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Global Mobilityprogram: Making It A Success

Understanding specific business needs, therefore, tops the list of tasks under a global mobility program.

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In a world dominated by technology, automation, artificial intelligence and machine learning; human capital remains the most critical economic resource in any organisation. With businesses expanding across borders, there is a growing need for talent across the globe. Recruitment, development, retention and mobility of talent have therefore become key to the success of any global or aspiring organisation. Interestingly, corporations are now increasingly using global mobility opportunities to attract, develop and retain talent. 

With the increasing importance of mobilising talent, it becomes crucial for an organisation to frame a well-documented global mobility program. A planned approach towards structuring the global mobility program is required to align employee aspirations with business needs. A successful global mobility program demands synergised efforts by various groups within the organisation such as business, Human Resources (HR), finance and tax groups.

 


Understanding business needs

A successful mobility program begins with understanding the requirements of the business and tailoring the program around the same. Knowledge of the business environment/ opportunity/ requirement of the receiving country thus become important. Whether the business requirement for globally mobile employees is temporary in nature or may extend to a longer period determines the period of an international assignment. Depending on the specific business requirements, the HR team could draft modulated international assignment policies under the global mobility program.

For short-term business goals, a short- term international assignment or deputation may fit the bill. In such cases, the payroll would generally remain in the sending/home country and the overall assignment costs may, however, be changed/transferred to the receiving/host country.

Long-term assignments or secondments are more strategic and may require a slightly different approach. Transferring payroll, adjusting compensation, relocation, social security, etc. may have different costs and tax implications in such cases.

Understanding specific business needs, therefore, tops the list of tasks under a global mobility program.

Optimising Global Mobility Costs

One of the prime objectives of an organisation is to keep a tab on the overall costs of global mobility programs. These mobility costs include international assignment costs for the employees and accompanying family members such as immigration costs, allowances, per diems, accommodation costs, tax, social security costs, etc.

A periodic review of the assignment costs will assist in meeting an organisation’s objective of cost optimisation. The idea is to adopt a host-based assignment package and to top-up the package with essential allowances/benefits. Such review, if based on the type of assignment could yield the best results. The assignments which are related to business needs could include a more lucrative assignment package with additional benefits or higher allowances, while the assignments which are initiated to meet employee aspirations are generally driven by factors other than compensation.

Striking an equilibrium between employee expectations and business budgets helps draw an optimum international assignment package.

Ensuring Compliance 

It is important for the HR team to have a clear understanding of the implications related to employee assignment in respect of labour laws, immigration, tax and social security. Most countries require the organisation and employee to be compliant with the employment-related laws. As tax authorities globally are moving to electronic compliance platforms and are increasingly exchanging information, compliances relating to employees require a pragmatic approach.

For instance, the Indian tax laws require employers to deduct taxes at source at the time of payment of salaries and deposit it with the Indian Revenue. Further, an employer is also required to file a quarterly report with the Indian tax authorities reporting the salary and tax payments. This ensures that the employee receives the rightful credit of such taxes at the time of filing a personal tax return for the year. Any mismatch in tax deductions or deposits or reporting are flagged by the tax authorities and notified to the employer and employee. Non-compliances are also penalised under the Indian tax laws. Further, Indian tax authorities are seeking information of overseas income and assets of an individual; they are now validating such information from information obtained from the other countries under the tax information exchange agreements with such countries.

Compliances are also required under the social security laws, in the presence or absence of Social Security Agreements.

Thus, chalking out a compliance calendar before the start of an international assignment brings out more clarity to all stakeholders and ensures a fully compliant and smoother functioning of the processes. This helps organisations to not only determine costs/budgets in advance but also avoid any unwarranted penal costs.

Comprehending the Corporate Tax Exposure

The overall mobility costs also include other aspects of an organisation such as payroll, administrative costs, transfer pricing aspects, corporate tax risk, if and to the extent relevant. These aspects form an essential part of the overall business structure and needs focused and deep acumen.

For instance, the continued presence of employees of an overseas entity in the receiving/host country may create a substantial corporate tax presence, resulting in additional tax outflow for the overseas entity. This has been a subject matter of deliberation for several tax jurisdictions. The courts of law have held that an employee’s prolonged physical presence in a country may create a ‘Permanent Establishment’ in the host country for the organisation. It also includes the overall global mobility structural aspects such as payroll location, employee’s roles and responsibilities during the international assignment, the control / supervisory rights over an employee during the assignment, reporting duties of the employee, etc. The result is that the overall tax costs for both employee and employer may increase substantially. Similarly, recharge of costs, mark-up and/or a service fee on international assignments amongst group companies is the subject matter of transfer pricing and a lack of planning on this account may result in double taxation. 

Plan to cope with challenges in a changing environment

While an organisation could prepare for certain foreseeable challenges, a successful global mobility program would be the one which adapts to the fast-changing global environment. These changes are not just restricted to tax or immigration laws of the countries but could also extend to the political and social environment, economic slowdown, data protection laws, labour law-driven changes, etc.

Not only do these changes significantly impact the organisation’s cost plans for mobility programs, but it could also pose a higher risk in premature termination of the international assignment for an employee, thus incurring additional costs.

An example could be one where the change in a country’s immigration law impulses the immediate termination of an employee’s international assignment. A global mobility program must endeavour the complete safety of the employee during such times. Premature termination also requires the HR team to be agile and take control of the actions to tackle such changes.

A systematic approach in structuring the global mobility program taking the above into consideration is sure to yield desired results for the organisation.

As Albert Einstein rightly said, “In the middle of difficulty lies opportunity”. With the ever-changing face of global mobility, the opportunities are truly plenty.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Jiger Saiyya

The author is Partner and Leader, Tax & Regulatory Services, BDO India

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