Secondment Agreements

A "secondment" is the process by which an employee transfers to another company for a fixed period of time for a specified purpose. Secondments can take place both domestically and internationally. At Cantwell & Goldman, P.A., our international business attorneys can prepare secondment agreements on behalf of both foreign and U.S. employers as well as review and negotiate secondment agreements on behalf of senior employees.

What is a secondment?

A secondment is the temporary allocation of an employee either internally within an organization or externally to a separate company. The secondment involves three (3) parties:

  1. Employer. The employer will dispatch its employee to another company.
  2. Secondee. The secondee is the employee who will be dispatched to another company.
  3. Host. The host company will take on the secondee for a defined period.

Secondments may involve moving a secondee to a different affiliate within the same organization or to an external company. The external company is often a client of the employer.

An international secondment involves the cross-border transfer of the secondee to an international company. A formal agreement referred to as a "secondment agreement" between the employer, secondee, and host is needed to govern the relationship between the employer, secondee, and host. The secondment agreement must take into account the laws of the employer's country and the host country.

Why do secondments Take Place?

Secondments offer the following benefits:

  1. Strengthening relationships:
    • A secondment may provide the opportunity for the employer and host to strengthen their relationship.
    • Each organization will develop a better understanding of the other through collaborative efforts.
    • A secondee may also consider an international secondment as a boost to his or her career and may receive additional benefits not otherwise available to him or her.
    • Employers favorably regard the opportunities that international secondments provide to their employees to work in culturally diverse work settings.
  • Special Projects:
    • A secondment may make sense when a project requires a secondee's specific skill set. The employer may assist the host by dispatching a secondee who has expertise in the field to assist the host with the assignment.
  • Staffing requirements:
    • An employer's headcount may be adjusted in accordance with the ebb and flow of the business cycle or due to an overall increase or decline in productivity. A secondment may allow a business to deploy resources to different departments or to external companies instead of increasing or decreasing headcount.
    • A secondment can help fill an important gap if a key employee has a leave of absence for a temporary period of time.

Formalities of Secondment Agreements

Key points which should be addressed in the secondment agreement include:

  • Identifying the employer, host and secondee
  • Specifying the duration of the secondment
  • Addressing which party will cover salary, bonuses, expenses, benefits, and illness/leave for the secondee
  • Stipulating health and insurance obligations owed to the secondee
  • Addressing which party will handle the management, grievances and daily supervision of the secondee
  • Identifying actions that would lead to termination of the agreement
  • Addressing intellectual property rights and confidentiality of shared information between the parties

The following additional terms should be addressed in international secondment agreements:

  • Tax liabilities specific to each jurisdiction
  • Labor and employment laws and how a secondee will be treated locally in a foreign jurisdiction
  • Employment visas which may need to be obtained from the host's country and related immigration issues
  • Secondee benefits such as relocation and travel allowance and benefits that may extend to their family members (e.g., health insurance, private school for children, etc.)
  • Continuation of retirement benefits (e.g., vesting of 401(k), pension, etc.)
  • Support for preparation of international taxes filings
  • Cost-of-living allowances and currency exchange issues

Special Considerations for Cross-Border Secondments

  1. The labor laws of the host's country may apply to the secondee as a matter of public policy, notwithstanding the terms of the secondment agreement:
    • Mandatory host-country employee protection laws may include pay rate, overtime, working hours, rest periods, vacation and holidays, occupational health and safety, collective bargaining, discrimination and harassment, employee/contractor classification, and terminations/dismissals.
  • U.S. labor law may apply to a foreign employee seconded to a U.S. host even if the foreign employee has opted out of local law by signing a choice-of-home country law provision:
    • Example: A foreign employee seconded to a U.S. employer signs a choice-of-home country law provision regarding wages, which would result in payment below minimum wage in the U.S. This provision may be unenforceable under U.S. law.

Key Issues for Employees to Consider

Employees considering an overseas secondment should follow these guidelines concerning secondment agreements:

  • The employee should confirm that any employment agreement, offer letter and/or expatriate agreement sets forth his or her specific location, duties, and reporting lines with the host and stipulates the benefits which he or she will receive under any secondment arrangement.
  • The secondment agreement should be for a specific period of time in which the secondee will work at the host. Following the secondment, the secondee shall be entitled to return to his or her position with the employer.
  • The secondee should remain bound by the management practices and employment rules of the employer, but the secondee may be subject to the general oversight of the host.

Our international business attorneys are skilled in drafting and negotiating international secondment agreements. We have expertise in reviewing and drafting choice-of-law clauses, nondisclosure provisions, noncompetition covenants, and other provisions which are normally included and/or referenced in secondment agreements. Contact our office to speak with our international business attorneys about secondment agreements.