Employers know their biggest asset is their people, they also know that in order to attract the best people they need to have a competitive benefits and remuneration package.
Prospective employees are often interested in the ability to travel through work. Many global employers therefore offer a programme of mobility in order to meet the needs of the business as well as to attract the best people.
For employers there is a ‘deemed’ pay off between the costs of global mobility and getting the best human capital. What is clear is that for many employers, their current programmes of global mobility are outdated and not commercially viable.
Now more than ever employers need to reduce costs so it is encouraging that there are simple steps that can save on costs while still providing opportunities in order to retain the best employees and grow their business.
Global Mobility Policy (GMP)
An effective GMP drives the basis by which employees are globally mobilised and covers all aspects of mobilisation including tax and social security.
A GMP needs to be legally robust in order to safeguard both parties from unexpected hardship and costs as well as uncertainty, litigation and to minimise the risk of overseas tax compliance failures.
Consider the GMP currently in the place for the business; is it legally robust; does it cover all aspects of mobility in both the home and host locations; is it fit for the current mobility programme of the business? It may be that the current GMP just needs to be updated to take account of changes across the business as well as the requirements of the employer.
If the business does not have a policy is it then exposed to potentially expensive legal costs as well as penalties for failure to comply with overseas jurisdictions.
It is important that while employers want to provide their employees with attractive packages for secondments these also need to be cost effective.
Actual Costs and Tax Compliance
The real costs of moving employees between locations is rarely quantified in full. The costs of remuneration tends to be well known, as will any benefits package, but what about other costs?
- Have subsistence and accommodation costs as well as the tax on these been considered in the home and host locations?
- If the GMP is to tax equalise employees what deduction of Hypothetical tax will be made from employees, will this be based on a straight percentage or based on home country tax rates. In addition is this being accounted for when calculating the host location taxes?
- What impact will the employee’s residency position have on the costs to the company, does the GMP clearly detail what will happen if an employee doesn’t break home country residency and who will pay any tax liabilities arising?
The remuneration packages and the GMP go hand in hand when quantifying the real costs but with a bit of tax planning alongside full cost projections in line with the GMP many businesses could make substantial savings.
While it is appreciated that the advice surrounding tax compliance and planning and in particular tax residency can be expensive in its own right, the savings that proper planning can bring far outweigh the potential costs to the business in the longer term.
There is no doubt that providing a global mobility programme to employees is littered with many challenges but now is the time to start reviewing the current programme to ensure it is fit for the future.
If you require further information, please contact Isla Mayfield, IES Manager (firstname.lastname@example.org) or your usual AAB contact.
Global Mobility is changing - how robust is your policy? Watch our video below.