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How To Hire Overseas Employees

Mar 26, 2019 12:18:27 PM

Australian businesses are increasingly engaging workers overseas attempting to overcome skill shortages or simply lowering labour costs. Opening offices overseas or establishing overseas joint ventures usually involves Australian companies sending Australian management overseas and then, along with hiring local workers, establishing overseas branches to assist in their Australian operations. But advances in technology are progressively making it unnecessary for Australian businesses to relocate employees overseas, they can simply ‘hire and fire’ overseas workers from the comfort of their Sydney-based HQ offices.

This raises the questions regarding Australian employers’ responsibilities when hiring and firing employees who live overseas. Are these employment arrangements subject to the Australian workplace laws, or are they subject to the laws of the foreign jurisdiction?    

The Fair Work Act 2009

The Fair Work Act 2009 [the Act] was created to regulate the relationship between employees and employers in Australia. In the case of foreign workers, the question is whether the ‘relationship’ is ‘in Australia’ – that is with one party to the relationship being overseas and the other one in Australia?

Section 14 of the Act states that it applies to a ‘national system employer’. A national system employer is a ‘constitutional corporation’ (or company) insofar as it employs or usually employs an individual. Section 35 of the Act defines an ‘Australian employer’ as a ‘trading or financial corporation formed within the limits of the Commonwealth’.

An employee who is therefore employed by an Australian corporation is likely to be deemed to be covered by the Act, no matter where the employee is based in the world.   

If the Act applies to the overseas-based employees of an Australian employer, it follows that the National Employment Standards will also apply to these foreign-based employees. These 10 standards include:

  1. Maximum weekly hours
  2. Request for flexible working arrangements
  3. Parental leave and related entitlements
  4. Annual leave
  5. Personal/carers leave
  6. Community service leave
  7. Long Service Leave
  8. Public Holidays
  9. Notice of Redundancy and Redundancy pay
  10. Provision of the Fair Work Information Statement

It also means that employees will be entitled to the protections for minimum wages and access to unfair dismissal.

However, care should be taken as in some instances local employment laws may also apply to employees based overseas.  It is therefore imperative for Australian Employers who are engaging foreign-based employees, to review local employment laws as those laws may apply concurrently. It follows that where employees may be entitled to different entitlements under the Act and the local employment requirements, then the minimum entitlement to the employees will be that which is more beneficial to the employee.

Using different business models

Employers who are considering expanding its workforce in this way are encouraged to consider various business models to support the viability of making use of foreign labour. Different business models may reduce the risk in foreign workers being deemed subject to the Act and entitled to the minimum standards of employment in Australia.

In Fair Work Ombudsman v  Valuair Limited [2014] FCA 759 the Federal Court had to make a decision whether or not the employment of Jetstar cabin crew members were subject to the Fair Work Act. The cabin crew were all based in Singapore, or Thailand, but their duties included flying to and from Australian ports on Jetstar’s international services, as well as working on domestic flights between Australian cities. There was evidence that the cabin crew were not remunerated in accordance with the Australian workplace requirements.

The court applied the following principles:

  • a constitutional corporation must have an appropriate and sufficient connection with Australia in order to be considered a ‘national system employer’;
  • in determining whether an employee is covered by the Act a court will consider not only the work being performed by the employee, but also the employment relationship as a whole; and
  • it is possible for an employer to have employees who travel in and out of Australia in the performance of their work who are not subject to Australian employment laws.

The court ultimately concluded the employment relationships were not ‘in and of Australia’ and accordingly, not subject to the Act. The Valuair case is a good example how an Australian company used a structured business model to avoid the higher Australian labour cost base.

Another important factor to consider is the tax requirements. Businesses should seek advice as to whether or not Australia has a ‘double tax agreement’ in place with the relevant foreign jurisdiction, as this may have a significant effect on the decision and viability to use foreign based workers.

If you have further questions about the obligations when engaging overseas workers, please contact Philip van den Heever at philip@franklaw.com.au

This is not legal advice.

Photo by Sourav Mishra from Pexels