Global Mobility is the movement and transfer of individuals across national borders for the purposes of their work. This movement can be undertaken in various ways, from short term business travel, and dual employment arrangements to more formal overseas assignments under a company’s Global Mobility Policy such as long term, short term, commuter or rotator assignments.
The Global Mobility function within IPM Global can assist its clients with this movement of people, including developing policies and planning and costing assignments in advance of any relocation.
We partner with our clients to put processes in place and can coach our clients’ staff, aiming to raise their awareness of tax, compliance, payroll and immigration matters, as well as assisting the transferring employee with their personal and practical relocation needs.
This high touch and well planned approach help our clients save costs and reduce the risk of financial ‘surprises’ during an assignment whilst protecting the client company’s reputation and facilitating the movement of their employees.
A company should carefully consider the strategic benefits to the company as well as the personal/development benefits to the employee before sending them to work overseas. The costs should also be estimated before any financial commitments or “offers” to employees are made.
Depending on a number of factors, the process could take several months.
Immigration and tax planning are essential if the company wants to avoid compliance risk. Many immigration, tax, social security and payroll arrangements cannot always be backdated in several jurisdictions and so assignments undertaken without full and timely consideration of the risks could lead to large tax fines, breaches of country legislation or even deportation and costly legal proceedings. Early planning in these areas will pay dividends. An assignment should not start without the correct immigration documentation in place, so the timelines relating to this will be the most important factor in how quickly an assignment can take place.
The company also needs to consider the practical arrangements associated with the assignment in the country of work such as payroll and banking arrangements, accommodation, transportation, expense management and medical care provision. There might also be family considerations to prepare for such as schooling, partner support and cultural briefings.
IPM Global can support clients with all of these factors either working in partnership with their current third party suppliers or with carefully selected suppliers from our own network.
It is common for employees on commuter or short term assignments (under one year) to remain paid in their home country as normal, as it very likely that they remain liable to tax there. However, the location of payroll, or where the contractual agreement has been signed, is not in itself a determinant of where tax or social security is due. Tax and/or social security may also be due in the host country on the same income depending on how long the assignment is for, which employer the employee is working for the benefit of, where the costs are to be charged and what tax agreements exist between the two countries. It is essential therefore that advice is taken at outset as to what will apply in the specific circumstances of each assignment. This will reduce compliance risk and unanticipated costs.
Legislation will differ between countries, but in general “overseas business travel” will be to attend meetings or training courses., but not to undertake activities which directly benefit an entity in the host country, or to, for example, execute contracts on behalf of that host entity.
The more frequent the trips, or if such trips are for several weeks duration, the more likely the risk that immigration officers will question whether it is “bona fide” business travel, or whether the activities constitute “employment” in their eyes. The latter requires a full work permit.
Regular business travellers should be prepared to show a full itinerary of their visit.
The short answer is possibly, as the legislation of the home country where the employee resides will determine what criteria are required to “break” residence (i,e. the home country agrees that the income is “overseas earnings” and therefore not taxable in their jurisdiction.)
As international assignments by their very nature involve more than one location and are legislated by specific tax and immigration regulations, it is important that policy documentation is agreed. This will ensure that it is clear not only what “benefits” are provided but also who bears the tax on them. This ensures that there are no “hidden surprises” for either employee or employer. It is also important from an equity standpoint that a policy will apply to all employees on similar assignment types irrespective of where they move to/from.
A clearly defined relocation process will ensure that key steps are taken in the right order at the right time, thereby enhancing the employee experience.
There are three key stages in designing an assignment package:
In some countries, paying a component such as housing as a benefit will be treated more preferentially taxwise than paying as a cash allowance. Likewise in some countries, tax concessions may exist for foreign nationals reducing the amount of tax payable. However, Revenue authorities do not pro-actively advise you that things can be done in a more tax efficient way. It is therefore essential cost management practice to consider at an early stage the tax efficiencies that can legitimately be used to reduce costs. Similarly, it is usually the default position that social security will be due in the host location, but this can be avoided in some cases by way of totalisation agreements where the employer can apply for a certificate of continuing liability.
Where an employer has considered the fact that taxes in the host location will be different from home, this means that the remuneration policy and tax compliance policy, are designed so that the assignee pays no more, but also no less tax than they would have done had they stayed at home. This gives the assignee protection, and usually means that the employer will pick up the excess taxes on remuneration, and on assignment benefits such accommodation and education.
Where an employee is paid in their home country but has a tax liability in the host country, a shadow payroll may be used to pay tax across to the host tax authorities on a regular basis. This is called a shadow payroll as it exists solely for the employer to discharge local tax liabilities rather than to pay the assignee, and may not even be visible to the assignee.
A cost of living allowance as used in international assignments measures the relative prices of a basket of goods and services in the home and host locations. Prices may well increase in the host location, but if inflation is rising higher in the home location, then the allowance may go down. Likewise, if the host currency weakens against the home currency, the allowance could also go down.
A certificate of continuing liability is a certificate which shows that the home social security laws apply to an employee whilst “temporarily” working abroad and therefore that both the employee and the employer do not need to pay into the host social security scheme.
This will only be the case where there is an agreement in place between the two respective countries. It is not automatic, and needs to be applied for, for each assignment. Certain criteria also need to be fulfilled before it can be granted.
Certificates are normally issued for a maximum of 5 years, although some agreements provide a shorter period of coverage.