International employee assignments are a tried and tested HR tool for many companies, whether for projects abroad, for know-how transfer or as part of targeted personnel development programs. However, as soon as the place of work is relocated abroad, the playing field changes, as international assignments are subject to complex requirements in terms of income taxes, social security, employment law and work permits.
The first part of this five-part series deals with the basics of classic international assignments, i.e. temporary assignments abroad governed by employment contracts in which the original employment relationship remains in place. We explain what constitutes an international assignment, and why it is the actual practice that counts and not the label. This is precisely where the legal and administrative consequences arise, which determine the effort, risks and costs involved.
1. What is an international assignment?
An employee is deemed to have been assigned internationally if he or she works abroad for a limited period of time without the original employment relationship with the company in the home country being terminated or fully transferred to the destination country. The employment relationship remains legally valid and is usually supplemented by an additional contract or an international assignment agreement for the foreign assignment.
Typical scenarios are:
- Know-how transfer to foreign companies
- Operational support for projects
- Targeted development or stabilization of international structures
- Further development of managers and junior staff as part of global programs
The complexity of an international assignment depends not only on the destination and duration, but also on the specific arrangements. Does the employee remain in the social security system of the home country? Is there a tax liability in the host country? Does a work permit have to be obtained? Depending on the constellation, the legal framework conditions differ considerably - and with them the workload for HR, Payroll and Legal.
2. Forms of international assignment at a glance
Short-term assignment
Depending on the in-house definition, short-term assignments abroad start at around 30 days to two months and are often limited to a maximum of twelve months. In the past, however, the maximum duration was often only six months. Short-term assignments are typically used for clearly defined projects or to bridge personnel bottlenecks. The administrative effort involved is less than for long-term assignments, but income tax, social security and work permit issues must be clarified at an early stage.
Long-term international assignment
Long-term assignments usually involve assignments of more than six or twelve months and can extend over several years. They require comprehensive preparation, including amendments to employment contracts, tax planning (e.g. tax protection or tax equalization), clarification of social security law and a revision of the remuneration package. In practice, greater consideration must also be given to the employee's family situation. In these cases, support with relocating the family is, therefore, often part of the overall package.
Assignment for employee development ("Development Assignment")
This form primarily serves the targeted professional and personal development of talented individuals. It is often part of structured development programs for junior managers and typically lasts one to two years. The focus is not only on the operational benefits for the company, but also on the international experience for the employee (e.g. through rotation between different locations or business units).
Weekly commuter model ("Commuter Assignment")
With the weekly commuter model, the employee regularly works abroad without relocating their place of residence. For example, they commute weekly between their place of residence and the country of assignment. This model is particularly common in a European context. One example of this is project managers who regularly support a subsidiary or customer organization abroad. The complexity often lies in the tax treatment and social security status, especially if more than two countries are involved or if it is a complex international situation.
3. Which aspects are decisive for international assignments?
It is not the title but the implementation that determines the legal consequences of a foreign assignment. The following areas are, therefore, fundamentally relevant for all international assignments:
- Work permits: Whether a work permit is required for an assignment abroad depends not only on its duration or title, but above all on the actual activity on site. A formal work permit (or a registration procedure) may be required even for a few days. The decisive factor is whether the assignment is considered gainful employment.
- Income Taxes: The question of whether and where a tax liability arises depends on factors such as length of stay, activity and economic employer. Shadow payroll is often required for international assignments. The risk of a permanent establishment for tax purposes should also be examined at an early stage.
- Social security: Different rules apply depending on the duration, contract structure and destination country. In the EU/EFTA, an A1 certificate is usually required. In third countries, bilateral agreements or local regulations apply. Incorrect classification of social security status can lead to insurance gaps or double contributions.
- Labor law: In principle, the labor law of the home country remains applicable, supplemented by mandatory local protective regulations (e.g. working hours or minimum wage). In the event of longer or full integration into the host country, foreign employment law may apply under certain circumstances, with consequences for protection against dismissal, vacation or payment of wages.
Conclusion
International assignments are not a formal category, but a complex deployment model with clear legal implications. The decisive factor is what is implemented in the individual case and not what the assignment is called. The specific arrangement results in obligations in the areas of taxes, social security, employment law and work permits, which must be checked and managed in advance. A clear classification creates the basis for legally compliant processes, reliable responsibilities and predictable costs. In the second part of this series, we look at the topic of social security and show what companies should pay particular attention to in cross-border assignments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
