International assignment policies - Grant Thornton LLP
International assignment policies - Grant Thornton LLP
International assignment policies - Grant Thornton LLP
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Cost Effective Management of a Global<br />
Workforce<br />
A Handful of Expats – A Fistful of Dollars?<br />
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Presenting<br />
Linette Barclay<br />
IES Senior Manager,<br />
Houston<br />
Beth Penfold<br />
IES Senior Manager,<br />
Chicago<br />
Jerry Zukauckas<br />
IES Director,<br />
Atlanta<br />
Panelists<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
Brooke Schnitker<br />
IES Senior Associate,<br />
Chicago<br />
Peter Sid<br />
IES Senior Manager,<br />
New York - Midtown<br />
4
Poll 1<br />
How many employees are in your global mobility<br />
program?<br />
A. Fewer than 10<br />
B. Between 10 and 50<br />
C. Between 50 and 150<br />
D. Between 150 and 300<br />
E. More than 300<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
5
Learning objectives<br />
• Recognize how to design a standardized global workforce<br />
policy<br />
• Identify essential ingredients of <strong>assignment</strong> letters<br />
• Be aware of how to manage payroll details for cross<br />
border employees<br />
• Identify and manage risk of stealth<br />
expatriates<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
6
Agenda<br />
• <strong>International</strong> <strong>assignment</strong> <strong>policies</strong><br />
• Secondment agreements and <strong>assignment</strong> letters<br />
• Managing the payroll details<br />
• Stealth expatriates<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
7
<strong>International</strong> <strong>assignment</strong> <strong>policies</strong><br />
• Overview<br />
• The value of an IAP<br />
• Creating an IAP<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
8
Poll 2<br />
Does your organization have a written international<br />
<strong>assignment</strong> policy that applies to all assignees?<br />
A. Yes<br />
B. No<br />
C. Sort of – individual ‘deals’ are negotiated<br />
D. Don’t know<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
9
<strong>International</strong> <strong>assignment</strong> policy - overview<br />
• Written statement of policy for the organization’s<br />
international assignees<br />
• Comprehensive guide to direct the administration of all<br />
aspects of an international <strong>assignment</strong><br />
• Components – Will be unique to each organization and can<br />
include:<br />
Pre-<strong>assignment</strong> <strong>policies</strong><br />
IA compensation<br />
Tax equalization policy<br />
Repatriation<br />
General <strong>policies</strong><br />
Uniform <strong>assignment</strong> letters<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
10
The value of a written IAP - case study example<br />
Facts:<br />
<strong>International</strong> Inc has three individuals on <strong>assignment</strong> from the<br />
U.S. to Country A. All are executives operating at a similar<br />
level of responsibility. They are married with school age<br />
children; the spouse and children accompany the executives<br />
to the international <strong>assignment</strong> location.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
11
The value of an IAP – Case study example<br />
Compensation/Benefit Exec 1 Exec 2 Exec 3<br />
Base salary/bonus X X X<br />
Home leave trips 1 per year 2 per year 4 per year<br />
Housing allowance None $10,000 All rent paid<br />
Cost of living allowance $5,000 $10,000 $15,000<br />
Tax equalization No Partial Yes<br />
Relocation allowance Limited $5,000 Full<br />
School allowance (children) None Partial Full tuition<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
12
The value of a written IAP<br />
• Standardization – Manage exceptions<br />
• Consistent with business objectives of the organization<br />
• Enhances communication and understanding<br />
• Eases administration<br />
• Controls costs<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
13
Creating an IAP – the process<br />
• Use a team approach to devise a policy – include<br />
stakeholders and experts:<br />
Mobility Payroll Security<br />
Tax HRIS Benefits<br />
Accounting Immigration Transition<br />
• Assess and determine objectives of the policy<br />
• Address <strong>assignment</strong> types: long term; short term;<br />
commuter; permanent transfers<br />
• Benchmarking – General and custom<br />
• Implement; evaluate; revise; improve<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
14
Agenda<br />
Questions?<br />
• <strong>International</strong> <strong>assignment</strong> <strong>policies</strong><br />
• Secondment agreements and <strong>assignment</strong> letters<br />
• Managing the payroll details<br />
• Stealth expatriates<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
15
The value of secondment agreements and<br />
<strong>assignment</strong> letters<br />
• What should be included in a secondment agreement or<br />
<strong>assignment</strong> letter?<br />
• Why is it important to use a secondment agreement or<br />
<strong>assignment</strong> letter?<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
16
Poll 3<br />
How familiar are you with secondment agreements and<br />
<strong>assignment</strong> letters?<br />
A. Very familiar: We issue secondment agreements or<br />
<strong>assignment</strong> letters for all of our international assignees.<br />
B. Somewhat familiar: We typically only issue <strong>assignment</strong><br />
letters for exceptional cases.<br />
C. Not familiar at all: We never use <strong>assignment</strong> letters.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
17
Meet Frank Jones, HR Manager<br />
• Frank coordinates international <strong>assignment</strong>s within<br />
ABC Company<br />
• He knows the secondment agreement includes<br />
the general terms of the <strong>assignment</strong><br />
• He has heard complaints from the assignees<br />
that the letter is too general and does not cover<br />
all the aspects/issues<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
18
Frank asks…<br />
“What should be included in the secondment agreement<br />
or <strong>assignment</strong> letter?”<br />
• Basic information and <strong>assignment</strong> details<br />
• Additional information<br />
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19
“What should be included in the <strong>assignment</strong> letter?”<br />
Basic information and <strong>assignment</strong> details:<br />
• Assignment location and duration<br />
• Compensation (base salary, bonus, incentive<br />
compensation)<br />
• Assignment allowances (Host country housing,<br />
transportation, COLA, home leave, relocation)<br />
• Other benefits (Health Insurance, pension)<br />
• Tax matters – U.S. and foreign / Tax equalization<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
20
“What should be included in the <strong>assignment</strong> letter?”<br />
Additional information:<br />
• Career management<br />
• Personal matters (visa process, bereavement leave,<br />
spousal assistance)<br />
• Taxation of personal income / Personal tax planning<br />
• Treatment of personal residence/home<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
21
Frank asks…<br />
“Why should we use a secondment agreement or<br />
<strong>assignment</strong> letter? It seems like a lot of extra<br />
administration.”<br />
• Set clear expectations and identify responsibilities<br />
• Risk management<br />
• Document intended length of <strong>assignment</strong> – Aids tax<br />
planning in home and host country<br />
• Manage cost<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
22
Frank agrees…<br />
“A written <strong>assignment</strong> agreement with details of who will be<br />
responsible for the foreign taxes on all the <strong>assignment</strong><br />
allowances would definitely be helpful. It would avoid time<br />
consuming and costly misunderstandings.”<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
23
Agenda<br />
Questions?<br />
• <strong>International</strong> <strong>assignment</strong> <strong>policies</strong><br />
• Secondment agreements and <strong>assignment</strong> letters<br />
• Managing the payroll details<br />
• Stealth expatriates<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
24
Managing the payroll details<br />
• Who is the employer?<br />
• Shadow payroll issues<br />
• U.S. form W-2 reporting<br />
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25
Poll 4<br />
How comfortable are you regarding your company’s<br />
payroll reporting in both the United States and the foreign<br />
country with respect to your international assignees?<br />
A. Very comfortable: I am confident we have appropriate<br />
payroll reporting in both the US and the foreign country.<br />
B. Somewhat comfortable: I believe we have the reporting<br />
correct in the majority of cases.<br />
C. Not comfortable at all: We could use some assistance with<br />
the payroll reporting for our international assignees.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
26
Frank asks…<br />
“Why are the payroll issues for our international<br />
assignees always so complicated? I spend too much<br />
time working with the payroll manager on just a few<br />
individuals.”<br />
• Identify the employer, as well as where the pay will be<br />
delivered<br />
• Address foreign withholding obligations – Possible shadow<br />
payroll<br />
• Ensure complete U.S. form W-2 reporting<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
27
Managing the payroll details<br />
• Often the home country employer will continue to pay the<br />
assignee’s wages and home country benefits<br />
• The additional <strong>assignment</strong> allowances may be<br />
paid/delivered in the host country – Housing, COLA,<br />
education<br />
• Shadow payroll may be required (penalty for not complying<br />
with the local foreign country tax withholding requirements)<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
28
Frank asks…<br />
“What should be included in the US form W-2? We seem<br />
to be constantly issuing corrected forms W-2 for our<br />
international assignees.”<br />
• Base salary and bonus<br />
• Assignment allowances: Housing, COLA, education, foreign<br />
tax reimbursement (even if paid/delivered by foreign entity)<br />
• Gross ups: Social security, Medicare, federal or state tax (if<br />
applicable)<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
29
Frank concludes…<br />
“By consistently issuing secondment agreements or<br />
<strong>assignment</strong> letters and by managing the U.S. and foreign<br />
payroll details upfront, we can save time and money!”<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
30
Agenda<br />
Questions?<br />
• <strong>International</strong> <strong>assignment</strong> <strong>policies</strong><br />
• Secondment agreements and <strong>assignment</strong> letters<br />
• Managing the payroll details<br />
• Stealth expatriates<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
31
What is a “stealth expatriate”?<br />
Employees who are:<br />
• Outside their home countries for extended periods of time;<br />
• Not included in formal global mobility programs; and<br />
• Not tracked by human resources as global employees<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
32
Poll 5<br />
Are you concerned about Stealth Expatriates in your<br />
organization?<br />
A. Very concerned: We have identified more than one<br />
situation within the past 6 months.<br />
B. Somewhat concerned: We are fairly certain we have<br />
situations but have not formally investigated.<br />
C. Not concerned: We have processes in place to identify and<br />
manage these situations.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
33
How are stealth expatriates found?<br />
• Visa and immigration issues<br />
• Increased travel and/or project costs<br />
• By chance<br />
• Company initiative<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
34
Visa and immigration issues<br />
Paul is the project director for an engineering team working in<br />
Malaysia. HR assisted the core team to obtain visas when the<br />
project started. You have heard through the grapevine the<br />
project has had some set backs. Over the weekend, Paul<br />
contacted HR because a new team member,<br />
who was called in to provide technical<br />
expertise, was denied entry to the country;<br />
she did not have a current visa. The project<br />
is at a critical point.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
35
Increased travel and project costs<br />
Nigel is the new project manager for a virtual design team.<br />
He is concerned about the consistently high level of travel<br />
expenses being submitted by some team members based in<br />
Northern Europe. Upon further investigation, he learns the<br />
employees have been traveling to Germany to meet and work<br />
in a hotel every other week for the past year.<br />
The original project budget included<br />
only modest travel costs.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
36
Chance identification of stealth expatriates<br />
Mary is a high performing software designer who has been<br />
with the company for three years and is based in Chicago.<br />
She has a flexible work arrangement and generally works<br />
from home when she is not on the road, which is the majority<br />
of the time. Payroll notices that she has put in a change of<br />
address, effective immediately and the new address is in the<br />
UK.<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
37
Adverse consequences<br />
• Tax issues<br />
• Visa and immigration issues that delay projects<br />
• Tracking employees during emergencies<br />
• Additional expenses not included in contract pricing or in<br />
budgets<br />
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38
Isn’t this old news?<br />
• Increased enforcement of rules by immigration and tax<br />
officials<br />
• Safety and security of employees becomes a focus after<br />
natural disasters and political turmoil<br />
• The trend in some industries is away from “formal”<br />
expatriate <strong>assignment</strong>s and toward extended or “as<br />
needed” business trips<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
39
Managing the problem<br />
• Communication of issues<br />
• Employee tracking system<br />
• Evaluate results of tracking on a regular basis<br />
• Monitor travel requests<br />
• Management awareness<br />
• Use facts to assess risk in each location<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
40
Poll 6<br />
Of the topics presented today, which one concerns you<br />
the most?<br />
a. <strong>International</strong> Assignment Policy<br />
b. Secondment Agreements/Assignment Letters<br />
c. Payroll Matters<br />
d. Stealth Expatriates<br />
© <strong>Grant</strong> <strong>Thornton</strong> <strong>LLP</strong>. All rights reserved.<br />
41
Any final questions?<br />
Jerry Zukauckas Atlanta jerry.zukauckas@gt.com 404-475-0070<br />
Linette Barclay Houston linette.barclay@gt.com 832-476-3663<br />
Beth Penfold Chicago beth.penfold@gt.com 312-602-8284<br />
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Tax Accounting and Risk Advisory Services<br />
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