The risks areas of relocation and international assignments
Even the shortest overseas trip can bring risks making it a priority for both employers and relocating employees to be up-to-date and aware of potential risk areas during international assignments.
13 October 2016
This hub page contains the key information you need to move people successfully, whether you’re operating domestically or internationally, whether you’re new to relocation or an experienced professional. Even the shortest overseas business trip or commuter assignment brings risks. Often, the areas of highest risk, for both employer and relocating employee, are the ones managers tend to consider least.Relocate can help! Our new hub pages will provide all the specialist information required to ensure you are up-to-date with any mobility related enquiries.
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Today’s employers regularly send their staff to work in another country, whether for a few days or for several years. Many are aware of the risks associated with cross-border working. But, as globalisation increases and businesses rush to compete for opportunities, priorities are often not focused on the relevant risk areas.The four areas of highest risk for international assignments and cross-border working are the ones managers tend to consider least:
Personal income tax
Corporate income tax
It is easy to assume that someone working in one European country is able to work in another; that employees are not liable to personal income tax in their host location if they are paid by their home payroll; and that someone else is making the necessary corporate tax and finance arrangements for the project or assignment.Such assumptions and omissions could result in significant financial, employment and reputational damage to the employer, as well as personal cost and disruption to the employee, director or partner. The UK’s vote to leave the EU may add another layer of complexity.In today’s economic climate, tax authorities around the world are becoming more vigilant over foreign workers and foreign companies undertaking business in their jurisdiction. Where the authorities discover tax or social security avoidance, or where immigration formalities have been ignored, penalties – both financial and for the continuation of the business – can be severe.The good news is that, providing we know about the cross-border workers, there are steps that can be taken to mitigate the costs, avoid the penalties and ensure the employer is compliant with all relevant legislation.
Almost every country requires a foreign national undertaking productive work in that country to have permission to do so. Regulations vary, and it is vital to check before starting a project, an assignment or – in some places – even a business trip. While the EEA promotes the free movement of labour, this does not mean that a US employee with a work permit for France may also work in Italy or the UK. Make sure that all your cross-border workers have the correct work permission.
Individuals can become liable to a foreign income tax if they spend time in another country, and many regular visits can pose the same risk as one long stay. Many countries now have a ‘double tax treaty’ with other countries, and, providing certain conditions are met, the individual will only pay tax on the same income in one jurisdiction.However, that jurisdiction might be one with a higher tax rate, and the employee will generally expect reimbursement. Make sure you take professional advice and monitor the international movements of all your staff, from the CEO down.
Specialist tax advice is required by employers with employees working in another country, as the risks of creating a ‘permanent establishment’ if no secondment agreement is in place are high. Businesses should also consider the implications of transfer pricing and cross-border value- added or sales taxes. Setting up processes to manage these issues might seem costly, but it is money well spent and a sound investment for future international working. Make sure your finance and tax teams know about the project, assignment and any cross-border business activity.
Working in a country with a state social security scheme generally means social security is payable, both by the employer and by the worker. In some countries, this can be expensive, and a certificate of coverage (available across the EEA and some other countries with a legal agreement) exempts the individual from host-country social security payments while continuing contributions to the home scheme. But, where social security is payable, costs for the employer could have a significant impact on budgets, and fines for non-payment can be severe. Make sure you know who is working where, and for how long, and that you apply for (and obtain) any applicable certificates.
Additional points to consider
International working is a complex area, and there are many more elements than these to consider: will family members be included, will tax equalisation apply, how will pension contributions or share plans be treated, what allowances will be paid, to name but a few.
It is important that all companies conducting any kind of international business are aware of the risks associated with cross- border working. Cross-border workers may include:
The simple answer is ‘yes’!A relocation policy – whether for international or domestic relocations and assignments - is needed in the same way as a policy on grievance procedures, absence or any other HR issue.It brings consistency to an otherwise very fluid area, helps to reduce unexpected and unbudgeted costs, and gives prospective assignees – as well as those managing them – the guidance they need in understanding the terms, benefits and obligations of the relocation.A policy will tell the employee and the business how the relocation, assignment or transfer will work. It will explain the benefits and entitlements available, and how taxable benefits will be treated, and describe the services to be provided to assist with relocation. It should also outline, for those undertaking an international relocation, how payroll, income tax, social security and pension will be managed, plans for the individual at the end of their assignment, and the process for ending any assignment early. Employees, managers and HR all need to know and understand these points and their implications.
Having a comprehensive policy ensures there are no surprises and that everyone, whoever they are in the organisation and wherever they are relocating, is treated in the same way. It, and an accompanying letter confirming specific terms and conditions relating to the relocation, is also vital from a legal perspective, ensuring that – if applicable – home-country employment is maintained throughout an international assignment, that expenses are anticipated and budgeted for, that a secondment agreement is in place to mitigate the risk of corporate tax exposure, and that confidentiality is maintained, both internally and with external service providers.Without a policy, employees will negotiate their own terms. This can lead to spiralling costs, the inability to budget or plan, inconsistency and low morale in the workforce, and potentially difficult repatriation discussions. Those responsible for administering domestic and international mobility without a policy framework will struggle to determine appropriate terms, to negotiate with demanding individuals, and to be fair to the undemanding, to ensure corporate compliance, and to monitor and manage costs.Having a policy and making it widely and publicly available should mean that managers will seek guidance and support at an early stage and not wait until there is a problem, either with an employee or with the authorities in a host location.
How to write your relocation policy
Whether you are experienced or new to relocation, our series of policy factsheets (part of our new Global Mobility Toolkit) will guide you through the process of writing a policy or help you to assess whether your existing policy meets today’s fast-changing requirements.
Domestic relocation policy
There are a variety of reasons for domestic relocation in the UK. Relocation may be required when an employee’s job moves or they are needed to fill a vacancy or take up a promotion in another part of the country. An organisation may also move office location for cost reasons, expansion, or perhaps as a result of a takeover or merger. Many companies also use relocation to support recruitment.Whether you are relocating individuals or conducting a group move, it is essential to have a relocation policy in place.
International relocation policy
International assignments are required to meet three key objectives: strategic, operational and developmental. Expatriates are needed to provide strategic direction and focus within overseas subsidiaries, to fill skills gaps, complete projects and address operational requirements, to train and develop local people, and to undertake professional and personal development themselves as part of the talent management process.Our relocation policy design and review factsheets provide practical guidance on all the issues you need to consider when you are compiling or reviewing your strategy. Topics include: principles, process and administration; communicating your policy; content – long- term, short-term and commuter assignments, business travel; analysis of international policy trends; international reward strategy (home/host/others); domestic mobility/in-country relocation.
Repatriation is one of the four key HR elements of successful international assignments, alongside personnel selection, pre-arrival preparation and support in post. Research reveals that a high percentage of employees leave their company within a year of repatriation. Companies simply can’t afford to see talent walk out of the door at the end of an international assignment. Find out on our website how you can help expatriates weather the repatriation storm and beat the attrition rate. Useful advice is also provided for repatriating families.
Find out in the next section how you can support your relocating employees, their partners and their families to ensure a successful relocation, retain talent and grow your organisation. Keep up to date with the latest thinking and refer your employees to our leading international website.
The importance of employee support in managing successful relocations and international assignments cannot be overestimated.See the dedicated sections for relocating employees and their families on our website, relocateglobal.com. This invaluable resource, combined with the expert advice given in the pages of Relocate magazine, will make life easier for HR, line managers and global project teams. Wherever you are moving employees and their families, into or around the UK or internationally, refer them to relocateglobal.com for reassurance, practical help and advice from a trusted source. Relocation is an ongoing process, so you can be sure that, wherever your assignees are in the cycle, there will be something for them – from planning their move to the practicalities of partner support, from settling in and making friends to repatriation.Here are some of the key areas to consider as a starting point.
It is always hard for individuals and families to uproot themselves. Finding the right property, in the right place, affects the whole family, and so is fundamental to the success of a relocation.There are many factors to be taken into account when choosing a property, whether for purchase or rental. Number one is location. For most assignees, ease of commuting is vital, together with access to transport, good schools, shopping facilities and leisure amenities. Finding a suitable property within budget is often quite a challenge.Relocation management companies can help with Guaranteed Sales Price schemes, whereby the employee can move to the new area and has a guaranteed price for the old home to purchase the new one.
This is a really neat solution for relocation, with provision growing rapidly around the world. It is ideal as a short-term measure for expatriates waiting to go into longer-term rented property, employees on short-term assignments, domestic movers waiting to move into their new home, and business commuters working away on a project.
No need to worry if a shipment is late or your employee can only find an unfurnished property. Furniture rental companies can provide furniture for a whole house, top-up items for an additional room, and even kitchen, linen or bathroom packs for those essential household items.
Planning is the key to a successful move. If you select a removals company that specialises in corporate relocation, their experience should pay dividends, because whatever country you are moving employees to, they’ll have the experience in their network to deal with customs, security and timescale issues.When negotiating the price, be clear what your priorities are regarding weight, storage and transit time. Take advantage of the wealth of experience on offer from the professionals rather than making snap decisions based solely on price.
Choosing a school is a major concern for relocating parents, whether they are moving within the UK or on an international assignment.Many international families prefer to send their children to an international school, or to an independent school offering the International Baccalaureate, so highlight these schools in your area. Boarding is another option for global families on the move.If you are relocating employees from other parts of the UK, it is a good idea to inform them of the state and private school open days or evenings. Consider whether it would it be valuable for someone from your HR department to attend, so that they are more informed when questions arise.Education consultants will help individual families, and relocation agents often offer school search and school appointments as part of their service. There are also regional school shows, where you can see a range of schools exhibiting, all in one place. The state education sector is changing rapidly and can be confusing.Published in digital and print format, our new Guide to International Education & Schools contains the authoritative and accessible information relocating families need to make the best decisions for their children, with beautiful illustrations and high- quality production.
The sooner your relocatee and his or her family are happily settled, the better, both for the individuals and, ultimately, for the success of the assignment.If the relocation is to an overseas destination, culture shock may well be an issue. Pre- departure cultural and language briefings, for both the assignee and the family, can go a long way towards mitigating this.Those relocating within the UK may also experience a degree of culture shock, and will need time to adjust, plus plenty of area information – on everything from doctors’ practices to theatres, health clubs and sports facilities.
Don’t underestimate the importance of career support for the accompanying partner or spouse. Though dealing with the upheaval and personal change that relocation necessitates is a challenge, it is also an opportunity, perhaps for a career change.Careers advice, CV writing, analysis of transferable skills and interview preparation assistance, plus career development strategies and knowledge of how to get a handle on the local jobs market, are critical to ensuring that the relocating partner’s career stays on track. A careers consultant can offer help with all these areas. If working isn’t feasible overseas owing to local restrictions, help can be given with further education and training options or creating a virtual working environment.See our website resource, Relocate Careers (relocatemagazine.com/careers), which is specially designed to support career change and transition for partners accompanying an employee on a relocation or an international assignment.
Make sure everyone relocating has access to up-to-date information about the area they are moving to. This provides reassurance, saves you time, and ensures the relocatee can prepare for their move and settle in well.