The trade war between US and China has had new development and has been a concern for many major businesses. After the first wave of events, with both countries imposing tariffs on the other, in an abrupt announcement over Twitter, US President Trump threatening China with yet another round of tariffs and levies.
Adapting to the unstable global economy, many businesses are careful to expand with firms turning to flexible workforce arrangements to combat the unpredictable nature of the economy, a popular option MNCs use is secondment.
What is PEO/ Secondment?
PEO (Professional employer organisation)/ Secondment refers to the temporary transfer of an employee from one organisation to another in the form of a temporary assignment.
There are various terms used to identify the parties involved in a secondment arrangement. For better understanding, we’ll be defining the terms as follows assuming that the secondment arrangement is carried out to another organisation.
Original employing entity
The employee being seconded to the non-employing entity
Non-employing entity, the organisation which is to have the services of the secondee
What are Secondment Arrangements Used For?
PEO is most commonly used as a way to bypass the tedious procedures associated with overseas hiring.
For organisations looking to expand into a new market, it is likely that they will want to set up a presence locally to scout out the location before setting up a legal entity. With a secondment arrangement organisations can more easily station people in the new location without the hassle and costs traditionally tied to setting up a legal entity.
Secondment services are also used to combat the restrictions of a hiring freeze or to cut down the tedious procedures associated with hiring overseas.
In the banking and finance sector where major firms are often hit with an organisation wide hiring freeze, to continue meeting the demands of the customers, banks will often acquire our secondment services as a way of hiring the relevant talent without increasing their headcount.
How Does Secondment Work?
In a secondment arrangement, the original employing entity or seconder is seen as the one who legally employs the employee/s. Under the arrangement, the employee is then seconded to the host who receives the services of the secondee.
Legally, the seconder is the one responsible for paying the secondee’s wages, this includes various connected costs such as income tax and national insurance contributions. In the case of a commercial arrangement, these costs are reimbursed by the host.
Due to the nature of the relationship, as part of the secondment agreement the employer and host will need to contractually agree who will bear the costs relating to the liabilities of the secondee (health and safety) and for actions of the secondee during the secondment agreement.
What to look out for in a secondment agreement?
- Duration of secondment agreement
- Payment from host to employer (management fee) including VAT
- Management of secondee
- Which party bears the responsibility for the employee’s actions during the arrangement?
- How each party may terminate the agreement
- Intellectual property clauses
Terms to review in the secondee’s contract of employment
- Entitlement to secondment
- Job description
- A well drafted contract, the duties clause should be wide enough to cover any work delegated by the host
- Place of work and mobility clauses
- Intellectual property clauses
- Time secondee will commit to the secondment
- Termination process
- There should be an advance agreement on the secondment period
- Fixed term
- Fixed term which is terminable on notice during the term
- Terminable on notice at any time
Know your options
Be it expanding overseas or overcoming a hiring freeze, be sure to know your options so you can better weight out each solution to your company needs.
Protect yourself legally
When entering a secondment agreement make sure to check the key details mentioned above and that the terms included are conducive to your interests.
Know your options
While there are many organisations offering secondment services, not all demonstrate the same level of understanding. Make sure to partner with a certified vendor who is familiar with the local employment laws and regulations to defend yourself against unnecessary disputes.
At Links we provide professional secondment/ PEO and employer of record services as a way to help businesses bypass the restrictions imposed by hiring freezes, headcount caps, and overseas employments.
Are you looking to expand your business into Asia? Links HR Outsourcing is your best choice, with over 20 years of HR services in Asia. Get in touch with one of our representatives to see how we can help you build your business.
- How to Set Up a Presence in China: Use PEO/ EOR Secondment!
- Expanding into Southeast Asia: Business in Vietnam
- HR Leaders Should Know the Difference Between PEO & EOR
- How to expand your business in Asia through Secondment/PEO
- How to build or expand in Asia under a headcount freeze
- Your Ultimate International Business Expansion Framework
Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcing, visa application, Employer of Record (EOR), recruitment and more! Contact us for more information on how we can help leverage your HR function.