While it has never been easier for digital startups to expand internationally, there are some important things to be aware of before making the leap.
The local codes of practice, rules and regulations and idiosyncratic quirks can cause ventures by high-growth US startups to stall overseas. The nuances of European business practice have tripped up stateside businesses of all sizes.
Some of the most common misunderstandings surround employment: employee rights, the bureaucracy, and the expectations of European workers are all very different to those in the US.
Hiring and firing
A concept that may seem odd to an American business is the fact that one cannot hire and fire people at will. There are certain rules and regulations that can make it more difficult for an employer to get its ideal candidate. For example:
An attempt to employ your ideal candidate can often be delayed by gardening leave.
The term refers to an employee's suspension from work on full pay for the duration of a notice period, typically to prevent them from having any further influence on the organisation or from accessing up-to-date, confidential, sensitive information, especially when they are leaving to join a competitor. While they’re on gardening leave, they’re not working for their previous employer, but they can’t work for you, either.
If you have someone in mind to be your European chief technical officer, it’s not uncommon to wait three or even six months for them to become available. This takes some pre-planning and should be factored in well before you move across the Atlantic.
Unlike in the US, there is no such thing in Europe as employment at-will, under which an employee can be dismissed at any time, for any reason or for no reason. In Europe, employees enjoy much greater protection, and reasons for dismissal must be established and justified.
In the UK it is customary for new employees to have a probationary period: essentially a safety net for employers after the recruitment stage is complete. The probation period is a mutually agreed-upon duration of time (typically anywhere between three and six months) during which your employee’s ability to meet certain performance levels will be observed and assessed.
Pending a review, the subsequent failure to meet these standards within the set period means you can dismiss an employee without fear of unfair dismissal claims or an employment tribunal. Once the probationary period is complete, employees in the UK gain greater protection which increases based on length of service until they achieve full protection within two years.
After the probationary period employees still have rights to ensure they aren’t dismissed without just cause, as laid out in the written statement of terms and conditions (see below). Dismissing an employee unfairly or treating an employee unlawfully could lead to an employment tribunal. This is when an employee makes a claim against their employer to an independent or governmental body. If the dispute is not settled the claim will go to court and could result in a costly compensation payout.
Using the UK as an example (although rules across the EU are similar), all employers are required by law to outline their disciplinary rules and procedures in an employee's written statement of terms and conditions. The written statement can refer staff to the employer's full, written disciplinary policy that employers (of any size) are advised to have, and to which they should let employees have access.
There isn’t a statutory disciplinary procedure anymore, but the 2009 ACAS Code of Practice on disciplinary and grievance procedures sets out the basic principles that should be followed. Again, there are similar rules across the EU.
The minimum statutory notice period that must be given by an employee is one week if employed continuously for one month or more by that employer. This minimum is unaffected by longer service.
Likewise, an employee must be given a notice period before their employment ends. In the UK the statutory notice periods are:
at least one week’s notice if employed between one month and two years
one week’s notice for each year if employed between two and 12 years
12 weeks’ notice if employed for 12 years or more
Redundancy refers to the process of dismissing an employee because the role has become unnecessary -- or “redundant.” For a redundancy to be genuine, an employer must demonstrate that the employee’s job will no longer exist. This is typically the procedure that an employer will follow if they have a financial imperative to reduce headcount.
Even a genuine redundancy situation can result in a finding of unfair dismissal at an employment tribunal if an employer does not adhere to the correct processes. Therefore, it is advisable to take legal advice from specialist redundancy solicitors when considering making any employee redundant.
Redundancy: the basics
An employee dismissed because of redundancy and who has been continuously employed for two years or more is entitled to a statutory redundancy payment. The amount is based on gross weekly pay, age, and length of service. Redundancy payments can add up and can create a cash flow headache, so planning for the financial impact of redundancies is essential.
Employers must give employees sufficient warning of the impending redundancy situation and the fact that it may affect them. They need to identify a pool of employees from which to select those to make redundant and the pool must relate to the reason for the proposed redundancy. For example, it would be inappropriate to include administrative staff in the pool if the need is to reduce the number of software developers. There must be a fair and objective criteria for determining who is made redundant; for example, “last in, first out” is more objective than making redundant those with the greatest seniority because they cost the most.
Average working week
In Europe, the average working week is around 37.2 hours but this varies. The Greeks are the hardest working, clocking up an average of 42 hours whereas in the Netherlands they clock up a relaxed 30 hours a week. The British are somewhere in between with an average of 36.5 hours a week.
In the main, most of the major holidays in the UK and Europe are in line with those of the US. It is usual for employees to have time off around Christmas and Easter. But be aware, in the UK there are eight additional bank holidays throughout the year. Normally these occur on a Monday and are so called because, unsurprisingly, the banks shut on these days.
While US law does not require employers to grant any vacation or holidays, European workers on a five-day week are entitled to paid holiday leave. The time varies across Europe, with the amount of paid holiday varying from 38 in Finland to 10 in San Marino, but in the UK, full-time workers are allowed 28 days a year paid holiday. Employers can include bank holidays within that annual leave.
All this is really scratching the surface of employment law across the EU; it can be a minefield. The bureaucracy and paperwork can seem alien to American businesses used to just ‘getting things done’. But it’s the culture. Handled incorrectly, it can be easy for an employer to get tripped up. Handled well, and it can lead to a positive culture and work environment with a loyal, motivated team.
Prepare for the unexpected and let Atlantic Leap guide you to Europe. Find out more about our services here.