Split or Dual Employment Contracts: Are They the Right Approach for Expatriates Working in Multiple Countries? Understanding the Legal Position

Introduction to Split or Dual Employment Contracts

In today’s globalised business environments, multinational companies often require employees to work in multiple countries. Hence, to address the complexities of cross-border employment, split or dual employment contracts have become a potential solution. A split employment contract involves an expatriate having separate employment contracts with different companies within the same multinational group, each based in the country where the employee works which allows the employee to work across different jurisdictions.

However, before adopting such a model, companies and expatriates should understand the legal implications, benefits, challenges and best practices to ensure compliance with local laws.

What is a Split or Dual Employment Contract?

As previously mentioned, a split employment contract means that an expatriate is employed under two separate contracts with different companies in a multinational group. Meanwhile, a Dual Employment (DE) arrangement refers to a situation where an individual holds separate employment contracts with two employers in two different jurisdictions, with reporting obligations to more than one entity in the same multinational group.

The contracts, based in the countries where the employee is working, must clearly define the job duties and reporting lines for each position to avoid overlap and confusion. More specifically, these contracts are to specify the employee’s tasks, responsibilities, and reporting structure in each country, ensuring a clear separation between the roles.

Benefits of Split or Dual Employment Contracts

1. Tax efficiency as by aligning income with the country where the work is performed, split employment contracts can help mitigate double taxation risks. The employee’s income is then only subject to tax in the jurisdiction where the services are rendered, reducing overall tax liabilities.
2. Compliance with local laws through having separate contracts for each jurisdiction helps protect both employee’s rights and the employer from breaching local labour laws.
3. Clear job responsibilities, reducing confusion about roles and accountability.

Challenges and Considerations

1. The legal complexity because each country has its own set of labour laws, tax regulations and immigration requirements; hence, it would be advisable for employers to seek expert legal advice to avoid compliance issues.
2. There is a potential for disputes, especially if the employment contracts are not clearly defined, leading to confusion regarding responsibilities and reporting lines.
3. Administrative burden in managing multiple contracts and ensuring compliance with various legal and tax requirements.

The Right Approach – Key Factors to Consider with Split or Dual Employment Contracts

To ensure the effectiveness of split contracts, employers must address several important factors:

1. Each employment contract should clearly outline the employee’s specific duties, responsibilities, and deliverables in each country to avoid overlap or confusion.
2. Each contract must designate separate reporting lines to ensure clarity in the employee’s relationship with each employer.
3. Proper tax planning to ensure compliance and prevent issues like double taxation.
4. Visa and work permit requirements should be verified.

Conclusion

Split or dual employment contracts can benefit expatriates working across multiple countries but require careful planning and legal compliance. Clear job roles, reporting lines, and tax and visa considerations are essential. While these arrangements offer tax and legal advantages, companies must consult experts to ensure compliance and mitigate risks. Contact our legal team to assess your employment structure and ensure full compliance with all relevant regulations.

How Our Panel of Lawyers Can Assist

• Legal compliance advisory on split or dual employment contracts.
• Tax risk assessment to avoid double taxation and corporate tax risks.
• Contract structuring to clearly define roles, responsibilities and reporting structures.
• Immigration and visa compliance.

References

1. https://ceelegalmatters.com/poland/22799-is-it-possible-to-divide-an-employment-contract-when-dividing-an-undertaking/
2. https://www.crowe.com/sg/-/media/crowe/firms/asia-pacific/sg/crowehorwathsg/media/files/publications/dual-employment-arrangements.pdf
3. https://kpmg.com/xx/en/our-insights/gms-flash-alert/flash-alert-2023-108.html