My employer's (let's call him "MyCompany", headquartered in prosperous country A, with international operations) local management (in a not so prosperous country B) informed us that we will be changing entities. As of the moment, the entity that employs me in my country B is actually a branch of MyCompany, so the senior staff here in my country are mostly citizens of country A and/or expats. Now they have decided to make this local branch a local entity (whose leadership will be mostly locals). The simplified explanation provided to us is to avoid being taxed on both jurisdiction (they didn't elaborate).

They told us the position and role stays the same, compensation and benefits stays the same, tenure will be carried over, everything's the same, no adverse effect on our employment status. They ask us to sign a new employment contract (assuming will contain what they have promised) to the new entity (which will still bear the name MyCompany, but different wording) on a certain deadline. To sweeten the pot, should we sign before the deadline, we will receive a bonus compensation equivalent of a month-salary, provided the employee who signed stay within the next x months (less than a year) after official employment date with the new entity. Someone asked what about those who refused to sign up to the new contract, the management replied that they will stay in the old entity, implying it will still exist after the new entity starts existing.

I am suspicious; in fact a number of my coworkers are also suspicious. I have a previous employer (let's call it "ExCompany") who suspended yearly appraisals in two consecutive years under the guise of rolling out new performance evaluation process. It turns out they are just cutting costs and I absolutely hated the management-speak that tries to cover the entire thing up. Additionally, one of the management guys who explained the change of entity of my current employer is a lawyer, which added to my apprehensions (I am generally distrustful of lawyers).

My question is, what could actually be happening that the management is not saying? Why the re-signing bonus if the employment terms remain the same anyway? Is there a reason to be suspicious or to think it is some kind of a trap or something (it is hard to compare "legalese" and "fine prints" on old and new contracts)? As for ExCompany, why go through all that subterfuge (which we can see through anyway); should they not be more honest (which I will certainly appreciate) that they will not promote people due to cost-cutting measures?

  • 2
    I didn't downvote, but My question is, what could actually be happening that the management is not saying? is not really answerable. Maybe they're telling the truth. Maybe they're doing this because they plan to close the company next year, and the other country has easier legal restrictions. Maybe they're doing this because the tax savings will let them pay you all huge bonuses. Maybe the owner lost the company in a game of Sabacc. – dwizum Feb 12 '20 at 15:17
  • In what country the local branch is located in? Is the company in financial trouble? Are severance packages, or unemployment benefits, based on the number of years an employee is with a particular company? Once you get a copy of the contract, can't a group of you chip in to hire a local employment lawyer in your jurisdiction? – Stephan Branczyk Feb 12 '20 at 15:59
  • Labor Law of which country (A or B) is in effect for your current employment? Labor Law of which country will be in effect for the employees of the new entity? This could make a lot of difference, even if the contracts are pretty same. – Igor G Feb 12 '20 at 19:37

This is normal.

In the modern business environment, there are a lot of strategic reasons to have various business entities instead of one big one. Taxation, the ability to fund them differently, fold or sell them off separately, qualify for country specific grants and benefits, and so on. Hell I work for a 10 person company and we have at least 3 and maybe more separate legal entities spread across several continents.

As with any strategic move, there may be benefits or issues to specific employees. They seem to be covering all the internal ones well. Does the new country of origin have significantly worse worker protections? But these don’t have to be bad, it can also have positive effects on you if it’s easier to fund or operate a local company (you’re already getting a month salary bonus out of it).

So read your new contract even though it’s “hard”, and then move forward. Make sure seniority is being preserved, that’s pretty standard in these cases. The only red flag I see here is that they have a batch of employees who are overly suspicious to the point of being counterproductive, which could lead to syndromes like “let’s not staff up over there in country X any more, it seems like they’re always problems.”


Our company wants us to sign-up for a new contract to a new entity. What could be actually happening?

As an employee, a new contract usually means you have resigned from your previous position and starting a new position.

It is a chance for HR to tweak a new contract of everyone, I would double check those clauses if they are the same: non-competing, intellectual property, work hour, availability, etc.

Everything related to a date is affected:

1. In some countries laws, it is harder to fire an employee after 12-24 months of service.

Depending of your seniority, you may loose some protection from laws.

2. Do you need to reimburse training if you quit before X months?

I would ask a written confirmation to clear those fees just to avoid to get screw if things get sours;

3. Will your financial status will be reviewed soon?

I would try to negotiate the deadline if I was planning to acquire an asset like a house so it does not official appears that I am recently employed.

4. Are promotion, bonus, severance package, holidays length and priority are calculated by seniority?

You may loose some advantages depending of your seniority and your location. If that is the case, you may want to negotiate or add clause to compensate your forfeited privileges.

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