Checklist for negotiation of an expatriate employment contract
Before you sign an expatriate employment contract, there are a number of preliminary matters that you should address your mind to. These matters include:
Background checks on the company
Remember, you are interviewing the company as much as they are interviewing you. Accordingly, have you undertaken a Dun & Bradstreet search on the proposed employer? If the company isn’t paying its bills, why would you want to work for them? Check to see if there is any mention of the company on glass ceiling.
Personal security issues
Have you properly investigated the personal security issues that you may be confronted with in the city/region where you are being asked to work? The web site of the Department of Foreign Affairs and Trade would be an appropriate place to research these issues.
An insurance audit and estate plan
You need to undertake a proper insurance audit to ensure that all of the risks to your life, health and property are properly covered while you are away. On average, 1600 Australians die every year when travelling abroad. If you suffer illness, injury or death while overseas, it is absolutely essential that you have life insurance, income replacement insurance, disability insurance, health/dental insurance. You also need to have an up-to-date will and an Enduring Power of Attorney.
Informal discussions with prior executives
This may not always be possible, but where it is, you could consider speaking (on a confidential basis) to any former executives of the company. They may be able to provide you with insights regarding internal politics and personalities that you are unlikely to glean from the recruitment consultant. It could be very useful, for example, to find out that the person to whom you will be directly reporting is regarded by many within the corporation as a sociopath. This may involve some digging around, but the more you can find out about the company you are proposing to work for before you leave the country, the better.
Accommodation in your foreign destination
Have you considered the rental/property market in the country in which you will be working? Until you know how secure the position will be, you should avoid signing any long-term lease commitments. If you can, you should negotiate short-term leases with options to renew.
It is better by far that you negotiate with the company that they are responsible for providing accommodation to a suitable standard. This means that, if you are suddenly forced to leave because your employment has been terminated, you are not exposed to any action at the initiative of the landlord for lost rent.
Managing your home in your absence
Have you considered what you will do with your own property while you are away from Australia? If you can afford it, you may consider leaving the property vacant for the probationary period under your expatriate employment contract. In the event that you need to return to Australia quickly, you would therefore not to have to worry about your accommodation upon your return in what would no doubt be stressful circumstances. If leaving the property vacant for this period is not feasible, have you made contact with any managing agents who could look after your home and find suitable tenants in your absence? You should bargain hard to obtain the company’s approval to pay for your relocation expenses to the foreign destination and upon return to Australia in the event that the contract is terminated for any reason.
Immigration status in host country
On the assumption that your entry into the foreign destination is permitted on the basis of your proposed employment with your new employer/parent company, what happens if your employment is suddenly terminated? How long after the termination must you leave the host country? Is there any documentation which your new employer/parent company would need to complete and/or sign which would assist you in remaining on in the foreign country at least until you have the opportunity to either find alternative work or make arrangements to return home?
Attend to medical issues before you leave
You should not make any assumptions regarding your personal health and whether you are up to the travel and relocation. Being hospitalised is never pleasant, particularly in a foreign destination, so if there are any medical issues, it would be advisable to find these out before you leave and have them treated here. You should also realistically consider whether your spouse and/or children will be able to cope with the foreign destination and being away from home. If they are forced to return home early leaving you in a foreign destination, you may wish that you had never accepted the offer of employment in the first place.
The Expatriate Employment Contract
When dealing with a recruitment consultant/senior company executives, take a careful note of any representations which may be made regarding pay and conditions. The Competition and Consumer Act 2010 is proving particularly important in executive contract litigation. Under this legislation, representations may be actionable if they are misleading and/or deceptive. It is strongly recommended that you cultivate the diary habit, as a detailed contemporaneous file note can be invaluable when reconstructing events.
Create a paper trail of confirming emails regarding representations that have been made to you.
It would also assist if you could create a paper trail of confirming e-mails as to the representations that have been made to you. You should avoid using the word “representations” or wording your correspondence so that it sounds as if it has been written by a lawyer. All you need say is that you “confirm” the position title, salary and conditions etc. and whatever else that has been said to you.
If you have been headhunted make it clear to the recruitment consultant what you will be giving up
If you have been headhunted for a new role, and you are already employed in another position, you should make sure that the recruitment consultant realises that, if you accept the proposal being offered, you will be leaving a lucrative opportunity with respect to which you had long-term prospects.
Golden Rules for negotiating an Expatriate Employment Contract:
If you wish to save yourself a lot of stress and disappointment with probably disastrous repercussions for your family, you need to pay close attention to the expatriate employment contract.
The discussion that follows below has been in no small part drawn from the experience of many senior executives If you wish to avoid making the same mistakes, then you should consider the matters set out below.
For a general discussion regarding the negotiation of an executive employment contract, you should refer to the article on this website entitled Negotiating an Executive Employment Contract .
The material below will focus on those issues particular to Expatriate Employment Contracts.
An expatriate employment relationship will usually occur in one of two ways viz:
(i) Under the first arrangement, the expatriate assignment occurs within the context of your existing employment relationship with your employer. You are employed by a local Australian subsidiary of a foreign entity and the arrangement is that your employment is transferred to the parent company on secondment. At the end of that international assignment, the Australian entity will use its “best endeavours” to offer you a comparable position on your return.
The Australian entity is, of course, a separate company from that of the parent company. You are probably employed under a written Contract of Employment with the Australian entity and the transfer will occur pursuant to an Expatriate Agreement and probably an International Assignment Agreement. Documentation of this nature will invariably involve questions of how the expatriate agreement interacts with your underlying employment agreement and often seeks to vary the terms of that underlining agreement, particularly relating to redundancy.
(ii) The second most common arrangement is where you are made an offer of employment by a foreign entity that has no relationship with your current employer.
Under these circumstances, the key documents would be the proposed Expatriate Employment Agreement and various policy documents relating to conduct, dispute resolution etc. That will usually also include an International Assignment Policy document. However depending on the sophistication of the employer, they may not provide you with an IA policy document and instead set out the details of the transfer in the Expatriate Employment Agreement itself.
How an expatriate employment relationship is structured will therefore depend on whether it is arising out of an existing employment relationship or a new relationship with a foreign corporation with no links to your current employer.
Golden Rule 1
Agree on a specific position description
Has agreement been reached on your position description, duties and responsibilities, and the person to whom you report? It is within your interests that this is as specific as possible. You should not agree to any arrangement under which these components can be changed after the employer has simply “consulted” with you. By pinning the company down to a specific position description, your objective should be to minimise their discretion to change the terms and conditions of your employment.
Has agreement been reached on your salary package and all of its components as well as the tax treatment on those components? Have you discussed the salary package with an accountant specialising in expatriate tax and how this might be repackaged for your benefit?
Golden Rule 2
Determine whether there is a Human Resources Policies and Procedures Manual/International Assignment Policy that will be incorporated into your Expatriate Employment Contract.
If this is the case, you should carefully examine – and take legal advice on – its contents, its relationship to the expatriate employment agreement and which document takes priority in the event of conflict.
What is said in these policy documents may significantly affect your rights.
Golden Rule 3
Understand the difference between a fixed-term contract and a contract of indefinite duration and how the Expatriate Employment Contract interacts with the original employment contract.
A fixed-term contract is one which has a fixed end date and cannot be brought to an end by the employer before the expiration of the term. This means that, if the contract is of this nature and is brought to a premature end by the employer, the executive is entitled to receive by way of damages the unexpired term of the agreement.
However, if the contract contains a termination clause entitling the employer to terminate the executive’s employment upon notice and the contract also has a fixed end date after which it expires, this does not mean that it is necessarily a fixed-term contract. It may simply be an “outer limits” contract beyond which the contract cannot run but which can be terminated at any time beforehand by the exercise of the notice provision.
A contract of indefinite duration on the other hand simply means that there is no specified end date and that it continues on indefinitely and either party has the right to terminate the agreement upon providing notice to the other.
It is not uncommon for executives to believe that they have been “guaranteed” a minimum period of employment, only to discover on closer analysis that the contract they have signed is either of indefinite duration or, even if it does have an end date, that it enables the employer to terminate prior to the expiration of that date.
Most expatriate employment agreements have a “fixed” term subject to the termination rights of the host company to bring the agreement to an end.
Finally, you must make sure you understand how the Expatriate Employment Contract interacts with your original contract.
Golden Rule 4
Negotiate a remuneration package that makes it worth your while to assume the risks of living abroad
When negotiating a remuneration package, make sure it includes the cost of living/living away from home allowance as well as a cost-of-living allowance adjustment.
You should also negotiate a bonus arrangement based on clearly achievable key performance indicators that operate in a nondiscretionary way.
In other words, although there may be a bonus payable depending upon the overall performance of the company, there should nonetheless be an individual bonus that is solely confined to your own performance. This should effectively compensate you for the risk and disruption to your life in accepting the overseas appointment. The bonus should be payable irrespective of the timing of your departure from the company.
Taxation returns should be prepared at company expense and you should consider the inclusion of a “tax equalisation” clause under which you will not be penalised for paying excess tax in the host country that exceeds what you would have paid had you remained in the home country. You should take accounting advice on this issue.
Other elements of the package to consider:
Negotiate the status of your international airfares and adequate home/compassionate leave
For travel from home country to host country, you should negotiate as a minimum a business class air ticket for you and your family with perhaps stops along the way. In addition to annual leave, you should also negotiate for home leave of two weeks or more to enable you and your family to remain in contact with friends and family at home. Again, this should be on a business class air ticket basis. You should also negotiate generous compassionate leave entitlements. This leave should be triggered if your spouse and/or children become sick or injured while in the host country requiring their repatriation to Australia.
Anticipate that you may have to take more personal luggage than you expect and negotiate for the company to pay for this
Until your unaccompanied personal property arrives, you will almost certainly be facing the prospect of having to take excess air baggage and you should negotiate for a generous personal and family allowance. This should also apply on return travel on completion of the assignment.
Pay particular attention to the relocation and storage of personal effects.
All the costs associated with relocating your personal property from the home country to the host country should be paid for by the company. Similarly, on completion of the assignment, it is essential that the company clearly pay for the cost of returning this property to Australia.
In addition, there is the question of storage of your personal property that you do not take with you. You should request that the employer meets the storage costs of this property and that you can at any time gain access to and remove these possessions.
This last issue is particularly important if you are suddenly terminated. If this occurs and you need to return home, you may need to quickly access this property. You do not wish to find yourself locked out of your personal chattels with your employer claiming a lien over them until all outstanding exit issues have been resolved.
Don’t forget you may need temporary accommodation prior to departure
You may be in a situation where you have already rented out your home or apartment before leaving for the host country. In this event, you should negotiate that the company pays for a fully furnished and serviced apartment prior to your departure. Similarly, on your return on completion of the assignment, you may be in need of such temporary accommodation while your tenants move out. The contract should also cover this situation.
Don’t forget the importance of a relocation consultant and how expensive it is to set up a functioning household
Access to a relocation consultant could make a big difference to making the transition to the host country. You should shop around and obtain some recommendations as to which firm provides the most effective service. The cost of this should be borne by the company. The cost of restocking the larder, obtaining kitchen equipment, purchasing appropriate clothing for the new climate, arranging for an international driver’s licence etc., can mount up. You should negotiate for an allowance to cover these types of expenses.
Negotiate temporary accommodation in the host country while establishing permanent accommodation
It may be that the company already has a fully furnished and serviced apartment waiting for you upon your arrival in the host country. However, if this is not the case, and it is expected that you will find your own accommodation, you should negotiate a generous allowance for temporary accommodation on arrival to allow sufficient time to organise this.
Golden Rule 5
Give proper consideration to what you will be returning to at the end of the assignment
You should consider in advance the position you will be in at the conclusion of the expatriate assignment.
To what position will you be returning and on what package?
If there is no position to return to, what rights do you have to notice and severance?
Be sure to seek legal advice during the negotiation process and before signing the Expatriate Employment Contract
The above checklist is not intended to be exhaustive, but will hopefully be of assistance to you in negotiating your Expatriate Employment Contract.
Needless to say, it is our strong recommendation that you seek legal advice throughout the negotiation process, and, in particular, before signing the agreement.
Executive Rights Employment Lawyers have extensive experience in the review and negotiation of Expatriate Employment Contracts. If you are seeking legal advice on an Expatriate Employment Contract or on the drafting of an Expatriate Employment Contract, please don’t hesitate to contact us.
From our clients
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice regarding your own situation.