Understand the EOR’s Role in the Termination Process
One of the primary functions of an EOR is to act as the official employer of the worker, managing legal compliance in employment matters. This means the EOR is responsible for following labor laws related to termination in the relevant jurisdiction. However, the client directs day-to-day work and ultimately decides whether to keep or terminate a worker.
As a client, it is your responsibility to inform your EOR provider of your intent to terminate, but the actual legal process and execution of the termination are carried out by the EOR in compliance with local regulations. Timing is crucial when executing a termination process.
2. Provide Clear Documentation and Justification
When a client decides to terminate a worker, they must provide the EOR with clear and legitimate reasons for the decision. This might include:
- Performance issues
- Redundancy or restructuring
- Misconduct
- Other business-related reasons
Providing supporting documentation, such as performance evaluations, incident reports, or restructuring plans, can help the EOR execute the termination in a legally compliant manner. An experienced EOR provider will lay out the best strategy, depending on the country, to end the employment relationship in the best terms for all parties.
3. Comply with Local Labor Laws
Each country, and sometimes regions within countries, have their own unique labor laws governing termination. These laws may dictate:
- The required notice period before termination
- Severance payments
- The handling of unused paid time off
- Procedures for wrongful termination claims
While the EOR ensures compliance with local laws, clients, with the support of their EOR provider, should understand the general rules that apply in their specific case. In some countries, termination without a valid cause could result in costly severance obligations or even legal claims.
4. Support the EOR in Worker Communication
Although the EOR carries out the official termination process, when the location and process allows it, clients can partner in communicating the reasons for termination to the worker in a clear, respectful, and transparent manner. Since the client has the direct working relationship with the employee, when appropriate, the client’s participation humanizes the process for the employee being offboarded.
Additionally, the client, with the assistance of the EOR provider, should ensure that the termination discussions are handled professionally, with appropriate documentation in place, to minimize the risk of disputes.
5. Follow Required Notice Periods
Many jurisdictions require a minimum notice period before terminating an employee, which can vary depending on the employee’s tenure or the nature of the termination. The EOR will guide the client on the required notice period in the applicable country, but the client and the team directly involved with the offboarding worker should be aware of these obligations to avoid surprises.
In some cases, clients may choose to offer a payment in lieu of notice (PILON), which compensates the worker for the time they would have worked during the notice period.
6. Coordinate Severance and Final Payments
Severance obligations also vary greatly depending on the country of employment. Clients need to share with their EOR provider any specific agreements or obligations negotiated with the worker in relation to severance payments. In certain cases, clients may wish to offer additional compensation to smooth the transition for the worker, but this must be done in coordination with the EOR to avoid overstepping legal requirements.
The EOR will handle the disbursement of final pay, severance, and any outstanding benefits, but the client should confirm that these amounts align with their expectations.
7. Post-Termination Obligations
Some countries may impose post-termination obligations on both the employer and employee. For example, there may be non-compete clauses or confidentiality agreements in place that continue after the worker’s employment ends. Clients should ensure that any relevant contractual clauses are enforceable under local law and that the EOR includes these in the termination process.
Additionally, clients should ensure the return of any company equipment or intellectual property and address any outstanding projects before the worker departs.
8. Prepare for Possible Disputes
While a properly handled termination often results in a smooth process, there is always the possibility of disputes arising from the worker. If the worker believes the termination was unjust or did not comply with local laws, they may raise claims of wrongful dismissal. In such cases, clients should be prepared to work with the EOR and legal advisors to resolve the matter.
The EOR will often be the primary party in handling these disputes, but the client’s input and documentation will be crucial in defending any claims.
Conclusion
Terminating a worker under an EOR arrangement is a process that requires careful coordination between the client and the EOR to ensure compliance with local labor laws and minimize the risk of disputes. By understanding their responsibilities—such as providing clear documentation, adhering to notice periods, and coordinating on severance payments—clients can effectively manage terminations while protecting their business interests.
Remember, working closely with an experienced EOR partner, like Quadlux, can help navigate the complexities of international terminations, ensuring a smooth process that balances both legal and business considerations.
