Overseas mobility – to second or not to second?

With many organisations having multinational operations, mobility is a matter of increasing significance and the first question to consider is what is the best arrangement for moving people overseas.

Two options often faced by companies is to either terminate the employee’s employment with the home entity and commence employment with the overseas entity of the organisation, or for the employee to be seconded from one entity to another.

On a secondment, the employee will continue to accrue, and be entitled to take, their leave entitlements (annual leave, personal (sick) leave and long service leave) in accordance with the laws of their home country. They may also be entitled to accrue and take leave entitlements in the host country. If that host country is Australia, the employee will be subject to the Fair Work Act 2009 whilst on secondment in Australia and the secondment will be governed by the National Employment Standards and any applicable Modern Award.  The fact that the employee’s ordinary place of employment is outside of Australia does not affect the application of the Fair Work Act during the course of the secondment.

If the employee is to be employed by the host country rather than seconded, their employment with their home country may terminate.  If the home country is Australia, this will mean that the employer will be required to pay to the employee their accrued but unused annual leave (and possibly accrued but unused long service leave depending on their length of service, reason for resigning and the State in which the employee is based).   The employee will not be paid out their accrued but unused personal leave.

The employee will then commence employment with the host country and will accrue entitlements under the new employment contract in accordance with the applicable law.  The host country may, as a matter of contract, agree to recognise the employee’s continuous service with the home country for the purposes of leave entitlements.

Should the employee return to Australia, in many states their service with the host country entity may count as service with the home country entity for the purpose of long service leave.  In circumstances where the entities are associated, this may be irrespective of whether the arrangement is done by way of secondment or termination and re-employment.

If a secondment arrangement is in place, it is important that there is an agreement between the seconding employee and the home entity as well as a separate agreement between the two entities which govern the terms of the secondment.

Matters that may be considered as part of any mobility arrangement include which entity will be responsible for benefits to the employee that apply above and beyond their legal entitlements.  For example, does the home entity continue to be responsible for health and income protection insurance? Who will be responsible for travel insurance? Will the employee be provided with airfares home and at whose expense? How will the employee’s accommodation arrangements be managed and which entity will be responsible for the employee’s living expenses? These matters are largely commercial matters that should be negotiated between the employee and the relevant entities.

Whether a secondment or a more permanent arrangement is preferred will depend on the nature of the position, the length of time the employee is to spend in the new position and the relationship between the two employing entities.  As always, the best approach will be to ensure that any arrangement is appropriately documented.