An organizationwide approach to global mobility
Employees (and their family members, if appropriate) should have overarching guidance for their global assignment that includes international assignment agreements that speak to the basics on immigration, compensation and allowances, tax guidance for assignees who are tax-equalized, cultural training, pre-assignment trips, relocation, home trips, and repatriation matters. But first, legal, human resources, tax, finance, accounting, treasury, payroll, the business units, outside vendors, and government officials all need to be on the same page.
A global mobility policy
The best way for all of the relevant parties to work together and communicate effectively is to have an overarching global mobility policy that covers the basics of a global assignment. The specifics of the global assignment are then detailed in an assignment letter that walks an assignee through the assignment from start to finish.
Primary compliance with this policy involves the active integration of the organization teams for purposes of the global assignment needs, specifically, with respect to following the standardized approach detailed in the policy and its underlying procedures and processes that classify an assignee within the policy parameters. It allows for a standardized allowance package and creates cost models and compensation packages for assignees based on a global assignment role and geographic location (including approaches to home-country versus host-country payroll), federal acquisition regulations (where appropriate), and coordination of immigration matters.
Behind the scenes an organization must then determine what it can handle in house and what it feels it needs to hire a vendor to undertake. For example, if an organization has no in-house immigration law expertise, then it should engage an immigration attorney. Ideally, organizations can seek out vendors to handle multiple facets of the global mobility program, such as accounting firms with international consulting practices.
Building a support team
When global mobility is driven by a business unit's demand for staff on the ground in a different country, it is necessary for all areas of support to assist in that regard. Ownership of that support is often undertaken by human resources (as it involves the movement of people), tax (as it involves the interplay of a second taxing jurisdiction and some organizations' wish to make their employees whole from a recruitment perspective), and finance or accounting (as the costs associated with global assignments need to be accurately and timely recorded). Each organization has to independently determine which group can adequately cover each support area.
For example, in a service industry where employees are the organization's inventory, the lead might be best undertaken by human resources. The assignment agreement is similar to an employment agreement with terms and conditions most often used by HR professionals. Many organizations that regularly send workers on short- and long-term international assignments may even go as far as creating a global mobility department or international human resources department. The HR professionals are dedicated not only to the compliance and operations surrounding international work assignments, but also to ensuring a successful assignment, which leads to employee satisfaction and retention of key international team members.
When an assignee's compensation must be tax-equalized to incentivize him or her to participate in a global assignment, the tax group might take the lead in fully supporting a technical team to answer complicated tax questions. Tax equalization is a tax-mitigation strategy for making sure certain assignees neither suffer significant financial hardship nor realize a financial windfall from the tax consequences of a global assignment. The objective of tax equalization is to provide a framework whereby assignees may be transferred to or among international locations while incurring only an individual tax burden similar to that which would have been incurred in their "designated" home country had they not received allowances and other tax considerations resulting from a global assignment.
The tax team would manage the tax equalization to ensure that the home-country tax position of the assignees will be neither advantageous nor disadvantageous. Often, this effort will require the application of hypothetical tax deductions through home-country payroll and payment of foreign taxes through host-country payroll, which will require significant initial coordination between the tax team and home-payroll and host-payroll administrators. Additionally, the assignment may have corporate tax implications—such as whether the assignee creates a permanent establishment or corporate tax nexus in the host location or if there are tax reporting requirements for business travelers that need to be coordinated in the host location—that will require the tax team to have significant involvement in the structure and tracking of global assignments.
End goals: Employee retention and satisfaction
When an assignee returns home, an organization looks to retain its personnel and have a satisfied employee. The employee looks to have experienced an issue-free assignment and gained an understanding as to how the assignment can lead to additional opportunities within the organization. Retention and satisfaction are measurable aspects of an assignment, and organizations are encouraged to consider how to apply these metrics in their global mobility programs.
Having a global workforce is an integral part of many successful businesses today—and tomorrow, too. Coordinating that global workforce takes a broad support team with a passionate leading team.
EditorNotes
Mark Heroux is a principal with the National Tax Services Group at Baker Tilly Virchow Krause LLP in Chicago.
For additional information about these items, contact Mr. Heroux at 312-729-8005 or mark.heroux@bakertilly.com.
Unless otherwise noted, contributors are members of or associated with Baker Tilly Virchow Krause LLP.
