Understanding employment rights oveseas becoming more important for mobile Irish workforce
Working across different national boundaries for undertermined time periods can create grey areas when it comes to employment rights and tax obligations
While jobless Irish make up the majority of those taking up positions overseas, employees of multinationals are also being sent abroad in large numbers
A greatly reduced demand for workers in Ireland in recent years, coupled with skills shortages in rapidly expanding global markets, has led to a much more mobile Irish workforce.
While jobless and underemployed Irish people make up the majority of those taking up positions overseas, employees of multinationals are also being sent abroad in large numbers, with long-distance commuting, frequent business travel and short-term assignments in other jurisdictions providing a more flexible alternative to conventional long-term secondments for both employers and employees.
But working across different national boundaries for undetermined time periods can create grey areas when it comes to employment rights and tax obligations, and employees need to be vigilant when signing contracts for overseas assignments to ensure all eventualities are accounted for.
A survey last year by PricewaterhouseCooper revealed that one in three employers don’t have an international employee mobility policy in place, and this informality can cause problems down the line, according to Davnet O’Driscoll, associate with Hayes Solicitors and member of the Lawyers International Network for Employees and Executives (LINEE), which provides legal advice for globally mobile workers.
“There’s a whole range of different setups for employees going overseas. It depends on the organisation, duration of the assignment, and whether the employee is to be seconded or transferred to another company or subsidiary, which is usually short-term with a right of return, or relocated on a more long-term basis,” she says. “Each situation has different implications for the employee’s status in the long-term.”
A new contract may not be necessary for short projects, but if an employee is to be posted abroad for longer than one month, employers are legally obliged to provide certain terms in writing before departure.
The most important thing to establish is whether the worker’s direct employer will change, O’Driscoll advises. The jurisdiction of employment should be identified clearly, especially if the position involves a lot of travel.
If there is a problem then the employee will know who to complain to, or what jurisdiction to sue in.
Employees who are relocating will generally have their current contract terminated before taking up employment on a new contract with the new company or subsidiary overseas.
“Employees should look at things like continuity of service and seniority to ensure this is taken into account, assurances as to how long the job will last, what is the position in relation to return, and what their employment rights will be, which can be very different to Ireland, depending on the jurisdiction,” O’Driscoll says.
Employees relocating to the US are particularly vulnerable, as employment law is much less protective there than in Europe and companies can hire and fire at will. Existing service may not be recognised, nor may entitlements to severance packages in Ireland.
In many instances, especially for secondments where employment remains with the Irish company, it is possible for employees to bring their current terms and conditions with them to the host country, or negotiate to “equalise” provisions like annual leave. This is especially significant for countries outside the European Union where the statutory minimum of 20 days holidays does not apply.
In countries where there are greater rights to things like working time, the employee will accrue them. This can be particularly beneficial for young parents working in Scandinavian countries where paternity and maternity leave arrangements are much more generous than here.
“Companies will often allow for a greater number of holiday days if an employee is moving far away, to facilitate them to visit home,” O’Driscoll says. “Some companies will even pay for a return flight once a year, which will be included in the contract.”
Other benefits, such as paid accommodation, transport, health insurance and school fees for children, may be included in the package, especially for people relocating with a family. These should be detailed on the contract.
No matter how enthusiastic the employee is about the move however, ensuring there is an “escape clause” included is vital in case things don’t go to plan. “There is always a chance they won’t like the work environment, or their family don’t settle, or someone could fall ill and they might need to return home,” O’Driscoll says. “They need to be absolutely sure about how this is dealt with in their contract. Will they have the option to return to their old job?”
Employees on a work permit or visa who have moved abroad with a view to staying long term should be aware of how their status in the host country will be affected if they are laid off. Workers on the employer-sponsored 457 visa in Australia, for example, must find alternative sponsored employment or leave the country within 28 days if their job ceases.
It is also important to be aware that if the employee is working outside the country for a period of time and is then made redundant, they are not generally entitled to statutory redundancy in Ireland.
Although some workers are using overseas opportunities to advance their careers, most are relocating in the current climate because they don’t have a choice, O’Driscoll believes. But even if they are leaving reluctantly, the packages on offer can be very generous.
“In the majority of instances, the employer wants the employee to go, to fill a skills gap or to share knowledge, and will do their best to incentivise them. If an employee is unhappy with what is being offered, it is within their power to negotiate.”
When the tide went out at home...Marine engineer set sail for Australia
Maritime engineer Stephen Fraser had just finished working on the redevelopment of Greystones harbour in 2011 when his firm offered him a temporary transfer to Brisbane, Australia.
Despite being married just two months, it made sense for him to go. The industry had stalled here and the opportunities for career advancement working on multimillion dollar projects in Queensland were great.
He was employed by the company’s Australian subsidiary under their terms and conditions for 18 months.
An international mobility team talked him through his options before departure, while a relocation specialist helped him settle on arrival and a tax consultant assisted with financial issues.
“I can’t help but think how hard it must be for people who arrive in a new city completely on their own and have to do all of that for themselves without any support,” he says.
Fraser completed a short four-month stint in London last year before returning to Dublin in December. “The agreement was that at the end of my assignment, I would revert back to the Dublin office.”
Money Matters: Balancing income tax obligations at home and abroad
If an employee is outside Ireland for more than 183 days in one year or 280 days in two years, they are considered non-resident and are not liable to pay tax here. Workers who travel a lot will be obliged to keep track of the number of days they spend in Ireland and abroad.
The Irish Government offers a Foreign Earnings Deduction for work-related travel to certain countries, which entitles eligible employees to tax relief on income up to €35,000.
To qualify, workers must spend a minimum of 60 days developing export markets in the BRICS countries of Brazil, Russia, India, China and South Africa, or in selected African nations.
Christine Keily of Taxback.com advises employees to look carefully at the tax position at home and in the host country, and to ensure there is a policy for tax equalisation or protection in the contract.
“Equalisation guarantees the employee will be no better off or worse off because of the different tax rules, whereas tax protection means they will be no worse off and could gain from it, which is a huge incentive for workers moving to the Middle East for example, where there is little or no tax,” she says.
Many countries provide tax incentives for overseas workers. An allowance in the Netherlands reduces the amount of taxable income by 30 per cent for employees recruited from abroad, while the US and UK have schemes to allow for tax-free hotel accommodation and subsistence expenses.
Retaining social security in Ireland is important if the employee intends to return. If they remain working for an Irish employer for the duration, they will remain within the Irish system, but a transfer of prior contributions to another country is accommodated by EU rules or a bilateral agreement, Keily says.