The Legal Complexity Behind Cross-Border Employment & Expatriate Management

It seems that when an IT company takes on its very first German worker, the company might think it just needs to include some more additions into its current contract. However, before long it becomes evident that the whole contract depends upon which law will govern that employment, and choosing the wrong one will make the whole contract meaningless. When a manufacturing organization decides to send its engineer from India to its Vietnam-based factory for a period of eighteen months, it soon realizes that just a normal deputation letter will not suffice, as this particular situation involves three different issues: In which country the employee has been paying his taxes; does the social security of the employee in India get suspended during the deputation period; and who will be held responsible if any disputes arise at the factory?

A financial company recruits an employee who will be managing the company’s operations in India from his new office but soon realises that the process is only just beginning and now it is time for visa categorization, FRRO registration and subsequent compliance. A business that has been managing its expatriate payroll manually for many years now would like to know whether the tax withholding has taken into account the country’s Double Taxation Avoidance Agreements and thus, whether it has been overpaying or worse, underpaying, without realising it.

These issues have a similar thing in common in that they exist along a common process, namely, recruiting from abroad, seconding personnel from one country to another, and handling the tax and immigration implications that arise as a consequence of this practice. The reason why it is so important not to make mistakes in any of these processes is that usually the mistake in each process tends not to remain within its own limits and spill over into other related processes. Thus, a wrongly drafted cross-border agreement could be declared as invalid once the dispute takes place in a jurisdiction which was never even taken into account when drafting the agreement. Seconding personnel without proper documentation could lead to both organizations involved to incur unexpected tax liabilities in two countries at the same time.

This is where Corrida Legal comes into play by ensuring all of this does not remain just an assumption. The company drafts employment agreements for expatriates and international recruitments based on the true jurisdiction and relationship involved, and not any template agreement amended slightly as per the needs of such an agreement regarding salary, benefits, termination and enforceability of restrictive covenants in that particular country, something that we have recently done for a SaaS company drafting contracts for hiring people in their small but fast-growing workforce from three different countries. This is always in parallel with immigration compliance right from the start, where we help companies get the work visas and FRRO registration, as well as handle the process of renewals and extensions, having done exactly the same thing for a professional services firm in recruiting specialist manpower from abroad for a long period of time. In case the employee is within the scope of secondment or dual employment and not a simple hiring, all the legal considerations completely change, like tax residency, EPF and ESI requirements and liability of the employing entity for the employee’s conduct, which were the considerations in case of a manufacturing company sending their engineers to its overseas facility while keeping their Indian social security contributions intact.

The people who work in India from foreign countries have their own set of continuous responsibilities, and we assist both the employers and employees in FRRO registration, police verification, exit procedures, and many such things. We also represent employers and employees if a compliance notice or FRRO inquiry does arise, though our preference is always to keep a foreign employee's documentation current enough that this kind of representation is rarely needed.

Taxation and payroll are the basic considerations in most of the cases like this. In this regard, we take care of expatriate tax, withholding tax, and using the benefits of DTAA available for the company rather than letting it go to. The businesses that have more than one expatriate and actually consider creating a program of mobility will find us helpful in making a relocation policy as well as designing an insurance cover plan that applies in each of the jurisdictions that the business operates in.