We are living in a world that is more connected globally than ever before. Businesses are conducting operations beyond borders and capitalizing on labor market resources located in jurisdictions outside of their home country, as well as sending talent abroad to be able to meet and exceed strategic objectives of the company. In addition, the Covid-19 Pandemic has accelerated changes and trends, such as:
- Loss and retirement of long-tenured employees, including the baby-boomer generation.
- A shortage of experienced and qualified job applicants to fill specific full-time employment opportunities.
- A movement from ad-hoc temporary and flexible remote working to permanent full-time remote employment.
- The need to effectively motivate and manage employees without face-to-face meetings; and
- A two-prong approach to improving employee retention that combines job satisfaction with a competitive and incentive-oriented compensation and benefits package.
A one size global mobility plan doesn’t fit every company but requires a customized approach to meet business objectives and goals. Have you been thinking about how your business is dealing with these employment challenges and opportunities? Is your approach reactive or proactive? Are employees that previously performed work for one affiliated company located in country X now spending time and performing work that directly benefits an affiliated company located in country Y or Z? Should the benefitting affiliate be compensated for the beneficial services received? Are short or longer-term foreign expatriate assignments necessary to meet business growth needs, and to develop and retain your company’s best and most talented employees?
In the ever changing fast-paced world we live in today, markets across the globe have their own regulatory and changing environments which cannot be assumed to be similar to your home country rules and regulations. Expanding and using resources abroad must be managed just as carefully as you would in your own home country when seeking out new business ventures, for example, opening an office in another state or hiring employees located in another state.
As businesses seek to overcome challenges in finding the right talent, a global mobility strategy may be at the forefront of their business plans. It is important to be aware that people are embracing “working in” or “working for” companies located in other countries, while also given the opportunity to experience different cultures in other parts of the world. This can be an advantage and an opportunity to a company as this expands the talent pool for employers ready to embrace the new wave by capitalizing on international markets. The Covid-19 Pandemic has also opened the minds of employers and employees by realizing you don’t necessarily need employees on premises to perform job responsibilities. Remote working relationships will continue to open many doors for both owners and talent in ways we’ve never thought of before.
While a globally mobile workforce can provide opportunities, it is crucial that the business understands the options available to structure an international workforce that minimizes any potentials risks. A company must manage its resources carefully, including managing and identifying the best talent to remain competitive in the new era environments we live in today.
When your company begins to develop a global mobility strategic plan, all stakeholders need to be involved, including but not limited to the following leadership team:
- Internal resources:
- Key executives, financial and operational management, and administrative leaders that understand company objectives, vision, and strategy
- Company human resource leaders
- External resources:
- A trusted consultant and advisor with global mobility experience such as PKF Mueller,
- Attorney/legal teams
- Tax consultant and advisor
The leadership team will need to consider many aspects involved with the use of US and foreign mobile workforces before, during and after assignment, including but not limited to the following:
- Structure of the assignment, which can include hiring talent in a state outside of your home state, hiring locally, sending talent abroad to another country, hiring talent located in other countries, or relocating talent to any jurisdiction for short and/or longer periods of time.
- Assessing the risks of having talent who live and work in a foreign country and finding a cost-effective solution to cross-border remote employment; consideration of using a Global Professional Employer Organization (PEO) compared to costs associated with branch operations or legally organized subsidiaries.
- Complying with multi-jurisdictional legal and tax reporting requirements both at home and abroad; company and individual level obligations; hypothetical and tax equalization planning.
- Minimizing the risk of double taxation or being taxed in more than one country: utilizing foreign tax credits.
- Immigration issues, work and residence permits, sponsorship issues.
- Employment law, home or host social tax systems, totalization agreements, application of various treaties.
- Compensation package considerations such as pay raises, bonuses, and promotions, including fringe benefits like cost-of-living allowances, housings, need for a vehicle, travel costs.
- Cultural training, on-going position training, pre-assignment and departure meetings, touch points throughout the assignment, and post-assignment, return and closure meetings.
- Development of a detailed referencing policy document and guide outlining all aspect of contract assignment, including the above considerations, FAQ’s and more…
It is vital to plan, seek advice early and consider all the factors briefly outlined in this article, as well as other factors that arise, to ensure the process is seamless for the company and, most importantly, for each of your employees. It is also important that contracts are customized appropriately to fit the assignment at hand, and that a one size fits all approach is not recommended. You will want to remain flexible and adjust your policies to fit the specific employee assignment, as necessary.
Smart companies think outside of the box to find right-sized solutions to deal with the increased challenges in finding talent locally by developing flexible, adaptable, and practical solutions through use of a global mobility strategy that will provide for business ingenuity and growth.
Amy Chamoun, CPA, MST
Partner, International Consulting Services