The global mobility environment is changing quickly. Companies and their employees doing business internationally are faced with a complex web of regulations and laws. While tax law changes almost daily, wider political agendas and large-scale reforms have the potential to create new complexity and to increase costs of mobility. U.S. businesses need to be proactive in addressing trends and their impact on global mobility.
Three issues are critical to ensuring international mobility programs and global workforces are effective in delivering growth in the future.
The United Kingdom’s withdrawal from the European Union is set for March 2019 and will create significant changes for how U.S. companies with European operations manage international mobility throughout the continent.
U.S. businesses need to plan ahead of time and, think strategically about assignments and business travel to mitigate risk and cost exposure. Companies should examine their employees on international assignments to identify:
U.S. tax reform and employee mobility
Which assignments could result in immediate social security tax increases
Which assignment destination countries will result in higher social tax costs in the future?
What is the cost to the business of meeting increased employee social tax burdens on their behalf?
Can assignments be restructured to benefit from the U.S. network of bilateral social totalization agreements?
How should assignments to the UK and EU be structured and business travel managed to avoid major cost issues?
On December 22, 2017 President Trump signed tax reform into law, the most significant overhaul of the tax code since 1986. The enacted changes will affect how businesses view and manage international mobility and impact the costs of deploying an international workforce. U.S. companies should be concerned with how their remuneration costs will change for U.S. employees working overseas and for those moving to the U.S. U.S. businesses pursuing an international growth strategy must consider how and where talent is deployed to ensure the return on investment is balanced.
For U.S. businesses grappling with the impact of tax reform across their operations, when looking at employee mobility, they should be addressing the following:
International business travel and the BEPS
The potential impact on tax cost across an assignee population
Which destinations and offices offer more balanced tax cost and still achieve strategic objectives
Whether the right level of return on investment is still achieved where costs are increasing
The Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) Action Plan has been on the radar of multinational companies for a number of years, but the new level of potential tax consequences are still only coming into view for internationally mobile employees.
In planning for the impact of BEPS, U.S. companies should ask themselves the following:
Effective mobility planning for the future
Do they track the movement of an internationally mobile workforce?
Do they know what specific work their employees are doing overseas?
Do they have employees working in countries where they don’t have an entity established?
Several forces continue to shape employee mobility. Globalization will keep moving forward, and internationally mobile workers will continue to drive growth. At the same time, countries are enacting new laws and regulations to deal with tax, and shifting political agendas may create uncertainty and change that affects all areas of business and mobility.
Forward-thinking companies need to not only keep abreast of the changing international rules but have a proactive strategy to ensure they are deploying their people effectively and cost efficiently.