With today’s global talent scarcity and the fact that many talented employees, particularly millennials, are looking for global job opportunities, global mobility programs continue to increase in scope and importance. In fact, almost 90% of companies are expanding their global mobility programs. A global mobility program is essentially the method a company uses when sending employees abroad. Programs range from simple (maybe even inadequate) to very sophisticated. Global mobility programs should address the interests of both the company and the employee, as such, they should include payroll processes, tax, and employment law compliance strategies, as well as employee relocation assistance.
Globig recently spoke with Jared Johnson, an expert in global mobility from Eide Bailly, about why a company should establish a global mobility program as soon as employees start traveling abroad and the importance of mitigating risks before employees move abroad. This article will explain some of the most important reasons why you should create a global mobility program for your company.
Global mobility programs should aim to mitigate and address risks before problems arise.
Reducing the strain of global migration by mitigating and addressing the risks associated with such a move is a critical first step. This will help to ensure the success of any global assignment, as well as raise employee enthusiasm for future endeavors. An effective global mobility program will ensure the company is in compliance with local laws and regulations, including taxes, payroll, any required social security and healthcare deductions, and immigration requirements.
Immigration violations can be costly and embarrassing to a company and can lead to penalties and limits to or loss of future business opportunities in a foreign country. Due to the heightened sensitivity on immigration worldwide, it is important to stay current on rapidly changing immigration policies and laws. This is not a good time to be lax about or try to get around immigration laws. Also important, a good mobility program ensures that the visa and work permit application process coincides and aligns with corporate goals. For example, the work and residence permit application process for non-citizens in Germany can take anywhere from two to four months. The time factor is crucial, and effective management prevents unnecessary delays and complications.
From a tax viewpoint, a company that decides to send a high-level executive to a foreign country will risk a higher than normal level of non-PE (permanent establishment) compliance. The PE threshold test determines whether a company has transacted enough business in the foreign country to establish a tax presence from a corporate tax perspective. Some companies fall back on the customary 183-day threshold, but that is a risky move. Depending on tax treaties between countries, the 183-day threshold may not be a reliable indicator to determine PE compliance. This challenge should be considered early on and addressed in your global mobility strategy.
Sometimes, a global employee may still incur a reporting and withholding obligation even though they may not ultimately owe any taxes. Countries like the UK and Canada have business traveler exemptions, but companies must comply with all statutory obligations in order to avoid the withholding and reporting obligations. An effective mobility program can explore the benefits or disadvantages of a frequent business traveler model, where employees work for brief but frequent periods in the foreign country of choice. It can determine when such an employee will trigger a filing obligation so that company decision makers can tailor corporate missions accordingly.
A good global mobility program is a great way to assess a company’s strengths and weaknesses.
Additionally, a good program can assess a company’s strengths, weaknesses, and needs to determine whether the company needs to permanently transfer an employee. The permanent transfer of employees is a huge company commitment that requires a carefully detailed business strategy. For one, if you are considering a permanent transfer, you need to determine whether you should invest in a tax-equalizing remuneration package for the employee. A tax-equalizing assignment is often an expensive option. At a cost of two to five times an employee’s annual salary, the company will need to finance a COLA (cost-of-living allowance), company car, and house, plus shoulder the considerable tax burdens of such an arrangement. A mobility program can help employees and company decision makers determine the ROI on shorter assignment periods (6 months as opposed to several years) that are combined with tax-equalizing benefits.
Global mobility programs are necessary to assist employees in a smooth relocation.
A global mobility program is necessary to because it facilitates an employee’s move to a foreign country. Employees who commit to a global assignment have a number of logistical tasks involved in the move, more so than a move to another house or even across the country. An effective mobility program will guide employees in this logistical maze. Some of the most important, but often overlooked challenges are spouse and child related, including dependant visa applications, school choice, healthcare, and spouse work options. Furthermore, employers should carefully consider employee compensation, including cost of living adjustments and other benefits. Employee assistance can take many forms, below is a nonexhaustive list of some assistance that should be considered:
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- including the visas and work permits for dependents (including adopted children, children of divorce, civil partnerships, etc.)
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- health benefits—how to provide comparable benefits to what employees are currently receiving, will the national health insurance suffice or do you need to supplement? Is there a provision for major medical to fly back to the home country?
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- moving and shipping assistance and expenses
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- required education or foreign language classes and/or cross-cultural training, including for employee dependents.
As you can see, an effective global mobility program will be crucial to your company’s success. An effective global mobility program should include considerations to address and mitigate risks, assess your company’s strengths and weaknesses, and assist your employees in a smooth transfer abroad. Because this process can be very long and onerous, your program should be considered and drafted early on, even before you need to send employees abroad arises.
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