Deploying and maintaining talent around the world is a critical priority for multinational companies. Driven by globalization, global mobility is an increasingly important component of maintaining market competitiveness, whether for expanding to a new country, sourcing the right talent or ensuring workforce diversity.
There are myriad reasons why companies choose to send employees overseas on assignment, but employers typically must navigate a common set of challenges with regard to properly managing their expats. Make no mistake: The stakes are high. Employing an expat typically costs two or even three times more than the simple cost of the individual's home-country salary. Moreover, expat assignments can and do fail, and improper immigration or tax compliance management can lead to serious legal trouble for the employer and/or the employee.
This playbook addresses the most common challenges faced by multinational companies sending employees abroad. Effectively managing a mobile global workforce is highly complex, touching on everything from immigration to taxes, insurance to talent development. Drawing on our vast experience supporting clients that send employees abroad, we have created this document as a roadmap of important questions organizations should answer and sensitivities they should be aware of to successfully deploy a workforce to foreign countries.
The playbook is organized according to four important themes. Though it would be impossible to give a full, technical account of each, we highlight those issues relevant to most organizations and suggest best practices where appropriate. The four themes are:
- Tax and Payroll
- Other Considerations
For the purposes of this document, an expat is an employee who is sent abroad by his or her employer on a foreign assignment for an extended period of time.
The expat's length of stay in the host country is often a critical determinant of his or her immigration status, compensation, taxes and treatment under company policy, among other factors. Thus, the most salient organizing principle for expat assignments is determined by assignment length. Here are five common types of expat assignments.
- Business visitor assignments: Typically last less than six months and can often be treated as a regular business trip, with reduced consideration for issues such as immigration and taxation (although the details of each assignment, including country requirements, must be reviewed).
- Commuter assignments: Frequently crossing jurisdictions (e.g., between the United States and Canada); how these expats are managed will largely be determined by the amount of time they spend in the host country and the activities being performed.
- Short- and medium-term assignments: Last anywhere from six months to two years and will require full consideration of immigration, taxation and other issues.
- Long-term assignments: Usually last more than two years and require full consideration of immigration, taxation and other issues.
- Permanent assignments: These are "one way" relocations, and the expat is expected to remain in the host country permanently or for the foreseeable future. Often the expat's employment contract and compensation treatment will be structured like those of locally hired employees, but with some additional payments to cover the initial relocation.
Understanding the composition of your expatriate workforce and adopting policies to manage them effectively begins by ensuring you understand how long each employee plans to be or has been outside the home country and where each employee has been or will be located. A common theme throughout this
playbook is the importance of developing expat policies that are appropriate to different types of assignments and implementing a system to administer and track expats. Taking these steps will help ensure that you are being consistent in your treatment of each employee, aware of and proactively addressing key questions that may arise from employees and other company stakeholders, and properly managing expatriates according to home- and host-country obligations to avoid costly errors.
It is advisable, then, that employers adopt and adhere to a comprehensive global mobility policy. The policy should address the key considerations discussed throughout this document, including incentives for accepting a foreign role, logistical support, local housing allowances, family support and tax considerations, among many others. Adopting and adhering to a well-structured policy with clear guidelines will help provide for a consistent and transparent approach across a potentially diverse expat population, removing uncertainty and reassuring your employees that you are in control.
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.