Working across international borders and frequent business trips combined have become the norm for globally operating companies. Be it for long-term assignments, to tap new markets, to build up know-how abroad, or even just for short business trips overseas.
Risk awareness in companies and the closer integration of authorities have led to increased demands for compliance in business travel. Whereas it used to be possible to generously disregard the need to obtain a business visa and simply enter the country on a tourist visa, those days are long gone. At least for companies that value compliance and want to reduce their liability risks.
There are plenty of legal pitfalls surrounding the international posting of employees. In the following article, we will show you the main compliance challenges for internationally working employees - without getting lost in the specific legal details.
Income taxes
Most HR and Global Mobility managers are probably aware that they need to pay attention to tax issues when working abroad. But the question is: how much? - It depends entirely on the individual case. Does the employee travel abroad on business for just a few days? Does he go abroad for a few weeks or even months? Does he regularly work abroad and is now coming to the company headquarters for a few days for meetings?
For all of these questions, both the specific situation of the employee and internal company aspects must be taken into account. Where is the employee's center of life? Where are the salary costs charged to? - These and many other questions must be answered to determine the employee's tax liability in the home country and abroad. After all, only when the entire background has been clarified can the correct conclusions be drawn concerning the employee's tax liability and any obligations on the part of the company (e.g. withholding taxes).
Social security
The issue of social security for international employee assignments is increasingly coming out of the dark. Many companies are more aware of the high liability risk associated with inadequate social security coverage, which means that nowadays there is a growing focus on ensuring that employees are properly covered by social security.
Global Mobility and HR managers with internationally active employees are also aware that obtaining A1 certificates has become a must for business trips within the EU as well. This annoying, but essential administrative step has meant that companies are now much better informed about the international travel activities of their employees.
Work Permits & Visas
For long or regular international postings, it is obvious that work permits and visas must be obtained. For business trips and short foreign assignments, the effort can be considered about the duration of the trip. It is, therefore, not surprising that pragmatic solutions are often sought here.
Nonetheless, companies are required to ensure that the correct permits and visas are obtained - even for short periods abroad. On the one hand, this means more work for HR managers and employees. On the other hand, this is the only way to significantly reduce the risk for the company.
Reporting procedures
The registration procedures in the European Union are a relatively new phenomenon, which is still far from being implemented correctly in all companies. For business trips within Europe, the so-called reporting procedures often have to be carried out (in addition to obtaining the A1 certificate).
However, the EU-wide regulation has been interpreted and implemented very differently by individual countries. While some countries are relatively relaxed about the reporting procedures and grant generous exemptions (e.g. Germany), other countries are notorious for their strict handling and rigorous penalties (e.g. France or Austria).
In terms of compliance for international employee assignments, it is, therefore, important to continue to keep an eye on developments in reporting procedures in the EU area and to implement them correctly, even for short business trips.
Labor law
In principle, there is a free choice of law - provided there is a connection to the place of work. However, if the employee is posted abroad or works permanently "remotely" abroad, the mandatory provisions of the foreign labor law must also be applied. The same applies to any more favorable regulations compared to the chosen law.
In the case of international employee assignments, it is, therefore, unavoidable to deal with at least 2 legal systems. Sometimes regulatory gaps or contradictions remain that are not easily identifiable or resolvable. HR managers should be aware of this risk and react appropriately in the event of legal disputes involving foreign countries. It is advisable to seek support at a good time.
Remuneration
When employees from Switzerland are sent abroad, there tends to be no risk regarding being compliant with the foreign minimum wage due to the high Swiss wage level. In contrast, when employees are assigned to work in Switzerland, it must often be expected that they will be paid a supplement for the days they work in Switzerland to comply with the Swiss minimum wage regulations (for work permit reasons).
Nevertheless, there are several other regulations to consider when employees are assigned to work abroad. For example, some countries provide mandatory retention by the employer that must be paid to the employee at the end of employment. These accruals can represent a significant salary supplement and should, therefore, be considered when determining compensation.
Permanent establishments
In times of "remote work", the issue of permanent establishments is coming more and more into focus. Many companies are aware that they could potentially have a permanent establishment risk if employees work permanently abroad. However, this permanent establishment risk is often ignored or not clarified in detail.
From a compliance perspective, it is advisable to at least restrict the scope of negotiations and prohibit local employees from concluding contracts abroad. This does not eliminate the permanent establishment risk, but it at least reduces it somewhat.
Conclusion
Compliance in the context of international work and postings remains difficult. Increasing globalization, changes in work behavior (e.g. workstation), and remote work are further increasing the demands on companies to implement employee postings abroad in a legally compliant manner.
This requires not only greater expertise in HR departments but also an awareness of the compliance risks associated with foreign assignments and business travel at the employee level.
In addition, the appropriate structures must be created within the company to be able to properly map the multitude of foreign assignments and to be able to take the right steps concerning taxes, social insurance, work permits, and the like.
To ensure compliance with international workforce mobility, companies should, therefore, promote awareness of the issues among their employees and request support from specialized partners in complex cases.
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.
