Start off right when sending an employee overseas

Businessman pulling trolley bagBusinesses today use a wide assortment of tools in their global communications – intranets, emails, cell phones, Skype, texts and instant messaging among them. Revolutionary as they may be for transforming how intercontinental business is conducted, they still provide no substitute for sending a trusted, capable employee on an overseas assignment to solve a problem or lead an initiative in person.

But sending an employee overseas to work can be a confusing process and prone to errors. Where will the employee work? Where will she live? Is her family ready and willing for this move? What language and cultural issues could complicate the stay?

Besides those issues facing individual employees, for any business, the taxing methods and legal requirements of sending an employee to work abroad can vary greatly depending on the country. Just determining the bottom-line cost of a move involves many factors.

With such an array of choices, HR departments will benefit greatly from knowing which decisions to prioritize.

Creating a smart policy The best place to start when sending an employee overseas is to have a policy already in place to address this effort before that decision is even made. An effective policy on global relocation, also known as an international assignment policy (IAP), should describe an efficient and comprehensive process, ensure consistent treatment of employees and reflect a company’s culture or philosophy.

HR should begin creating a company IAP by identifying and assembling individuals from a company’s tax, accounting and legal departments. Companies also should consider having a top company executive review the IAP.

A typical company IAP is a 25-30 page document, and in it, members of the IAP team need to identify and answer myriad questions about how an overseas assignment should proceed. There are many reasons to do this, but one of the more important is that an IAP helps assure that employees being sent overseas are treated consistently. Overseas employees often “compare and contrast” their company’s contracts. Without an IAP guiding the formation of these policies, these comparisons could reveal differences in treatment that could lower morale and even trigger lawsuits.

A good IAP is not only comprehensive but also reflective of a company’s culture or philosophy. For instance, a company could rely on young talent it expects to leave quickly or could be a “destination company” in its industry. This difference influences whether an IAP contains, for example, a “non-compete” clause governing an employee who is hired away by a competitor mid-assignment.

Company culture can also affect how an IAP treats an overseas tax differential. If an employee receives a tax benefit by moving overseas, should that savings go to the company or the employee? How about the reverse? A sound IAP for a U.S. company will generally require an overseas move be “tax-neutral” for an employee in either circumstance, with the company absorbing either the burden or the windfall.

A good IAP will treat equivalent employees similarly, but will also reflect moving requirements appropriate to higher-level executives (such as larger personal shipping limits). IAPs should address housing and lay out how employees will be housed and how employees will travel to and from work, often providing that the employer will take care of those costs for an employee. IAPs also should detail the company’s policy on how duties in their employees’ present jobs will be reassigned in their absence and on how employees will be reintegrated upon their return, if applicable.

Gathering all these considerations together in one policy also will help a company determine an assignment’s “bottom line.” Quantifying an overseas assignment cost sometimes can trigger a “sticker shock” reaction, so this exercise is best completed as early as possible in the planning process.

Drawing up the contract Having an IAP in place is a great first step when reassigning an employee overseas. But every employee and every overseas opportunity is different in some way. A company may need to “fine tune” its policy to the needs of the company, the employee or the position. To do this, human resources will draft the contract, a letter of assignment, which shapes the IAP into a specific plan for each employee.

An overseas reassignment can vary in many ways. First, the length of the assignment can have a profound effect on what is in the assignment letter. For an extended business trip of a month or two, there likely wouldn’t be much need for many relocation requirements such as a permanent residence or a family relocation. On the other end of the spectrum, a permanent, or “expatriate” assignment, lasting multiple years, triggers many more considerations, not the least of which is addressing the needs of an employee’s family.

The length and type of the assignment will commonly be crucial to identifying the best internal candidates for the role. HR may take an active role in choosing among a number of candidates for the assignment. The choice may not be a matter of finding the person who’s most qualified but the one most able to adapt to the relocation --- or the one who may benefit the most personally from the reassignment. Choosing an employee who has a strong desire to relocate to the destination country over another, more qualified but less willing employee, could pay unexpected dividends.

Another consideration is determining which company is financially responsible for an employee’s compensation. This is far from obvious, as an assigned employee may work as a contractor, or at a recently acquired subsidiary, or as part of a joint venture with another company. This decision can have legal ramifications overseas. If an employee is, say, in a traffic accident, which business entity is legally implicated? Sometimes, this step will require a separate contract with the partner company to spell out where the responsibilities lie for both costs and liabilities.

Tailoring a contract to an employee With a company IAP in place and the overseas assignment contract created, all that’s needed is to get the employee to sign on the dotted line and book the flight, right? That may work fine when shipping factory floor robots, but sending people overseas requires engagement with the employee to agree the fine points of the contract.

While an employee may know what the work overseas involves, more than likely she doesn’t know all the finer points of the relocation. For example, HR may not know an employee has specific medical needs that must be addressed in the new country. An employee may have unusual moving requests, say a wine cellar or a grand piano, which could require some tough decisions. What about a pet? If an employee is relocating to Australia, for instance, a pet might be quarantined for six months before entering the country.

For an assignment that requires a family relocation, HR may interview the employee’s spouse, too – perhaps alone. Each country presents unique living challenges and often those fall more heavily on the traveling spouse. While the employee, by definition, will have a job waiting for her, a spouse may have a difficult time finding new employment, particularly if working from home isn’t an option. In addition, cultural differences could be more burdensome on a spouse. If an employee has children who are coming overseas, identifying and providing adequate and appropriate education options obviously must be a prime consideration.

Because of the diversity and range of factors involved, many companies find it helpful to hire advisors with expertise in overseas relocations. Even with the expertise of another firm, the objective should be to make key decisions early on to take advantage of the opportunities an overseas assignment provides.

Linette Barclay
Managing Director
Human Capital Services
T +1 404 475 0204

Richard Tonge
Managing Director
Human Capital Services
T +1 212 542 9750

Bob Langham
Director - Tax
Human Capital Services
T +1 949 878 3340

Carrie Merda
Manager - Tax
Human Capital Services
T +1 312 602 8492

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