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March 2009 - Employment. Legal Developments by Cruyplants Eloy Wagemans & Partners .

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The transfer of an employee to go to work in another country than the home base will inevitably complicate the relations between the parties. Indeed the transfer will involve not only very practical but also legal questions, most notably in relation to the applicable law and the applicable social security system.

The parties may decide to terminate the existing employment contract and to enter into a new contract with the company based in the country to which the employee is transferred. This solution has the merit of being clear cut since there will be a change of employer and thus a change of applicable law both in relation to the employment contract and with regard to the applicable social security system.

However, more often, the parties will allow the existing contract to continue. In such a case it is highly advisable to enter into an addendum to the contract setting out the precise terms that will govern the change of the place of work. This addendum should indicate the law that is applicable to the contract and in this respect all the international and European rules provide for a priority in favour of the law chosen by the parties.

In the absence of any explicit choice of law, the rules systematically provide for the application of the law of the place where the employee normally works, even if he is temporarily transferred to another country. If the work is performed simultaneously in several countries the relationship will in principle be governed by the law of the country where the company office that hired the employee is situated, unless it is shown that the employment contract has closer links with another country, in which case the law of this latter country is applicable.

A European directive issued in 1996 guarantees in favour of the transferred employee the benefit of the minimum social rules of the EEA country to which he is temporarily transferred.

As far as concerns social security, most international and European rules provide for the application of the rules of the country where the work is performed, except in the case of an authorised temporary transfer. If the contract is performed simultaneously in several countries in principle the applicable system will be that of the place of residence of the employee. If it is a non-EEA country it is possible that both systems apply at the same time on the basis of the activities carried out in each country.

The addendum to the contract can also determine the financial terms relating to the temporary transfer to the other country. Indeed in the case of a transfer which is for other than a very short period it is useful to spell out the additional benefits to which the employee will be entitled. These can include matters such as an expatriation allowance, a cost of living allowance, an allowance for school fees, a home leave allowance, a housing allowance, a relocation allowance, a tax equalization allowance, living cots, travel expenses, including air tickets, administrative costs allowance etc. In general it is advisable to draft such an addendum so as to clearly define the parties’ respective rights following the transfer to the foreign country. It is also necessary to take advice on the employment law rules applicable in the country to which the employee is transferred.

Olivier Langlet