Prime Minister David Cameron and Chinese Prime Minister Wen Jiabao recently witnessed the signing of a deal worth £750 million for Rolls Royce at the UK-China Summit.
China is the world`s second biggest economy. Bilateral trade and investment is growing but there is scope for much more and exporting is important for UK growth and UK jobs. It is predicted that many small and medium sized enterprises from Britain will be expanding into China in areas such as low carbon growth, urban design and information and communication technology.
The European Commission (EC) has launched the centre for the European Union`s Small and Medium Enterprises (EU SME Centre) in Beijing which was referred to as opening the gateway to China for European SMEs.
There are 20 million SMEs in the EU which represent 99% of businesses and are key drivers for economic growth, innovation, employment and social integration. The launch of the EU SME Centre is a step towards implementation of the Small Business Act, the EU`s main initiative in support of SMEs, and a step towards the "think small first" principle that embodies European SME policy.
At a time when growth is flat at home, the growth potential for China`s massive new markets, as well as other emerging economies such as those in India and Africa, has never looked so appealing, but for British Exports turning that potential into pounds sterling still remains fraught with difficulties.
SMEs are often less well equipped than larger enterprises to deal with issues such as the different legal systems and risks present in foreign markets and need help with matters such as:
- Company registrations
- Employment contracts for recruiting locally
- Process of certifying technical standards
In particular, employers should be careful of recruiting abroad, making sure that they take advice on mandatory employment laws in the county in which they are setting up a new venture, as well as immigration controls.
However, often employers will second employees from the UK to a foreign company to work for a specific period of time rather than recruiting locally. If you are seconding employees abroad you should:
- Understand the jurisdiction to which the employee is being sent and the mandatory employment laws that will apply to them. These can vary hugely between countries (even within the European Union) and between different states in the United States.
- Clarify the contractual provisions that will apply during the term of the secondment and ensure the employee is aware of any additional responsibilities, employment laws, policies or rules he or she will be expected to abide by in the country to which he or she is seconded.
- Make sure you have a clearly drafted secondment agreement, with contractual provisions that adequately protect the company.
- Do you require and additional restrictive covenants?
- Is the employee prevented from bringing an employment law claim in the host country as well as in the UK.
- If he or she can bring a claim in both jurisdictions, does the secondment agreement prevent double recovery of any compensation?
- Remember section 1 of the Employment Rights Act 1996 requires a statement of terms of employment to state whether or not an employee will be required to work outside the UK for a period of one month or more. Where this will be the case the contract must set out:
- The period for which the employee is to work outside the UK
- The currency in which the employee will be paid - will it be in sterling or in the currency of the country to which he or she is seconded?
- Any additional remuneration payable, and any benefits to be provided, by reason of being required to work outside the UK - eg relocation expenses, flights to and from the UK
- Any terms relating to return to the UK
- Make sure that you and the employee are abiding by taxation rules in both the UK and the country to which he or she is seconded.
- Help your employee understand the customs of the country he or she will be working in and the cultural differences that may apply. Cultural differences can be an area for potential exposure, particularly those that affect female employees. It is in both parties` interests to ensure employees know what to expect and you should support the process of familiarisation with customs, taboos and potential threats.
- If there are written codes of practices, regulatory requirements or dress codes then you should consider changing employee contracts or putting in place agreements that require they comply with them while overseas. To avoid discrimination liability, if the host country has more generous entitlements, you should consider how inconsistencies would be dealt with.
- Suggest staff speak with an employee who is working in the host company before the secondment starts. You may wish to standardise the briefing process by arranging briefing packs or presentations. Some larger organisations facilitate virtual online tours of host countries.
- The employer can sometimes be liable for the unlawful acts an employee commits while overseas. Anticipating potential issues with the employee can be mutually beneficial in helping to avoid disputes when the secondment starts.
- Before the secondment starts, think about how it will end, and what notice you will have to give. Will the employee have a job to return to in the UK? Is it anticipated that they will eventually become an employee of the overseas company? If so, what will happen if that venture fails? Can the employee elect to return to work in the UK if they do not think the secondment is working out?
- If the worst happens, take advice before dismissing the employee - you will need to consider the laws of the country in which he or she works, possibly alongside UK law, to make sure you protect the company from a claim.
Employing or seconding people, especially abroad, is a complicated business and not knowing your obligations can be expensive and damaging. The need to be alive to your obligations as an employer has never been more critical as markets become increasingly global.
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