Category Archives: Expatriate Payroll

10 Killer Reasons to Attend the North East Totally Expat Show

The International HR Forum is proud to be a Partner Organization for the upcoming North East Totally Expat Show on 3 April in New York.  The event is just three weeks away! It will be the largest global mobility event ever held in New York.  So, if you are in the New York Metro area, or if you are able to travel, register now!

Here are 10 killer reasons why you should register today: Continue reading

NY Totally Expat Show

Warren Heaps – Birches Group LLC

Have you heard about the Totally Expat Show sponsored by the Forum for Expatriate Management? This group has hosted several very successful exhibitions designed for global mobility professionals.

This year, the International HR Forum will be represented at the New York Show on April 3rd.  Birches Group LLC will have a booth in the Exhibition Hall — stop by and introduce yourself as one of our loyal readers.

Check out the details on our NY Totally Expat Show page.

When you register, please be sure to mention you saw the event on the International HR Forum!  And if you want to, leave a comment if you will be there, so we can look for you.

New York Totally Expat Show – April 3, 2012

Join us at the New York Totally Expat Show on 3 April

The Forum for Expatriate Management’s Totally Expat Show will be returning to New York on 3 April 2012. We will also be visiting Chicago for our Mid West Show on 1 June 2012.

  •  North East USA at the Metropolitan Pavilion in New York on 3rd April 2012 – Register to Attend
  • Mid West USA at the Sheraton Hotel & Towers in Chicago on 1st June 2012 – Register to Attend

The International HR Forum is a proud partner organization of The Forum for Expatriate Management, and Birches Group LLC will be attending the New York Totally Expat Show on 3 April 2012. Do come along and visit us. With over 500  attendees, this is likely to be the biggest Global Mobility event  ever held in New York.

These truly unique global mobility events will include a major exhibition with a large number of leading service providers and a rolling program of seminars (which will be certified by HRCI for GPHR credits).

Entry is entirely FREE for corporate HR professionals.  Just  Register to Attend!

Service Providers can attend for just $290 for FEM Members ($350 for non-Members). Just Register to Attend!

Topics to be covered are listed below.  For full descriptions of the topics, see the seminar program.   Additional speakers and topics will be announced shortly.

  • Meet the Experts – Global Immigration Compliance Trends
    Experts from Fragomen and other leading specialists
  • Latest Trends in Global Mobility Policy and Practices
    Debra Frost, Vice President, Client Services, Cartus
    William Sheridan, Vice President, National Foreign Trade Council
  • Business Process Automation in Global Mobility
    Mark Rabe, VP Business Development, Equus Software
  • US Reporting Requirements for Foreign Assets – What Global Mobility Managers need to know
    Beth Penfold and Katrina Haynes, Grant Thornton
  • An Overview for Companies new to Expatriation
    Pat Jurgens, Director of Tax for AIRINC
  • Emerging Trends in Global Mobility Transformation
    Glen Collins, Senior Manager, International Executive Services, KPMG
  •  Technology and Global Mobility – The Next Generation
    Frank Patitucci, CEO NuCompass Mobility
  • Strategic Intercultural Support: Insuring the ROI on the International Assignment
    Dean Foster, President and founder, DFA Intercultural Global Solutions
  • Is Cross Cultural Training really worth it?
    Diane McGreal, Director Berlitz Global Leadership Training, Americas Region
  •  Spousal assistance : overview of best practices based on a global sampling of 200 multinational corporations
    Alain Verstandig, President and Denise Michelle Starrett, Senior Consultant NET EXPAT Inc
  • Managing the Global Mobility Function
    Brian Friedman, Founder and CEO, Forum for Expatriate Management

Register to Attend!

 Just these Corporate Attendees

AIG * Amphenol TCS * Associated Press * AXA Equitable * Axiom Law * BNP Paribas * Boehringer Ingelheim * Bunge Limited * Citibank * Citicorp * Coach * Columbia University * Corning Incorporated * Covance Inc. * Criteo * D&B * Deloitte * Discovery Communications * Dragados USA * DSM Services USA * Fidessa corporation * Foot Locker Inc. * Harris * HSBC * IBM * ING Financial Services * Ingersoll Rand Company * JPMorgan Chase * KPMG LLP * Marsh & McLennan Companies * MetLife * Milbank, Tweed, Hadley & McCloy LLP * Morgan Stanley * Nielsen * Novartis Pharmaceuticals Corporation * NYSE Euronext * NYU * PTC * Ralph Lauren * Resources Global Professionals * Sikorsky Aircraft Corporate * Sony Music Entertainment * Teach For All * Terex Corporation * The Hershey Company * The NPD Group Inc. * The Royal Bank of Scotland * Tiffany * Towers Watson * Toys’R’Us * UNDP * Unilever * United Technologies Corporation * White & Case LLP * William J. Clinton Foundation *

Equalization or Protection – A Taxing Question

Guest Author:
Jennifer Stein – Global Tax Network

[Editor’s Note:  We are happy to welcome Jen Stein as a Guest Author.  Jen is the Managing Director of the Global Tax Network Chicago office.  She has more than 15 years of experience in expat and foreign national tax preparation and consulting, starting her career with Arthur Andersen, and then Ernst & Young, where she served for over 14 years.]

Taxes are one of the most complicated and expensive aspects of an international assignment.  To control these costs, most companies utilize a tax policy as part of their international assignment process.  The two most common approaches are tax equalization and tax protection.  How do you decide if one of them is right for your company? Let’s start with some definitions.

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

Ten Tax Tips for Twelve-Thirtyone: Year-End HR and Payroll Actions for Global Mobility

Claudia Howe – Global Mobility Tax, LLP

Wow!  Where did the year go?  Now that it’s almost over, HR and payroll professionals are working hard to finish out the year.  In the world of expatriate compensation and taxation, here is a reminder list of 10 things to do before December 31 (for our international readers, I realize this will be a bit US-centric, but hopefully useful nevertheless):

Tip #1: Pay all taxes due for jurisdictions that do not have a 12/31 year-end
Some countries have different year-ends, for example:  Australia = June 30,  Hong Kong = March 31,  New Zealand = March 31,  UK = April 5,  South Africa = February 28.

If taxes are not paid throughout the year or by 12/31 (especially in the first year of assignment), the employee or the company (for tax equalized assignees) may lose out on claiming important foreign tax credits on the US tax return and could have a nasty surprise at April 15.  This is due to the fact that the US only allows tax credits on the US return against taxes paid or accrued during the tax year.

For example:  Suppose you have an expat from the US in the UK since June 2009 and have not quite been able to get regular monthly UK tax payments set up.  If  UK taxes have not been remitted to Her Majesty’s Revenue and Customs (aka UK tax authorities) before 12/31, they cannot be claimed as a credit on the US return, causing temporary (and potentially permanent) double taxation!

Tip #2:  Pay all US taxes due through payroll
Perhaps you are aware of a very large January bonus that was not withheld at the top marginal rate and on which a US tax payment  should be made to avoid the underpayment penalty.   What are the options to make the payment?

  • Option 1:  send a check in the mail to the IRS with an estimated tax payment voucher (1040-ES – Q4, due January 15).
  • Option 2:  make the payment through payroll before 12/31.

Best choice?  Option 2.  When making payment through withholding, the IRS will treat it as evenly paid throughout the year and this will minimize/eliminate estimated tax penalties that could otherwise apply.

Tip #3: Update your tax accruals
Year-end budgeting is in progress.  If there are liabilities out there – be it US or foreign tax liabilities that will come due, it is important to accrue for them so that the financials are correct and also to avoid surprises later on.

Tip #4: Review relocation Gross-ups
For folks that were relocated during the tax year but are not tax equalized, a relocation gross-up should be processed if the company promised to pick up the taxes on the taxable items such as temporary lodging, temporary transportation, etc.  Many major relocation companies will do this for you, or will at least give you the amounts to be grossed-up.  Tax professionals can also be useful here especially if you are relocating an executive with the expectation of no tax detriment:  your 25% supplemental rate would likely not cover that tax bill and you could end up with a disgruntled exec at tax time in April.

If you process gross-ups at year-end, don’t forget to send a courtesy email to the employee informing him/her why the last paystub or the W-2 looks so much higher all of the sudden.  And be sure to process the payments of withholding through payroll (see Tip #2, Option 2 above!).

Tip #5: Review expatriate compensation details for W-2 inclusion
The tricky part of expatriate compensation is that it is usually not delivered all from one location;  many items such as housing, children’s education, local tax payments, etc.  are paid from the host location and are not channeled back to US payroll for inclusion in the W-2 (which, of course is required by law:  all compensation no matter where or how paid must be reported to the IRS on the W-2).

It is especially at year-end that I am reminded that our colleagues in payroll are indeed the unsung heroes of corporate America:  they are expected to deliver correct payroll on-time with 100% accuracy all the time – talk about stress! And no-one stops by to say:  “Thanks, Andrea, for getting my W-2 right – I know it must have been a challenge”!

Tip #6: Review withholding on US bonus, commission and equity compensation payouts
For US expatriates on assignment in a foreign location, remaining on US payroll, usually federal (and sometimes state) withholding will be turned off.  In lieu of the actual withholding, a hypothetical tax withholding for tax equalized folks is implemented or a fixed withholding amount for the foreign jurisdiction is taken out of the pay.  Since oftentimes these are fixed dollar amounts per paycheck, the withholding on bonuses or commissions are easily overlooked. Better late than never – now is a good time to review and ascertain that the correct amount of withholding has been taken out of these type of payments to ensure that the employee does not owe the company or the governments any underwitheld amounts.

If actual federal/state taxes are withheld from executive or high-income taxpayer’s bonus and commission payments, and if the person is tax equalized, you will want to ensure that taxes were withheld at the highest marginal rates, not the 25% supplemental rate.

Tip #7: Finalize your Authorization List
Make sure to finalize the list of employees that are eligible for tax services and let your tax service provider know before 12/31.  Delays beyond that date could delay the kick-off for the tax season.  Then your employees could be left wondering if their taxes will be taken care of – or not?

Tip #8: Sign your Engagement Letters

Your tax firm may not be able to provide services until they get that signed engagement letter back from the company.  So better check with the person who signs the letter to make sure it get out and not hung up in legal or procurement.  Again, delays could cause problems for your employees.

Tip #9: Solicit the completed 2009 travel calendars from all assignees
This can be coordinated with the tax firm you are using; the travel calendar is one of the most important items in the tax preparation process.  Most will supply you with an automated calendar at the beginning of the year to make this process easy, but of course, your assignees have to use the tool!  Tax firms spend almost half of the tax preparation time on reporting compensation in the correct format and sourced to the correct jurisdiction.  The travel calendar is a key item needed for this exercise as well as to determine tax residency status, qualification for tax exclucsions, etc.  The earlier the tax professionals can get their hands on it, the better!

Tip #10: Don’t forget to enjoy the holidays!
We all tend to get very stressed at year-end – it is a hectic time, after all!  But sometimes we do have to remind ourselves that we need to take a deep breath, sit back, and relax…and enjoy the Season!

Happy Holidays!

More about Claudia:

Should Global Mobility Services Be Centralized?

Warren Heaps – Birches Group LLC

As organizations continue to look for the best way to manage their globally mobile employees (expats), one of the most common issues to address is the best organizational structure to provide the necessary services and support to this group.   What is the optimal structure – centralized or decentralized – and how does an organization decide which approach is best for them?

Back to Basics
Expat management is a cross-functional discipline made up of several different areas of expertise, each highly technical in their own right, including relocation, compensation, tax, payroll and immigration.   To be effective, one must become familiar with all of these areas, and master at least a few of them.

In addition, customer service and vendor management are critical, especially given the preponderance of outsourcing to third-party providers.   Finally, all Global Mobility departments need a link back to the global talent management strategy in their company.

In my opinion, few companies, and few individuals in those companies, are really truly experts in all the aspects of Global Mobility.  Therefore, it makes a lot of sense to centralize mobility services, and invest in and develop the few staff that do have the capacity and experience to become experts.   Depending on the size of your assignee population, this could be at the corporate or HQ level, or in organizations with larger assignee groups, at the regional level.

The Regional Model
One of the most common structures used by many organizations today is the regional one, typically Americas, Europe-Middle East-Africa (EMEA), and Asia-Pacific.   Under this approach, a designated regional center coordinates all of the assignment management for the region.   The reality is that all organizations are at least partially outsourced, so much of the work is handled by third-party providers, and the role of the internal staff also includes the management of these outsourced processes.

A regional structure helps to ensure consistency across a broad range of countries, and develops deep knowledge of local practices, to provide the highest possible level of support to assignees.  In many cases, regional suppliers are engaged, based on their local market knowledge and performance in the region.

The Global Model
Some organizations choose to centralize services at headquarters.  This model ensures the highest level of consistency, since one group is responsible for all service delivery.   With smaller programs, this approach can work; as programs get larger, however, the regional model quickly emerges as a more practical solution.

Under a global model, there are often opportunities to ensure high levels of tax compliance and identify tax planning opportunities effectively.   These decisions require input from corporate tax and finance as well as human resources, and are best managed jointly at the headquarters level of the organization.

Another added advantage of the global model is the selection of outside providers, which would tend to be more global as well.   Realize, however, that few service providers can really provide services everywhere – they all rely on partner organizations to supplement their own resources.

The Decentralized Approach
There are some companies which continue to manage their mobile employees through a network of local offices, without any centralized support at the regional or global level.   This is a challenging way to operate for all but the very smallest programs, and may give rise to missed opportunities in areas such as vendor consolidation, tax planning and the general efficiency of the program.   Even under a decentralized approach, however, a standard international assignment policy should be developed and distributed, ensuring a minimum level of consistency.

Tools to Help Manage Your Program
Another factor to consider is the level of automation available to your organization.  Without a technology tool for assignment management that is accessible globally, decentralization is not realistic.  These days, there are hosted (SaaS) solutions which are affordable and very powerful, and integrate easily with your global ERP solution.   Whether you work with a specialized vendor, such as Atlas or MoveOne, or rely on your accounting or relocation firm, deploying a robust assignment management software solution goes a long way to simplifying your expat administration and helps eliminate redundant and inefficient processes.

Ask yourself a simple question – how many expats do you have in your company today?   If you cannot answer this question with confidence, you need a better tool to manage your program.

Don’t overlook short-term assignees, commuter assignments and short-term business travelers.   Each of these assignees require tax, relocation and immigration services, and if poorly managed, can result in unexpected costs. You should be able to capture all types of assignees in your assignment management system.

Moving Your Program Forward
Now that I’ve got you thinking about how your expat administration is being managed, take a careful look at your organization structure.  What kinds of changes might be beneficial?  Where are you biggest “sore spots”?

Post some comments about your specific challenges, and we can try to address them.

More About Warren

Warren Heaps

Warren on LinkedIn

Developing Markets Compensation and Benefits Group in LinkedIn

Email Warren

Birches Group

Expats…What tax?

Claudia HoweAuthor:
Claudia Howe – Global Mobility Tax, LLP

You are an HR professional (or a VP of Tax or a CFO) and you have just been told that your company wants to send an expat (oh horror!) to the UK.  “Expat,” you think to yourself – “what now?  How can we understand the costs, and what about taxes – isn’t that a really expensive and complicated area?”

Understanding the Basics

Understanding the basics of an expat assignment is critical, especially the tax costs.  As many already know, the tax costs can be the most significant line item on the cost projection worksheet.  But don’t worry; there are ways to manage it!

If your company does not have an international assignment policy in place, you will have to determine the whole package including housing, COLA, education cost for the kids, and what tax reimbursement philosophy is to be employed.  Without a policy, many of these items will be subject to individual negotiations.  This can work for a few assignees, but once you expand your program beyond one or two, it’s a good idea to establish a formal policy to help manage costs and reign in the negotiations.  While all of the aspects of an expat policy are interesting, my expertise is in the global tax arena, so this posting will concentrate on how to decide the best approach to managing taxes for your expats.

Tax Reimbursement Methods

When an employee goes overseas, there is always an impact on the employee’s taxes – income taxes and social taxes.  If left unmanaged, there could be unforeseen consequences, either positive or negative, from the employee’s perspective as well as from the employer’s viewpoint.  Expat tax policies address these issues with tax reimbursement methods including tax protection, tax equalization, or the “simplest” of all:  laissez-faire (aka “do nothing”).

While laissez-faire keeps the company’s costs down, it usually gets the expat worried about the tax implications of the assignment as any incremental costs will directly hit the assignee’s bottom line.

Tax equalization and tax protection are alternatives which help both employees and employers manage the costs of assignments.  If you are not familiar with tax equalization or tax protection, it is easy to get them confused.  Here are the basic definitions:

  • Tax Protection – Employees are “protected” from any additional taxes that may result from the international assignment but can benefit from any decrease in taxes which may occur when, for example, moving from a high-tax country to a low-tax country or no-tax country.  So, the employee may pay less tax, but will never pay more than if at home.
  • Tax Equalization – Employees are “equalized” so they pay the same amount of tax – no more, no less – as if they were at home.  The company pays any difference and also benefits from any tax reductions.  This method is the most equitable for a workforce and the employees can easily understand the tax impact on them:  none – the employees pay the same tax as if at home.

Both methods are designed to help the employee, and if the host country tax rates are higher than the home country tax rates, then they technically will result in the same bottom line to the employee and the same cost to the company in the long run.  The fine distinction between the two is that with tax protection the company promises the expat that he will be reimbursed for any excess tax costs over his “stay-at-home tax,” i.e. he will pay no more than had he stayed home.  Tax equalization says that the employee will pay “neither more nor less” than had he remained in the home location.  And, unless they are going to Dubai, the host country will have the right of taxation and will tax the income (yes, even if paid from the home country and even if the work performed is for the benefit of some other location).  Because the host country tax system is unfamiliar, it is not always easy to know how much tax will be due in that country.

Tax Equalization vs. Tax Protection

Here you are, with your first expat, and you now wonder:  “hmm – tax protect or tax equalize” – how should we decide this?

The answer is usually more complex than meets the eye.  When you are in the infancy stage of your expatriate program you usually can afford customization to each expat’s situation.   We often see in practice that the first few assignments in an organization are custom built.  Tax reimbursement policies are often written once the first few assignments are already underway.

Here are some examples to help illustrate the two approaches.

Tax Protection Example

Let me give you an example where I would clearly recommend tax protection:  you are moving a young single line manager from the UK to Spain for 2  years; she will not receive any allowances, only relocation benefits.  The tax protection gives her the additional assurance that she is not going to pay more tax than had she remained home, but if she pays less in Spain than what she would have paid in the UK on the same income, then she gets to enjoy the windfall (and spend the extra money on something nice).

Tax Equalization Example

However, on the other end of the extremes, for example, when you are moving a US executive with wife and school age children from the US to Singapore, I would highly recommend tax equalization.  You ask:  why?  Well, it usually will take a bit more financial incentive to get the executive to accept the “risk” (financial and otherwise) of taking such an assignment (so he is doing the company a favor).  The assignment costs will increase due to the family’s need for financial assurance, there is a cost of living differential, and housing is a lot more expensive.  So, the cost projection worksheet is filling up quickly and the total compensation reportable in both countries becomes staggering.  All the numbers will make everyone’s heads spin, but the company really needs this executive to focus on the task at hand.  The easiest way calm this person’s financial anxiety is to tax equalize; promise him that he will pay the same amount of tax as if he had stayed home.  This will tie his personal bottom line to a tax system he is familiar with and leaves the tax planning and tax risks in the hands of the company (and their trusty tax advisors).  This approach also allows the company to pursue expatriate tax planning strategies to help manage the tax costs, therefore reducing the overall cost of the assignment.  Such strategies are available in many countries but require expert assistance and a full examination of income, social and corporate tax impacts.

How To Get Started

So, what about this first expat you are told is going to the UK next week (or wait, did they say he had moved already?  Or was that just a business trip?)?  It is best to break it down into the big components first:  immigration, payroll, taxation, relocation etc.

Then consider the needs of the company and the needs of the employee and find out the costs to each party under a couple of scenarios.  Once the costs have been established (and you may need assistance with some of the items) then it is time to go back to management to get the costs approved.  And don’t forget the tax costs!

Yes, managing expats is a complex and daunting task at first.  But if you prepare yourself with good information, helpful advisors, and most importantly gain strong support from your line managers, your company can reap the benefits of international assignees and, at the same time, manage the costs effectively.

More about Claudia