Author Archives: alanlfreeman

Best Practices for Selecting International Assignees (Part 2)

Alan Freeman – LOF International HR Solutions

This is the second of two installments on the topic of assignee selection.

In our last posting, we began to list a number of proven best practices for selecting candidates for international assignments.  Here are several more:

Provide an overview of the your company’s applicable policies and processes. You and the candidate need to know early on if there are any “show-stopper” issues or you run the risk of wasting everyone’s time. Be sure, by the way, that your policy and administrative processes are well thought through and developed. You don’t want to be caught building an ad hoc “package” through negotiations. One-off deals frequently lead to lots of ongoing problems. Continue reading

Best Practices for Selecting International Assignees (Part 1)

Alan Freeman – LOF International HR Solutions

This is the first of two installments on the subject of assignee selection.

A recent question, “Please share ideas on best practices for hiring candidates for an immediate international assignment” triggers a few thoughts.

First and foremost, the organization must definitively establish that it is not possible to recruit local nationals in the location where the job is based. Hence sending a foreigner as an International Assignee is both necessary and can be sufficiently justified to obtain assignment country work and residency permits. If so, then…

Continue reading

How to Develop Effective International Assignment Policies

Alan Freeman – LOF International HR Solutions

During a recent conversation a colleague shared some frustration she was feeling. “I’ve read lots of articles and attended conferences where we’re told what we “should” be doing with our International Assignments (“IA”) policies on the basis of what everybody else is doing with theirs. What I’m not hearing is how to go about structuring our program in a way that really makes sense for our company. Where do we start? Who should be involved? What steps are necessary?”

“True”, I said. “We hear a lot about best practices such as keeping the spouse happy, increasing flexibility, controlling costs, keeping exceptions to a minimum and conducting benchmarking studies to find out what everyone else is doing. That’s all well and good but if your company sells luxury consumer goods in the best department stores in the largest cities of the world, do you think that practices that work well for mining companies in rural West Africa or at 14,000 feet in the Andes Mountains will be relevant and useful?”

“Exactly – they wouldn’t!” she said, “so what should we do?”

Let’s start with The Prime Directive. Simply put, your IA policies and program exist to help your company achieve its business objectives by having the right talent, in the right places, at the right times, doing the right things. Clearly, your company’s business objectives define what the various “right items” will be. Is this another way of saying you must start by truly understanding your business? Yes, of course!

“OK, that makes sense” she said, “then what?”

Well, now it’s time to go about structuring your program. A process that has proven to work well follows these steps:

Assemble a Policy Development Team

To often, policy development is left up to a Global Mobility department or single HR staffer working in a vacuum.  This generally is not effective. Utilizing teams of key stakeholders provides greater breadth of ideas, broader input from key functions and business operating units, and greater understanding of and buy-in to the end product. The team must be led by someone with significant depth of IA program expertise and include Global Mobility, Tax, Accounting, Payroll, HR Business partners from units that utilize international assignments, etc. Bringing in expert consultants and specialty service providers, e.g. immigration, international tax, global security firms, etc. can pay large dividends as well.

Conduct Benchmarking

There are two types of benchmarking to consider. First, conduct internal surveys of line managers who make use of IAs, and current and former assignees themselves. These groups can provide a wealth of information as to what has been working and what has not. They further can often make great suggestions for new approaches worth considering.

Second, do take a look at market practices through both generally available surveys and, potentially, custom surveys more precisely focused upon your company’s industry and competitors. This can help generate ideas and help gauge competitive positioning. Be careful, however, to not only look at what companies are doing but also to ask how well those practices are working. It’s amazing how many times I’ve heard a colleague say “we do ____” and in the next breath, say “and I’d change that practice in a heartbeat if my management would allow me to!” Another caution about benchmarking is that it’s imperative to consider the policy package as a whole and how the many provisions work together in total. There is a definite tendency toward getting caught up on individual line items and, hence, “lose sight of the forest for staring at the trees”.

Draft a Policy Structure

Put together the first array of policy provisions that make sense given the demographic, geographic and time variables dictated by The Prime Directive. Make sure they integrate and work together in a consistent and holistic manner.

Model the Costs

The first question executive management is likely to ask when the new program is presented for approval is not, “how does it meet our business needs?” It’s assumed that it will. The first question is, “what’s it going to cost?” If you are reengineering an existing IA program you’ll need to show the difference in costs between the proposed and existing programs.

Fortunately, there are many applications and providers that make cost modeling relatively straightforward.

Test Your Ideas as You Go

One of the worst ways to achieve buy-in on your ideas is to keep them to yourself and spring them on someone only at the end. If you communicate as you go through the process, sharing what you’re thinking about and soliciting inputs, that engagement frequently gives the other a sense of having had input and influence on the final product. Those who feel they had input are much more likely to respond positively. Their inputs may well have a lot of value as well.

In a larger corporate environment this could be done via periodic progress update meetings.

Finalize and Implement

In pursuing the steps above, you’ll ultimately obtain approval to proceed. Prepare the necessary communications and implementation materials. If you are reengineering an existing program, you’ll have already determined whether current assignees will be “grandfathered” under their old terms, converted to the new terms, or converted with some sort of buy-out provision.

When you have it all in place, move ahead.

Continually Evaluate and Improve

Finally, when you implement your new program, be sure you’ve also built in metrics and processes for determining how well it’s working on an ongoing basis. You can’t have anticipated everything that will ultimately be encountered and change happens! Be ready to be flexible and make program adjustments “on the fly”.

More About Alan:

LOF International HR Solutions web site

Alan on LinkedIn

email Alan

Avoiding Burnout in Global Field Service Travel

Alan Freeman – LOF International HR Solutions

The following question, recently posted to an online discussion group, caught my eye:

“Our international technical services business is booming.  Our Field Service Techs are getting burnt out spending 2-3 months away from home. How can I incentivize them to keep traveling? They already receive an attractive daily bonus for each day in travel.  Also, some of the new clients are in areas that are not very desirable.”

My dear old grandpa used to tell me, “Son, if you run your horses too hard and too long, especially over rocky ground, they’re going to fall in exhaustion or go lame.  No amount of extra oats will make any difference.”

So what’s the problem?


Notable drop-offs in productivity, poor morale, health problems and, ultimately, resignations (at least in normal economic times) go hand-in-glove with heavy travel-related burnout – especially international travel to “not very desirable areas”.  If high crime rates, existence of serious infectious diseases, lack of sanitation, political unrest or even outright violence are characteristic of those destinations, then the prospect of employees being harmed, kidnapped or killed becomes a significant concern as well.

An indirect, negative impact on morale and productivity also can stem from marital or family problems attributable to employees’ extended absence from their spouses, partners and families.  Heavy travel on the part of one parent puts additional stress on the stay-at-home partner to look after the children, elderly parents, pets, household maintenance, financial management, etc.  In our experience, Field Service employees often maintained their homes and vehicles themselves so the spouse had to hire outside providers to look after these issues while the employee was traveling.

Throwing money at employees won’t make them or their families less susceptible to burnout, but it could contribute to a company reputation for “slave driving” and failing to understand the human side of the travel sacrifice. This is not a desirable outcome for the company or the employee.

What might be useful?


A firm could consider providing extended paid leave, “R&R”, between trips. Take a lesson from oil & gas, engineering & construction and defense contracting firms and utilize the “rotational assignment” approach.  Simply put, for every x weeks or months the employee works on travel, he/she is eligible for y weeks or months off on paid leave at home or in a “nice” location at company expense.  For example, one of our clients provides services at a mining site in a developing country.  Their employees work 7 days a week for 3 months at a camp site and then are sent home for a month off with full pay.

I once worked on a project where, after the employee worked 1 month (single status) at a remote Middle Eastern camp site, the company would pay for the employee and family to rendezvous in a Western European city, all expenses paid up to a set maximum, for a week.  Expensive? Yes, certainly.  Did it “refresh the horses”, improve morale and productivity and build positive morale and attitude toward the company?  Absolutely!

Sometimes, depending upon the facts and circumstances, it’s possible to provide some form of relaxation in-country (health club memberships, a bit of time off to sight-see, company-paid recreation, etc.) during travel.  This is another way to give them a needed rest.

Another possibility would be to hire additional Field Service staff so more employees share the travel burden and thereby make it possible for each to spend a bit less time in the field.  Yes, in today’s economic environment of extreme cost control, adding to labor cost is not a popular idea in the CFO’s office.  But then, what about the cost of assignment refusal, turnover, reduced productivity, lost opportunity while employees miss work due to illness or injury, and inability to recruit high caliber talent, etc.?

We also must ask how challenging, especially dangerous, are the “not very desirable” areas?  Iraq? Afghanistan? Somalia?  A jungle infested with disease-bearing mosquitoes?  Make sure you provide appropriate pre-travel medical exams and immunizations, and adopt some of the safety and security practices companies used for longer-term international assignees in hardship and danger locations.  This includes local safety and security plans, well thought out and established emergency evacuation plans and ensuring that death and disability insurance benefits are not voided by “war risk waiver” clauses in the insurance contracts.  This latter issue can easily be addressed through contact riders but, if not addressed proactively, can lead to extensive financial pain for the employer, especially given laws pertaining to the “duty of reasonable care”.  Woe unto those companies that have not established the mechanisms to track their employees’ whereabouts and deal effectively and quickly with emergencies.  Check out Mariana’s posting for some tips on extreme hardship assignments.

Our friends at International SOS Assistance are about to publish a research paper on employers’ legal “duty of care” that our readers should find of interest.

Something the person who raised the question didn’t mention – but we will – are global requirements for work permits, visas and tax compliance.  Often, even those on relatively brief field support trips to other countries are deemed by local governments to be performing “productive work” in those countries.  This can, and often does, require a work permit.  A company is well advised to consult with appropriate immigration counsel to ensure that its employees have the proper clearance to carry out their duties in each country.  This is not about the amount of time the employee might spend working in country; it is all about what he/she will be doing while in country.

As to taxes, members of management have often heard about the so-called “183 day rule” and simplistically believe that so long as the employee works in a given country for less than 183 days, he/she will not be liable for local income or social insurance taxes in the assignment country.  This is not necessarily the case and depends upon a number of key factors.  We recommend reading our contributing editor Claudia Howe’s excellent commentary on this issue.

So, at the end of the day, how do we respond to the question of “How do we incentivize our staff to keep traveling”?  We’d say, give your horses rest, treat them with dignity, recognize that their families bear a burden too, and provide them with fresh oats.

Otherwise, my dear old grandfather just might come back to haunt you!

About Alan


Alan on LinkedIn

How Do I Develop Expertise and Gain Employment in Global Mobility?

edit-Alan Biz Mug Shot 1Author:
Alan Freeman – LOF International HR Solutions

One of our readers recently asked, I have been working in the HR field for the last few years and would like to break into the Expat Management/International Mobility field in Global HR.  What is the best way to gain experience that will make me stand out to an organization that is recruiting global mobility staff?”

First, thanks very much to the reader for posting the question.  We truly appreciate receiving input from and creating dialog with our colleagues.

To begin with a broad response to the question, please take a look at my June 25, 2009 entry, “How Can I Develop Global Human Resources Management Expertise?”.

Since the question focused specifically upon expatriate management / “Global Mobility”, some additional considerations include:

  • Become a member of ERC Worldwide, use their resources, attend their meetings and become involved with their local affiliate groups’ meetings as well.  You also should consider obtaining the GMS certification.  ERC also posts career opportunities on their web site and you should monitor those.
  • If you are based in Europe, or are in Europe frequently, consider becoming involved with EuRA.
  • If you are currently employed in an organization that has a international assignments / Global Mobility program, get to know the staff responsible for the program – especially those with managerial responsibilities.  Take them to lunch, ask their advice, learn what you can from them and, perhaps most importantly, volunteer to help them with their work.  In today’s environment, they’re likely to be rather overworked and would welcome some help!
  • Seek employment in corporations with established international assignment / Global Mobility programs, network with the global mobility management staff in those companies, keep an eye on job postings on their web sites.  ERC’s members roster, their job postings board and involvement with the meetings mentioned above are ways to identify target companies and, possibly, specific opportunities.
  • Do the same as above with the various global mobility service providers such as Bristol Global MobilityCartus, Prudential, SIRVA, MI Group, AIReS, Crown, Primacy, Lexicon, Plus Relocation, Weichert, Altair, Brookfield, etc.  There are many more and you can find them via the ERC resources listings.  Please keep in mind, however, that in the current economic climate, the overall relocation business has slowed significantly so hiring in the industry has as well.
  • Seek out and participate in global mobility meeting groups in your area. For example, in Northern California, the Western International Personnel Association (WIPA) and Bay Area Professionals in Relocation Management (BAPRM) have a strong orientation toward global mobility.  There are many other such meeting groups around the country.  Global HR News hosts conferences in many locations across the US and abroad.
  • Consider joining the Forum for Expatriate Management, and the many LinkedIn groups that focus upon Global Mobility.  Track the discussions, and tap into the information and leads that appear in these forums.
  • Keep an eye on job listings at Blue Sky and Signature Source, make contact with the principals in those firms to “get on their radars”.  They are search firms that specialize in Global Mobility.
  • Take advantage of specific classes, seminars and webinars.  For example, ORC Worldwide, AIRINC and Mercer – the top three providers of international assignment package data – offer regular training programs. Also, please sign up for the remaining five sessions of the IOR Global Services webinar series that started on Sep 15 (I’m leading the Sep 29 session).
  • Read, read, read – there is a great wealth of books, periodicals, white papers, research reports, etc. that has become available over the years. You’ll find items on, at the SHRM bookstore, at the World at Work bookstore and within the ERC website.

So to summarize, learn as much as possible about international assignments / global mobility and network with people already working in the field.  The best way to learn, get on someone’s radar, and find out who is hiring, is to hang out with them!

Thanks again to our reader for her question. We ask others to also provide suggestions and guidance via comments on this post.

How Big Must Your Relocation Provider Really Be?

edit-Alan Biz Mug Shot 1The Forum recently received a great question via our “Ask the Expert” feature:

“We are a “young” international and domestic relocation management company but our staff has many collective years of experience in the industry. We are having a hard time breaking into the corporate market.  It seems that HR Departments do not want to give us the opportunity to present our services.  How can a small company like ours work itself into the international employee relocation market within a corporation?”

We can truly empathize with this situation, which is one we’ve often seen.  This is especially true in today’s economic environment of slashed budgets and significantly reduced transfer and assignment volume.  Overworked and highly stressed company staff are unlikely to spend precious time, now, to hear about services they’re not currently using.

The reader suggested that the “big” global relocation service firms receive a better reception from prospective clients than do the smaller and newly established firms.  In our experience, this is basically true.  The reader also stated that many of the smaller firms have a stronger service orientation and can be much more responsive and flexible than the big well-established providers.  Indeed, we have seen cases of this too.  It’s possible to demonstrate that smaller firms made up of seasoned experts, but with lower operating overhead and more flexible processes, can be quite cost competitive while providing high quality services as well.

So why are the small firms having difficulty “breaking in”?  What is it that the big firms offer as “competitive advantage”, often successfully, that the small firms do not?

Big firms have a large footprint.

They can point to wholly owned offices and affiliate relationships in a wide array of countries.  This can be a huge issue for corporations that want to have local touch points for their employees and direct knowledge of local environments readily available.  The small firms often don’t have such a geographic footprint and might not be sure how to establish one.

Big firms have globally experienced staff.

Frequently, their staff come from a variety of countries, have lived and worked in multiple countries and speak a number of languages.  They also frequently have individuals with prior international assignment policy development and program management experience on their teams.  This engenders great credibility in the eyes of the corporate buyer.

Big firms leverage their extensive experience.

 They have managed programs covering multitudes of assignees across a variety of countries and industries.  The corporate buyer is far more impressed with stories about “been there, done that” than with honest admissions of “haven’t been there, haven’t done that — yet”.  Corporations tend to be risk adverse and shy away from “being the guinea pig on whose dime the new service provider learns the business”.

Big firms have technology.

They offer sophisticated state-of-the-art, web-enabled capabilities for projecting total assignment costs, managing reimbursements, communicating with clients and their transferees, interacting online with data providers, providing country-specific information, and tracking and reporting expenses.  Many smaller firms do not have such (expensive) technology and, occasionally, cannot demonstrate expertise in managing the complex requirements of expense management and tracking across multiple countries and pay-points.

Big firms have strong relationships with key service providers.

They know and work with a variety of firms providing assignment cost of living and housing data, international tax experts, destination country employment counsel, cultural and language training firms, etc.  These pre-existing working relationships mean single point of contact and seamless service provision that is extremely attractive to corporate clients.

Big firms invest in polished marketing campaigns.

They advertise, host and sponsor conferences, deliver keynote presentations, conduct webinars, host booths at SHRM and ERC conferences, develop highly polished web sites, publish surveys and articles, etc.  This does not, of course, make the big firms better at providing services but, at the end of the day, polished marketing does impress prospective clients and creates name recognition.

Big firms have the advantage of name recognition.

 Finally, there is the cliché that no procurement professional was ever fired for hiring a well-known “big name” even if there was a service breakdown later. Let’s face it, in many corporations there is a built in bias toward hiring only name firms and avoiding the perceived risk (accurate or not) of hiring unknowns.

So what can a small/new firm do?

Emphasize responsiveness, service orientation and flexibility.

Probably the two most critical attributes in which to excel and compete are outstanding service and price.  Responsiveness, flexibility and competence are critical in what, I think we would all agree, is a service industry, after all.

Build internal international expertise.

This should be done via hiring highly experienced, preferably well-known, and globally networked staff and through education such as the SHRM GPHR and ERC GMS programs.  Travel and learn from first-hand experience about assignee destinations around the world.  External consultants also can be quite helpful in this area.

Invest in technology.

The ability to project and track costs, communicate with management, transferees and other services providers, e.g. the client’s international tax firm, and manage data is critically necessary.

Develop and nurture relationships with complimentary service providers.

This must include in-country providers and data, immigration, tax, language training and cultural training firms, among others.

Create name recognition through a well-focused and professional marketing campaign.

Demonstrate how the firm should be perceived as a trusted advisor and capable service provider. Create a public presence in the industry.

Delight your current clients and enlist them as your champions

When courting new business, make use of recommendations and testimonials from satisfied clients.  Ask your clients for leads and to make “warm” introductions.  Word-of-mouth recommendations are priceless.

Direct business development efforts towards smaller firms.

They tend not to have the budget for, and less of a bias toward, the big firms. It’s also relatively well known that the big firms don’t give their best attention to small accounts. Go where there IS business AND less competition.

Implement a “Blue Ocean” strategy.

There are many capable providers of  global mobility services, large and small.  The market, especially in the current economic scene, may actually be over-supplied with providers.  Competition is fierce.  We would suggest that small firms specifically target prospects whose mobility needs – geographically and transfer types – best match the firm’s geographic footprint and operational strengths.  Approach those firms that are not being approached by the multitudes of providers.

Seek out the advice and counsel of those with depth of experience and expertise.

We believe that seeking guidance and mentoring from experts can be quite worthwhile.  Professionals with prior “in-house” corporate experience, as buyers of external global mobility services, across a variety of industries are especially valuable.

We again thank the reader who submitted the question.  Now we invite our readers to share their views.  Please let use know your thoughts via comments on this post.

More about Alan:

On LinkedIn

Contact Alan

LOF Solutions

How Can I Develop Global Human Resources Management Expertise?

Alan's Mug Shot

Alan Freeman – LOF International HR Solutions

We are frequently asked this question either by relatively new entrants to the HR profession or by purely domestic practitioners who have been assigned international responsibilities for the first time.  In the latter case, there often is an element of panic in that the individual’s management expects top-notch global HR capabilities “yesterday”!

Fortunately, there are a variety of ways to acquire global knowledge and capabilities. For example:

Formal Education 

We believe that to truly advance in a global HR career, both Bachelor’s and post-graduate degrees in business and Human Resources form a necessary foundation. The University of Minnesota, Cornell University, and the University of Illinois offer excellent HR programs. Thunderbird, INSEAD, Cranfield University and the University of Southern California (IBEAR) offer global MBA programs of note. There are many more.

Additionally, many Universities and professional organizations offer classes, sometimes through their “Extension” programs, in various areas of global HR. These can be well worth checking into.

On The Job Experience

There is nothing like hands-on experience. One should seek out positions involving global responsibilities and volunteer for international projects, work teams and task force activities whenever possible. They also should get involved with business leaders who have global responsibility and shadow them and assist however possible. If an opportunity to live and work abroad presents itself, go for it! No, do more than that. Strive to secure an international assignment!

Professional Organizations

Many professional organizations now offer extensive global activities and resources. Join them and participate in their global HR offerings! Some are open to any and all applicants; some are by invitation only and sometimes dedicated strictly to specific industries. One of the first-best avenues is to become a member of your country’s national HR Association, such as the Society for Human Resource Management (SHRM) in the US or the Deutsche Gesellschaft für Personalführung eV (DGFP) in Germany. These organizations, in turn, are members of the World Federation of Personnel Management Associations (WFPMA). Attend both your country’s association events and WFPMA conferences.

Professional Certification Programs

A number of professional organizations have established certifications such as the SHRM “Global Professional in Human Resources”, the World at Work “Global Remuneration Professional” and the ERC Worldwide “Global Mobility Specialist”. These can be quite useful and we’d encourage the reader to pursue certification.


One can learn a great deal from a personal mentor. Some argue that mentorship is critical for success. Establish relationships with successful global business leaders, both within HR and in other disciplines, and ask them to be mentors. Heed their teachings and counsel. 

Conferences, Seminars and Webinars

There are many professional conferences and seminars available literally all over the world and they are often highly educational AND help one expand their professional network. Attend whenever possible!

A few examples include:

  • SHRM Global Conference
  • Big 4 tax firm conferences
  • Major consulting firm conferences
  • ERC Worldwide Global Workforce Symposiums – regional and global events
  • IBIS conferences and “institute”

Consulting Firms’ Reports and Data Products

A wide variety of useful information is available for purchase from major consulting houses. This is typically most useful for gaining knowledge relevant to practices in specific countries and regions. It is almost invariably quite expensive.

Professional Literature

A wealth of professional books, journals, magazines and newsletters are available and well worth the acquisition price and time to read. Much is available through the SHRM and World at Work bookstores, and from other outlets such as A very short list of useful materials includes:

Periodicals & Newsletters

  • “Benefits and Compensation International”
  • “International HR Journal”
  • Baker & McKenzie “Global Employer”
  • Law firm newsletters, e.g. White & Case
  • Immigration firms’ newsletters

Some Useful Books

  • The Global Challenge, Evans, Pucik & Barsoux
  • Strategic International Human Resources Management, Perkins & Shortland
  • International Human Resource Management, Briscoe & Schuler
  • Managing a Global Workforce, Vance & Paik
  • International Human Resources Guide, Roger Herod, ed.
  • International Human Resource Management, Dowling & Welch
  • Readings and Cases in International Human Resource Management, Mendenhall & Oddou

The Web

Finally, how could we not mention what’s available on the Internet? My first comment is “caveat emptor”!  Some of the information available on the web can be quite accurate and useful, some not so much. One must be very careful in taking the source into consideration and evaluating the quality of the input obtained. The ability to make such evaluations, of course, takes us back to working through the list above.

Wrap Up

As with any blog commentary, we’ve only begun to scratch the surface on the possibilities. We invite all readers to share their comments and suggestions as well.   Let’s hear from you!

Thank you

About Alan


Alan on LinkedIn

Can We Employ Them HERE When They’ll be Working THERE?

Alan Freeman – LOF International HR Solutions

We recently addressed a colleague’s question that echoed one we hear fairly often.  “We have an operation in Country A and want to hire our first employee in Country B.  He is a national of Country  B, will  continue to live there while working for our company, essentially all his work activities will be conducted in Country B and he will not be an expat.  Can’t we simply put him on a Country A  contract, enroll  him in Country A social insurance and our company benefits schemes, pay him through the Country A payroll and all will be well?”

Indeed, it is a true story (I am NOT making this  up!) that a senior executive once told me that he intended to hire seven employees in France under UK contracts and payroll from the UK.  His rationale?,  “We don’t want to have the extra burden of  setting up new administrative capacity in France and, besides, I don’t want to get tangled up in those restrictive French employment laws.”

While the desire to avoid the costs and efforts of establishing operations and additional administrative burden in “new” countries is understandable, it is not wise.  Here’s why.

What are the key issues?

In most countries, a person resident in the country and performing services in the country is considered an employee in that country.  It doesn’t matter where the payroll is paid, where the contract is issued, or what country the employing entity is located in.

In our example above, the likely circumstances would be:

  • The government of Country B would assert that the employment relationship must be governed by Country B’s employment laws.  This means that a local contract, and any additional “work rules” and requirements, must be executed in accordance with Country B’s rules.  This also means that, on an ongoing basis, the employer is required to manage the employment relationship under the terms of Country B regulations.
  • The employer and employee would be subject to Country B social insurance and, potentially, other mandatory program requirements, such as funded termination plans, 13th and 14th month payments and mandatory benefits.  Social insurance and other contributions usually must be withheld from payroll and remitted in accordance with Country B regulations.
  • The employee will be subject to income tax in Country B, not only on income generated related to his work in Country B but, potentially, on his worldwide income.  Many countries require regular ongoing income tax remittances as income is being earned (so-called Pay-As-You-Earn or PAYE arrangements).  In such cases, payroll once again is required to properly withhold, remit and report on income taxes in a manner akin to what must be done for social insurance.
  • If based upon Country A parameters, the employee’s compensation and benefits package probably will not conform to Country B legal requirements and market practices.  The employer could easily be paying too much or too little and if currencies are different, and there are exchange risks to consider.  Each country has unique practices for mandatory and supplemental benefits, and the latter are usually integrated with local social plans in some manner.  In the end, the inappropriately designed plans could be quite problematic and the employee would have the burden of dealing with them.
  • Finally, although it is not a purely an “HR” issue, there is a significant corporate risk that HR professionals must be aware of when setting up employment in additional countries.  Simply put, if an employee engages in business activities in a given country, especially if these activities produce revenue, the local authorities could rule that those activities create a “Permanent Establishment”, or PE.  A PE is an ongoing business that is subject to local country corporate income taxes.  If the company has not carefully established a local business entity that serves both as the employee’s “employer of record” and as a means for putting limitations around in-country business activities, then the authorities may assess corporate income taxes against the employer’s revenues both in-country and elsewhere.  To illustrate a worst case scenario, if our example employee is on contract with the Country A entity and triggers a Permanent Establishment ruling in Country B, not only could the company’s Country B revenue be subject to Country B corporate income taxes, but Country B might also demand taxes on all of Country A’s company global revenues.

Is there a simple solution?

Yes. Local employees must be employed on local terms and conditions, in accordance with local market practice, by a local employer-entity, and paid via local payroll services that ensure compliance with employment, social insurance and income tax regulations.  Oh, and by the way, if per chance the target employee doesn’t already have the appropriate immigration status, Work Permit and Residency Visa requirements come into play as well.

Exactly how the above can be accomplished is dependent upon what’s possible and appropriate in each country.  It isn’t overly difficult or expensive to “do it right the first time” and it is much less expensive and disruptive to the business than not doing it correctly.

More about Alan:

LOF International Human Resources Solutions, Inc.

On LinkedIn

International HR Forum

email Alan