When terminating an employee under the EOR setup, there are important factors to keep in mind even before initiating the process.
Basic Steps for Termination
Notify Remote People - Inform Remote People at least 5 working days before the intended termination date.
Assessment & Guidance - Remote People assesses the situation, confirms the earliest termination date, and provides the correct termination procedure.
Drafting Documents - Remote People prepares termination documents for preliminary review and approval by the client.
Client Action - The client informs the employee of the decision and negotiates a one-off severance payment, if required.
Official Termination - Remote People sends the employee the official termination documents.
Final Steps - Remote People issues the final invoice and arranges for the employee's final payment.
Informing the Employee
Remote People is the legal employer; therefore, do not discuss termination or resignation with the employee until you have consulted with Remote People. Premature communication may disrupt the process and could result in legal complications or additional costs.
Mandatory 5-Day Advance Notification: You must inform Remote People at least 5 working days before any planned termination or resignation. This advance notice is essential for proper case assessment before moving forward with the actual termination process. Please note, this does not guarantee the termination will be completed within 5 days; the timeline depends on local laws and the specifics of the employee's case.
Remote People will assess the situation to determine whether the proposed termination or resignation date is legally feasible. If the date is not viable, Remote People will outline the appropriate procedure and recommend an alternative date.
Only Remote People-issued notice has legal validity in the termination process. Additionally, informing the employee prematurely can harm the relationship and make it more difficult to negotiate the terms of termination.
Despite all efforts to handle the termination as smoothly as possible, the employee retains the right to file a claim, which is a common practice in some jurisdictions (see section "Litigations")
Reason for Termination
EOR setup limit the reason for termination in many countries, as certain justification may pertain to the client rather than to Remote People as the legal employer. Below are some general guidelines to follow.
Restructuring/Redundancy: Not possible, as restructuring or redundancy is not happening within Remote People' organization. In this case, a Mutual Termination Agreement must be pursued.
Economic reason: Not possible, since Remote People, as the legal employer, is not facing financial difficulties. A Mutual Termination Agreement must be pursued. Please do not share your economic difficulty with the Employee, as it is not relevant to Remote People termination process.
Underperformance: May be possible. However, depending on the country, the underperformance procedure may require specific steps, such as issuing warnings, implementing a PIP, or providing additional training, to officially qualify as "underperformance." This process can take 3 to 6 months, based on local laws and the employee's response. Additionally, the risk of litigation is high.
Gross misconduct: May be possible. However, it depends on the country and the nature of the misconduct. In some jurisdictions, repeated lateness may qualify as gross misconduct if multiple prior warnings were given. Additionally, the risk of litigation is high.
Abandonment of duties: May be possible. However, the concept of "abandonment of duties" may not exist in all jurisdictions. Additionally, the risk of litigation is high.
Termination cases
Mutual Termination
In many situations, a Mutual Termination Agreement (MTA) is the preferred method for ending employment due to its flexibility and robust protection against potential legal disputes. In countries where termination is only allowed for specific, strict reasons (as opposed to "at-will" employment or termination "for any reason"), and the case does not meet any of these criteria, negotiating a mutual termination becomes the only viable option.
In certain countries with strict labor laws, particularly in Europe, the concept of "mutual agreement" is heavily regulated and must be approved by local authorities. This means that the employer cannot simply reach an agreement with the employee; instead, a process established by local law must be followed for the termination agreement to be valid.
When entering into an MTA, both the client and the employee agree on a compensation settlement for the loss of employment. An MTA is typically utilized in the following scenarios:
Both the employer and the employee mutually agree that it is in their best interest to part ways. There is no legally valid reason to proceed with unilateral termination.
Unilateral termination is possible, but an MTA is preferred to ensure protection against potential claims.
Below are the tasks involved in signing an MTA. Please note that the entire process is usually completed within 4/6 weeks.
MTA Tasks (Remote People vs Client responsibilities):
Draft the MTA (Remote People)
Discuss with the employee (once confirmation is received from Remote People) the reasons for the separation. The MTA should be presented as a proposal for amicably concluding the employment relationship. It is essential that the employee does not view this as a unilateral decision, as this perception could lead to potential disputes (Client)
Discuss the severance package offered to the employee. The employee should be given sufficient time to review the terms of the agreement, typically around 1 to 2 weeks. While an expiration date for the offer can be included to encourage a timely review and response, the employee is not obligated to adhere to it (Client)
Confirm preferred last day of work (subject to employee acceptance and legal viability) (Client)
Draft the final MTA once an agreement is reached and send it for signature (Remote People)
Final compensation. Remote People provide final payment figures and client must settle the invoice without delay (Remote People and Client).
Dismissal
In some cases, MTA might not be the best way to terminate an employee, or the local labour law allows to unilaterally dismiss the employee without incurring in potential legal disputes.
Note: In most countries, the EOR setup makes it difficult to go with a dismissal. Instead, when a client intends to terminate an employee, it is advised to opt for the mutual agreement option even if the decision is originally unilateral.
Below are the tasks involved in the dismissal process:
Dismissal Pre-Steps Tasks (Remote People vs Client responsibilities):
Document the reason for dismissal (e.g., evidence of poor performance or misconduct). As Remote People is the legal employer, it is responsible for issuing formal warnings. The client must notify Remote People promptly of any performance or behavioral issues, allowing for timely documentation and action. Early communication ensures compliance with legal requirements and supports any future termination actions (Client)
Verify whether the reason for dismissal is legally sufficient - Remote People
Calculate the notice period and any mandatory severance - Remote People
Draft the dismissal letter (Remote People)
Dismissal Execution Tasks (Remote People vs Client responsibilities):
Hold a conversation with the employee to inform them of the decision to part ways (Client)
Send the dismissal letter to the employee (Remote People)
Final compensation. Remote People provide final payment figures and client must settle the invoice without delay (Remote People and Client)
Provide an employment certificate, if required (Remote People)
Resignation
When an employee voluntarily decides to resign, they must submit an official resignation notice addressed to Remote People. Any resignation notice sent to the client holds no legal value. A resignation process is initiated in the following scenarios:
The employee decides to leave their position.
The client needs to transfer the employee to their own entity.
The client decides to move the employee to a different provider or setup. Below are the tasks involved in the resignation process:
Resignation Tasks (Remote People vs Client responsibilities):
Receive and acknowledge reception of resignation letter (Remote People)
Calculate the final compensation (Remote People)
Final compensation. Remote People provide final payment figures and client must settle the invoice without delay (Remote People and Client)
Provide an employment certificate, if required (Remote People)
Litigation
Despite efforts to ensure a smooth termination process while maintaining compliance, employees retain the right to file claims for unfair dismissal or related grievances. In some jurisdictions, it is also a common practice to file such claims.
When an employee initiates a claim, Remote People is responsible for defending the case. There are two proceeding:
The client may choose a lawyer of their preference to handle the case, and Remote People, as the legal Employer of Record (EOR), will coordinate with the selected law firm.
Remote People can recommend a local law firm from our network and provide an estimate fee for their services. The client then needs to approve the cost and we will then be able to coordinate the case.
Important: All costs associated with any legal dispute (including legal fees, additional payments to the employee, administrative expenses, etc.) will be passed on to the client, who will be responsible for covering these expenses.