Terminating employees can be legally challenging for several reasons, especially with an increasingly global workforce.
In fact, according to a survey by HR Brew, 54% of respondents' companies operate in two or more countries, while 22% employ people in 10 or more.
With employees based in multiple countries, termination can be even more complex because employment laws vary by country.
Key takeaways:
- Each country has its own laws regarding just cause for termination, notice periods, and severance pay.
- When terminating an employee for cause, a specific process must be followed, as outlined in local employment laws.
- Failure to abide by a country's labor laws when terminating an employee can result in legal issues and financial penalties.
Understanding Employment Termination Laws by Region
Employment termination laws vary widely across the globe, and it's essential to familiarize yourself with local labor laws and termination processes in the countries where you employ workers.
But let's take a big-picture look at what to expect in regions worldwide, starting with North America.
The United States is one of the easiest countries to terminate employees because most states' labor laws follow at-will employment law. This means that employers can dismiss an employee for any reason (that's not illegal) without warning. The one exception is the state of Montana, where at-will laws apply only during a probation period, which is typically six months.
Although employment-at-will originated from old English common law, it's truly a foreign concept outside of the U.S.
In Canada, for example, employers must give a terminated employee two weeks' notice and pay them their regular wages during this time.
European countries tend to have employment laws that are very protective of workers, often requiring a valid reason for termination and giving the worker adequate notice and severance pay.
In most Latin American countries, employers are typically required to provide advance notice of employee termination, but notice periods depend on the country and individual employment contracts. Severance pay is also the norm.
The six countries of the Gulf Cooperation Council have employment termination policies similar to those of European countries, where they must have a valid reason for dismissal and a system of severance payments.
Moving farther south to Africa, labor laws differ from country to country, but notice is generally required, and employees are protected from unfair dismissal.
Asian and Asia-Pacific labor laws differ depending on the country, but generally, employment law is worker-friendly, and mass layoffs are difficult to carry out. Notice periods of termination are outlined in most countries' labor laws, and payment in lieu of notice — a lump sum paid to the employee as an alternative to a notice period — are common.
Termination for Cause: Legal Considerations
Termination for cause is the dismissal of an employee for a legally acceptable reason. The exact definition of "cause" will differ based on each country's labor laws; however, it often encompasses illegal activity or misconduct outlined in company policy or within the employment contract.
The primary reasons for termination for cause include gross misconduct, fraud, theft of company property, breach of confidentiality, sexual harassment, breach of safety rules, incompetence, or breach of contract.
Many regions, such as most of Europe, have very worker-protective laws; however, it's worth noting that Switzerland is an outlier. Its employment laws adhere to the principle of "freedom of termination," meaning both employers and employees may end the employment relationship at any time without providing a reason. However, labor laws prevent Swiss workers from being wrongfully dismissed.
In some countries, if an employee is terminated for cause, the employer may not have to give notice or pay severance. For example, in Portugal, an employer doesn't need to provide notice or compensation in the case of a disciplinary dismissal.
However, in Germany, even employees who are terminated for a justified reason must be given an appropriate notice period.
When terminating an employee with cause, a process must be followed, as outlined in local employment law.
In Australia, for instance, terms for dismissal must be outlined in the employment contract, and workers can be dismissed only if they're given notice or payment in lieu of notice. Further dismissal laws are outlined in the country's more than 100 "modern awards," which are legal documents for specific job categories, and failure to abide by these can result in hefty penalties.
Australia isn't alone in hitting companies with financial penalties if they fail to follow the appropriate statutory process. This is common across the globe, and it's not unusual for employees to file claims for wrongful or arbitrary dismissals.
That's why it's crucial for employers to provide substantial evidence, such as disciplinary records and witness statements when terminating an employee.
Redundancy Terminations
Other than termination for cause, there are also limited circumstances under which employers can legally dismiss employees, such as economic reasons or redundancies.
Redundancy is when an organization terminates an employee because their job is no longer needed. This can occur because the company needs to cut costs, is downsizing, changing its fundamental business operations, or a new system or technology has made the job unnecessary.
Redundancy laws are especially prevalent in Europe; however, they're found in countries all over the world, including South Africa, Israel, Japan, and Kazakhstan.
The United Kingdom's redundancy laws are some of the most protective of employees, requiring organizations to prove that a worker's position no longer exists. Employers must also give employees notice, try to find suitable alternative employment within the company, and typically provide redundancy pay.
Termination Notice Periods: What Employers Need to Know
A termination notice period is the amount of time an employer must give before the worker's employment ends. Once again, this can vary greatly, but according to Deloitte, employers are required to provide a termination notice period in 75% of countries.
Some countries may have a standard termination notice period, such as Chile and Colombia's mandatory 30-day notice period. But it's far more common for a country's labor laws to detail termination notice periods based on the length of employment.
In Sweden, for example, an individual employed at a company for two to four years must be given two months' notice. This increases based on the number of years of employment, up to six months' notice for those employed over 10 years.
Nigeria follows a process similar to Sweden’s. However, the notice periods are much smaller, with employees with two to five years of service receiving only two weeks' notice.
Several countries, such as Canada and Kenya, also allow companies to provide pay in lieu of notice. In these cases, a one-time payment to the employee is negotiated instead of being paid for the notice period.
Some countries that don't require a minimum notice period for terminating employees include the United States, Mexico, and Bolivia.
Severance Pay Requirements Around the World
Unsurprisingly, there are also many variations in global severance pay policies, with some countries requiring mandatory payments and others leaving it up to the employers' discretion.
Severance pay is required in most European countries and is often based on length of employment and a percentage of wages. France, for instance, calculates severance pay at 25% of monthly wages for each year of employment. In Germany, severance pay is 50% of monthly wages for each year of service.
Japan has very stringent employee protections but lacks a statutory requirement for severance pay. Still, it's customary for employers to provide generous severance packages to avoid legal disputes.
In the United Kingdom, severance pay is more commonly known as statutory redundancy pay. If a worker has been made redundant, they'll receive redundancy pay based on their age.
In the Middle East, employees of the six nations of the Gulf Cooperation Council receive severance payments known as "end-of-service gratuities." The amount of these payments differs by country but is based on employees' length of service.
Protecting Employee Rights During Termination
When terminating any employee, it's essential not to infringe on their rights, so you'll need to be familiar with their nation's anti-discrimination laws and abide by the country's fair dismissal practices.
While termination policies vary by country, they often include legal protections for employees. For instance, it's extremely common for employment laws to protect against dismissal based on the employee's race, gender, or religion. And it's not unusual for global labor laws to protect specific categories of employees from termination based on pregnancy, illness, or political affiliation.
It's important to note that many countries also have unions or workers councils that may become involved when an employee is terminated.
Germany's works councils, known as Betriebsrat, are particularly powerful; employers must consult with them for all termination proceedings. This can make dismissing employees challenging and time-consuming, and the process often results in severance payments and long notice periods.
Country-Specific Termination Laws and Practices
Now, let's take a closer look at a few countries' termination laws to get a better feel for their differences.
Japan
Although lifetime employment isn't commonplace in Japan anymore, it's still part of the culture, and this concept largely characterizes the country's labor market, so firings are rare.
To terminate an employee, the employer must provide cause that's both "socially acceptable" and "objectively reasonable." Even in the event of severe misconduct, an employee can't be fired without consent from the Labor Standards Inspection Office. The employer must also provide 30 days' notice or 30 days' worth of salary in lieu of notice.
If an employer fails to prove cause for dismissal, the employee can be reinstated or receive a financial settlement.
Because of these stringent labor laws, most employers aren't technically terminated. Instead, they're asked to resign and provided with financial incentives or may be sent to what's known as a "banishment room" or "boredom room," where they're assigned menial tasks designed to entice them to quit.
Mexico
Mexico's employment laws are also protective of employees — the country even sets forth minimum standards for labor laws in its constitution.
To terminate an employee, the employer must provide written notice stating the cause, and the letter must include dated proof of when the worker committed the acts for which they're being fired. However, there's no notice required, so employment can end on the day the employee is informed of the termination.
If the termination is determined to be just cause, the employer doesn't have to provide severance pay. However, if the employee files a claim with the labor court and the court deems the dismissal unjust, the employee will be reinstated or paid severance.
This amount is typically three months' salary, 20 days of pay for each year the employee worked, payment of overdue wages if applicable, and any accrued vacation and Christmas bonuses up to the time of dismissal.
France
This European country also has strong employee protection laws, so terminating a worker can be a long process.
Employees can be dismissed for either personal reasons (poor performance or frequent absences not due to illness or injury) or economic reasons (changes in technology that affect the employee's job or the closing of the business).
For the former, the employer must prove in court that the worker is being fired due to their actions and not because of management failures or economic issues. For the latter, it's a lengthy process, and if the employee's termination is due to layoffs, the company must develop a plan to help the worker transition to a new job.
If the employer cannot prove that they had cause for dismissing an employee, the court can reinstate the employee or offer a settlement that's a minimum of six months' salary.
Learn more about employee termination in France.
Navigating Global Employment Relationships with RemoFirst
Clearly, terminating an employee can be a complicated process, especially if you're unfamiliar with the employment laws in their country.
However, working with an Employer of Record like RemoFirst can help you mitigate risk and avoid legal complications and penalties.
When you partner with us as your EOR, we operate as the official employer of your international employees and assume all the risks associated with termination, including notice periods and severance pay.
We work with local partners in more than 180 countries who are experts in their country's employment laws and ensure full compliance with the termination process.
Want to learn more? Schedule a demo.
