How to Terminate an Employment Contract When Partnering with an Employer of Record
In the context of working with an Employer of Record (EOR), the management of the day-to-day relationship with the employee falls within your company's purview. Your organization holds the authority to make decisions pertaining to your business strategy and its impact on your workforce. Among the most intricate and often uncomfortable aspects of employment relationships is the question of how to conclude employment agreements under the EOR model—a query we frequently encounter.
In the event that such a situation arises, an EOR can provide valuable assistance by leveraging its local expertise to ensure compliance with the relevant employment regulations in the respective country. Furthermore, a reputable EOR should collaborate with your company to ensure that the termination of the employment contract is conducted in a tactful manner. This involves advising on the prescribed due process that must be followed in the jurisdiction and guiding your company in treating the departing employee with respect and sensitivity.
While numerous U.S. companies operate in "at-will" employment states, where employers can inform an employee, "Your employment ends as of tomorrow," the global landscape is marked by a different set of norms. In many parts of the world, employees are entitled to a clear and equitable process before a decision to terminate their employment can be made.
An EOR, equipped with local knowledge and a profound understanding of the necessary steps, assumes a crucial advisory role for your company throughout this process. It is paramount that your company consults with your EOR and their local experts before proceeding with an employee termination. Despite the temptation to rely on a checklist, it is too risky for a company to navigate this process without appropriate support. Here are a few compelling reasons:
- Terminating an employment contract is an emotionally taxing experience for both parties involved, making it prone to mistakes.
- Handling a termination in-person, even within the same country, can be an intimidating endeavor. Cultural differences and the absence of face-to-face communication further complicate matters.
- Many managers lack formal training in managing terminations, and even with scripted guidance, they may inadvertently make inappropriate remarks. Managers require specialized coaching and support to navigate these delicate situations.
Failure to strictly adhere to the termination process, depending on the country, can result in severe consequences. For instance, in Ireland, employment tribunals are not uncommon, and if a company mishandles any aspect of the process or fails to meet strict deadlines, the employment tribunal may rule in favor of the employee, leading to financial penalties for the employer.
