Whether you have employees permanently based overseas or you manage temporary assignees, it’s vital that you have the proper processes and procedures in place to protect both your organization and your people, says Morgan Danaher, Director of Services Ceridian, Ireland.
In today's working world companies realise that global workforce mobility is a rising but essential cost of doing business with more and more companies having to send top executives on overseas assignments.
According to Mr. Danaher "As well as ensuring that your employees are paid properly for their work, it’s also important to recognize the volume of in-country legislation and internal policies that you and your employees will need to comply with while working abroad.
You need to be clear on how to handle the home and host country payroll, especially who will perform which tasks and when. If you have employees working internationally, a clear and strong assignment policy needs to be in place.
Once you’ve defined organisational policies and identified the suitability of the candidate to dispatch on an international assignment, you must be aware of the regulations your employee needs to follow in respect to immigration, employment and health care. It’s also important to be aware of your employees’ emotional needs. Implementing a global employee assistance program (EAP) is an easy and cost-effective way to ensure they have access to counselling and advice before, during and after any overseas work.
It’s also important to think through the repatriation process ahead of time. International assignees and their families can experience reverse culture shock on return to their country of origin. You can minimize the shock of re-entry with clear communication before the employee returns by discussing the role to which they will return. If all goes as expected by both parties, the assignee needs to have a future career path clearly mapped out. An end goal is key for personal motivation and it’s important that your line managers are briefed accordingly.
Payroll calculations for international employees can be handled in a number of different ways. The two most common approaches are to use the balance sheet method, which maintains the living standards that the expatriate has in their home country, or the host country method, which sees the expatriate employed under local terms and conditions.
It can be highly beneficial to have one payroll provider that pays employees across all countries, so they can be paid in their chosen currency, or have their pay split between home and local accounts. One provider also greatly assists in the required elements of consistency and control for various policies and regulations relevant to the different assignees.
A number of other factors need to be considered — especially the way in which tax is treated, whether it’s full liability (the international assignees pays all the host country tax), equalization (the assignee is tax-equalised) or protection (assignee is tax-protected). Other key areas to be adhered to concern local and national regulations including work permits, residency rules and tax relief, Social Security agreements and the length of the assignment or follow-up assignments. Such rules and regulations can vary widely from country to country.
Discussions over the treatment of bonuses, pensions and benefits-in-kind need to be clarified before the assignment takes place. Because an international assignee can have a tax liability in the host country as well as a Social Security liability in their home country, there is frequently a need to operate two payrolls.
Often the host country payroll will be a “shadow” payroll, operating only as a method of calculating and paying liabilities. However, some employers will opt to have employees paid in both locations and sometimes it may be required to attract tax relief and continue contributions such as those for Social Security, pension and hypothetical tax or national insurance contributions.
The need for clear and consistent payroll and HR policies cannot be over emphasized for successfully managing expatriate programs. This, coupled with a support framework from the organization, is critical in the success of any international assignment.
An international assignment is a significant cost for employers and a stressful time for the employee and their family. Payroll needs to ensure managers have accurate forecast costs to make their decisions. The comfort of proper support systems adds peace of mind to assignees and helps them concentrate on the job at hand while on international assignment. For all concerned, payroll has a major role to play in an increasingly complex environment.