Understanding terminations in an EOR context

Unlike in the U.S., where employment is often “at will,” most countries require cause, due process, and documentation before an employer can legally terminate an employee. For companies working with an EOR, the EOR acts as the legal employer, and it must follow each country’s specific labor laws. Under the EOR structure, some termination options that may seem straightforward internally may not be legally viable.  At Plane, we recommend using Mutual Termination Agreements (MTAs) as the primary termination option.

The primary termination path: Mutual Termination Agreements (MTAs)

What is an MTA?

A Mutual Termination Agreement (MTA) is a voluntary, negotiated separation where both the employer and employee agree to end employment on mutually acceptable terms. This is Plane’s preferred method of termination.

Why MTAs are often required by Plane:

• They minimize the risk of wrongful dismissal claims

• They allow for predictable timelines

• They ensure the employee receives fair compensation

• They are compliant with strict labor protections in many countries

As your EOR partner, Plane handles the legal documentation and guides you through the negotiation process to ensure fairness and compliance.

Performance-related terminations

In some cases, it may be possible to terminate an employee for performance reasons when working with an EOR partner, but, at Plane, this is rare and on a case-by-case basis.

Global labor laws require employers to follow a strict and well-documented performance management process. To pursue a performance-related termination, employers must provide a documented Performance Improvement Plan (PIP) that does all of the following:

• Sets out clear expectations and timelines

• Includes evidence of regular feedback and coaching

• Records any written warnings issued where necessary.

Without a clear PIP and documented evidence, performance-based dismissals are usually not legally defensible. If you are considering a termination on the grounds of performance, please reach out to support@plane.com so we can check if this path is a viable option in the employee’s home country. 

Redundancies

Redundancies (also known as layoffs) happen when roles are eliminated due to restructuring, budget changes, or organizational shifts. But under the EOR structure, redundancy-based terminations are typically not an available option.

Why redundancy isn’t possible under an EOR:

• Redundancy laws tie the justification to the legal employer

• An EOR is the legal employer of the employees, rather than the customer

• Restructuring or financial hardship within the customer’s business does not legally apply to the EOR, the legal employer

• Therefore, the required justification for redundancy cannot be met

When a role is no longer required, the compliant approach is to proceed with a Mutual Termination Agreement (MTA). In rare cases, Plane’s legal team may deem it appropriate to explore an alternative option for redundancies.

Any means of offboarding outside of an MTA falls outside of Plane’s service scope, meaning that local external counsel would need to manage the termination to ensure full compliance, with all associated costs billed to the customer. This approach often results in longer offboarding timelines and higher costs compared to an MTA.

What you should avoid

Certain actions can unintentionally jeopardize the compliance of the termination process when you’re working with an EOR.

If you’re working with Plane as your EOR partner, please avoid:

• Informing the employee of termination before consulting Plane

• Sharing termination decisions with the employee prematurely

• Taking steps that imply the employee is already dismissed (e.g., blocking access, removing responsibilities) before approval of the termination

Best practices 

To ensure a smooth and compliant process, we recommend the following:

• Contact Plane before discussing termination with the employee. Please inform us at least 30 days in advance about any involuntary termination (minimum 10 days for terminations in Canada).

• Provide performance documentation early (if applicable)

• Follow country-specific timelines; some require formal consultation periods. Check out our Country Hiring Guides for country-specific guidance.

• Allow sufficient time for MTA negotiation (typically 2-4 weeks as these timelines may vary depending on the country of employment)

• Stay involved in employee discussions as needed

If you are considering a termination, it is essential to involve your EOR partner from the very beginning. We will provide comprehensive guidance through each stage of the process, ensuring full legal compliance. For more details, please refer to our help article on terminations.