Part 1: Due Diligence And Risk Management In Global Mobility

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Cross-border work is now a natural part of many companies, whether for projects, knowledge transfer, or to support new locations. At the same time, every international assignment raises a number of issues that should not only become apparent during the assignment.

This is where due diligence and risk management come into play. Basically, the terms risk assessment and risk analysis describe the due diligence required for a planned project. In the context of HR and global mobility, this means nothing more than a structured preliminary clarification of all relevant issues before the start of an assignment.

Basic questions before every international assignment

Before going into depth, it is worth conducting a pragmatic preliminary review:

• What is the specific reason for or goal of the assignment abroad?
• What type of assignment is planned (assignment, commuter, remote)?
• Are there employees in the company who are professionally and personally suitable?
• Are there alternatives such as local employment or a remote solution?
• What are the basic conditions (duration, location, start date)?

Only when there is clarity or at least a basic direction does it make sense to carry out the necessary legal and operational clarifications in connection with the assignment abroad.

Due diligence in the context of global mobility

Once the initial assessment has been completed, the actual due diligence process begins in the context of global mobility. This usually revolves around six key areas:

• Work permits: What work permits and/or registration requirements are necessary?
• Social security: Where is the person insured? Is an A1 form or certificate of coverage required? Is additional insurance necessary?
• Income taxes: Where does tax liability arise? Is a tax equalization necessary?
• Payroll: Which salary components must be accounted for and reported where?
• Labor law: Which protective provisions apply in the country of assignment and must be strictly adhered to?
• Permanent establishment risks: Are there any risks associated with a local permanent establishment?

These questions form the core of almost every global mobility assessment. It is generally irrelevant whether it is a workation or a long-term assignment.

Decision-making

At the end of due diligence for international assignments, there is rarely a simple yes or no. Rather, there are typically three scenarios:

• The assignment is possible.
• The assignment is possible, but only with conditions or additional effort.
• The assignment is currently not feasible or can only be realized with significant adjustments.

It is important that all parties involved (human resources, line managers, payroll, and employees) are aware of the implications so that unpleasant surprises can be avoided.

Real-life example

A Swiss manufacturer of machinery is expanding its market in North America. Its new production site in Illinois (USA) urgently needs expertise from the parent company that is not available locally.

Of ten potential internal specialists at the Swiss headquarters, only two are available for an international assignment to the USA due to family or work commitments. A preliminary legal review reveals that, due to their nationality, one remaining candidate would only be able to obtain a work permit for the USA at considerable additional expense. The company, therefore, decides in favor of the other candidate.

Further clarification now only concerns this one individual. This reduces the effort involved and minimizes risks. The planned two-year assignment abroad can be prepared by the responsible human resources or global mobility department. Any associated risks relating to income taxes, social security, labor law, etc. are identified and minimized as far as possible, and the parties involved are informed accordingly (risk management).

Conclusion

Due diligence in the field of global mobility is not an abstract concept, but rather a structured, pragmatic preliminary assessment. It is about asking relevant questions early on, before risks even arise or have to be accepted unchecked. Not everything has to be clarified in detail, but the major topics such as work permits, social security, income taxes, payroll, labor law, and permanent establishments risks must be clearly recorded and clarified. Human Resources does not need to build up specialist legal knowledge in these areas. However, it is necessary to know which questions need to be clarified and which topics are critical. A systematic approach not only prevents unnecessary effort, but also builds trust among managers, payroll, authorities, and, last but not least, the employees themselves.

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.