Harmonising Global Employment Contracts: Why do it?

Global employers often have a range of different employment contracts and staff handbooks for many of the countries they operate in. This may be as a result of a period of rapid expansion when consistent employment documentation was not the priority.  Or it may reflect a cultural preference for autonomy at local level or simply because of an historic lack of formal controls from the centre.

The questions then arise, should the global employer harmonise as far as possible its global employment documentation and is the cost of doing so worthwhile?

What does harmonisation involve?  Harmonisation involves establishing a benchmark global employment contract and policy handbook and then applying these benchmarks as closely as possible to each country of operation. Local variations will be required by local law, practice and labour market conditions but the aim is to stay as close to the benchmarks as possible, consistent with the organisation’s business objectives and values.

What are the benefits?  The benefits of harmonisation fall under three main headings: culture and presentation, risk management and managerial efficiency.

Culture and presentation  Many global businesses use their employment contracts and handbooks as a way of presenting themselves, their values and their culture to the global workforce. It is one of a number of useful tools for keeping a widespread group of people aligned to the group’s ethos, ethics and objectives. It communicates both style and expectation. With harmonised documentation, as far as possible the global workforce sings from and performs to the same hymn sheet.

Risk management   A harmonised approach implies greater central control.  Businesses that are committed to a devolved HR structure will find a harmonised approach counter-cultural and may prefer to avoid it.  Those who look for greater cross border alignment and central control often choose document harmonisation for risk management reasons.  A harmonised approach reduces the risk of the consequences of poor contracts and unhelpful handbooks.  It makes documentation updating and legal development tracking much easier, thereby also reducing risk. It gives head office greater control, reducing contractual drift and variation at local level unless that variation is approved and justified on local business grounds. It is also possible to adopt a mixed approach by which the documents state which clauses or sections cannot be changed without head office consent and those that local HR can adapt to reflect local custom and practice.

Managerial efficiency   A harmonised approach, once established, can save a significant amount of management time. It becomes easier to access, interpret, monitor, review, keep up to date and apply the employment documentation globally, regionally and at local level. It simplifies employee mobility and posting issues. It improves and simplifies overall document management and control and also assists where the documents are being handled by third party providers, such as Payroll.

What are the main challenges of a harmonisation project?  The bulk of the global business’s work on a document harmonisation project occurs at the front end. The business has to make key decisions at the outset regarding content (full detail or light touch), style (corporate or personal) and coverage (all possible policies or just business critical ones). This process can confront questions of core values and business need and is not always easy. One of the decisions that must be made is whether harmonisation should include providing employees with greater protections and benefits than their local law requires. An example would be enhanced benefits in the case of holiday or sick pay. The choices here will reflect the group’s values and business objectives. Other challenges include flushing out what has been happening at local level over time and identifying any deviations from group policies, getting stakeholder buy in to the harmonisation project and ultimately employee acceptance of the new terms.

Summary  A well conducted harmonisation project is not an easy option. It requires commitment from the global employer.  It is not for everyone, especially those businesses which place a high value on local autonomy. However, the long term beneficial impact on culture presentation and alignment, risk management and management time saved is usually compelling.