Employment Law Newsletter – Overseas Assignment Of Employees & The Applicability Of Labour Laws: Sept 2023
Introduction
The advent of liberalization and globalization has given rise to the necessity of inter-country communications and the transfer of skilful resources for the purpose of expanding businesses or for updation via knowledge transfers. The disparity in technological and logistical advancement witnessed across the globe, paves the way for the the inevitable cross-country movement of human resources, by way of overseas assignments.
The cross-border transfer of human resources is necessary for various reasons, particularly in the context of an increasingly interconnected and globalized world. Some of the key reasons why cross-border movement of resources is necessary are as under:
Knowledge Transfer and Addressing Skill Gaps
Cross-border transfer of human resources across different locations or countries facilitates the exchange of knowledge, expertise, and best practices. Deputation/Transfer enables companies to address these skill gaps by deploying experienced personnel from other regions.
Business Expansion/Market and Knowledge Adaptability
Cross-border transfer of human resources to these new locations help in setting up and managing operations more effectively, ensuring a smooth transition into new markets. Debuting employees to foreign markets allows companies to gain firsthand insights into local business practices, customer preferences, and regulatory environments.
Cultural Exchange and Global Team Building
Cross-border transfer of human resources provides an opportunity for employees to work in diverse cultural settings, fostering mutual understanding and promoting cross-cultural collaboration.
Ways of Facilitating Cross-border Human Resource Mobility:
Deputation
The deputation, based on its dictionary meaning, would refer to “a small group of people who are asked or allowed to act or speak for others”.
According to the observations in Umapati Choudhary v. State of Bihar, ‘deputation’ is described by the Supreme Court of India:
“an assignment of an employee (commonly referred to as the deputationist) of one department or cadre or even an organization (commonly referred to as the parent department or lending authority) to another department or cadre or organization (commonly referred to as the borrowing authority).”
Deputation is thus a temporary assignment or transfer of the employee (“Deputee”) from one entity to another either within the same country (domestic deputation) or a different country (international deputation) (“Deputation”).
Permanent Transfer
As per the Oxford Dictionary, ‘transfer’ refers to “an act of moving something or someone to another place, organization, team, etc.”
Permanent transfer of employees from one entity (home entity) to another entity (host entity), effectuated through transfer documents and separation documents executed between the employee by the home entity and joining documents executed by the host entity.
Comparative Overview of the Concepts
| Sr. No | Particulars | Deputation | Permanent Transfer |
| 1. | Concept | The Employee (“Deputee”) will continue to remain employed with the Home Entity during the Deputation and after completion of the Deputation, return to the Home Entity. | This entails the end of service of the Employee (“Transferee”) in the Home Entity and commencing fresh employment with the Host Entity. |
| 2. | Contracts | Deputation Agreement is executed between the Home Entity and the Host Entity recording the terms of deputation and an assignment agreement/ letter is signed between the Deputee and the Home Entity.
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The Transferee and Home Entity execute separation documents.
The separation document shall capture that the Transferee is being asked to work with a Host Entity and employment including all benefits has come to an end. Simultaneously, the Deputee accepts the assignment with the Host Entity and signs a fresh employment agreement. |
| 3. | Social Securities
In the context of Home Entity:
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Double benefits:
If the Home Country has not signed any SSA (as defined below) with the Host Country wherein the Host Entity is located, then in such case the Deputee is required to be paid with social security benefits arising out of both the countries (irrespective of the entity making the payment). |
Upon resigning, the Home Entity pays the final dues to the Transferee (along with retiral benefits if any), prior to his/her transfer.
Social security arising out of and relating to the Host Entity, the Host Entity is bound to pay the Transferee.
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| 4. | Impact | i. The entity paying the salary to the Deputee needs to be defined in a deputation contract.
ii. All the social securities in the Home Entity will be calculated on the salary paid to the Deputee. iii. Double Social Security Benefits in the absence of SSA iv. In the presence of SSA, a detachment certificate can be obtained, and Home Entity Social Security benefits can be continued. |
There is no liability on the Home Entity for providing any type of benefits to the Transferee. |
Conclusion
As a business, having a comprehensive understanding of the intricacies involved in overseas deputation agreements is of utmost importance for maximizing the employee’s potential. In today’s interconnected world, employee-employer relations are rapidly adapting to meet the challenges of globalized markets. Consequently, deputation has emerged as a prevalent concept, enabling us to access a diverse talent pool and expand our operations globally.
Being fully aware of the organisation’s roles when they send human resources on assignments abroad is vital. While it is important to have adequate legal documents in place it is also necessary to equip the employees with the right information to foster a collaborative environment that optimizes international assignments, boosts employee satisfaction, and ultimately drives businesses forward in the global marketplace.
