While employers continue to invest in international talent mobility to deliver organisational objectives and drive competitive advantage, the growing challenge of managing risk and mobility compliance should not be underestimated.
Non-compliance with employer duties can result in wasted expenditure, loss of revenue, damage to reputation, decline in employee morale and significant financial penalties.
The potential benefits of global mobility can only be derived where the programme is efficient, cost-effective and compliant across immigration, regulation and tax in both the home location of the employee, and any overseas jurisdictions where the employee has travelled to for work.
The risks in global mobility compliance
Integral to achieving an effective global mobility compliance strategy is a real understanding of the regulatory framework within the industry sectors and geographical areas in which your organisation and overseas assignees will be operating.
While organisations continue to utilise traditional relocations and long-term assignments, there are an increasing number of short-term assignments and business travellers in response to a demand for more flexibility and agility in mobility programmes.
This has been driven by a need for perceived cost-containment in the company, and employee reluctance to accept longer-term arrangements for family reasons such as a reluctant spouse or to avoid upheaval for children.
Business travellers in particular raise compliance risks as they typically travel under the radar of any mobility policy or guidelines, despite being subject to the same immigration and regulatory obligations as long-term assignees.
Governments across the globe are pursuing increasingly protectionist immigration policies, increasing enforcement action against non-compliance and improving cooperation and data sharing between institutions and jurisdictions. This is impacting the availability of work visas internationally and causing issues and delays when business travellers attempt to gain entry at the border but are faced with immigration officials with extensive discretionary powers to refuse entry. Local rules are also subject to frequent change, which travellers have to keep pace with.
Employee expectations may also need to be managed in relation to immigration issues and timescales for delivery.
Employers should also be clear and unequivocal about the employee’s responsibilities in any visa application.
Clear and accurate advice should be given on the immigration options available and the requirements on the employee to provide information, evidence or to attend a visa appointment.
It is crucial that both the employer and employees understand the local regulatory environment from an immigration point of view, for example, what permissions are required from the relevant authorities for travel to and leave to remain in the country in question, as well as to undertake work there.
Effective immigration compliance goes beyond visa processing. Taking a strategic and proactive approach can help to identify future changes in target countries and regions, to help reduce overall immigration risk exposure and facilitate unimpeded business travel and streamlined operations.
As well as meeting the immigration requirements, the organisation will also have to comply with the relevant national and regional tax regulations, taking account of both the direct implications for both outbound and inbound assignees, and for your business.
You will need to assess whether you are adhering to both individual and corporate tax rules, as well as compensation and payroll reporting requirements and meeting the full tax liabilities so as to minimise any tax authority challenges and the risk of serious penalty.
In particular, many countries have non-resident tax filing requirements for expatriates who may not be paid in the current country in which they are working but are still employed there, for example, in the USA.
Moreover, the actual presence of an overseas assignee in a foreign jurisdiction can create an unintended taxable presence. Employees may become accidental expats because they have involuntarily triggered legal or tax rules that re-classify them as resident in the host country.
The challenge is for corporate tax departments to not only need to understand the nature and structure of international work assignments, from the activities that will be carried out to the long-term plan for operations in that location, but also how each part of that assignment and overall plan will legally impact on the individual assignee and the organisation.
Managing global mobility compliance
The global mobility programme should be underpinned by guidelines for different types of assignment.
Employee engagement will be critical to promoting best practice in mobility compliance. Identifying frequent travellers and supporting through training and signposting them to internal policies and procedures can help to address specific compliance risks within specific regions.
Global mobility policies and processes should be reviewed on a regular basis to identify areas of risk and improvement for full compliance.
Technology adoption has become critical in global mobility compliance and reducing and eliminating risks, offering employee tracking, real time data, integration with other organisational systems and reporting functionality to support in meeting compliance needs efficiently and effectively. For example, systems can be used to monitor employee travel and expenses, so that potential tax and visa issues can be automatically flagged for attention.
Risk management also demands a sustained commitment to keeping up to date with changes to the legal and regulatory framework in regions your employees operate.
Regulations are constantly changing and becoming increasingly complex. As such, it is important from a global mobility compliance perspective to understand the changes occurring within each country, and to assess the implications for assignees and your mobility processes and policies.
Key questions could include:
- What regulatory changes are pending?
- Are these regulatory changes going to impact the policy, processes and structure of your business?
- Is the local regulatory change in one country going to block the global policy, processes and structure of your business?
- What are the risks involved for your business?
- What are the risks involved for individual overseas assignees?
- How will this affect your clients?
- Who needs to be communicated to?
- Which outsourced third parties need to be advised?
- What are the likely costs involved in adapting to any changes?
- What are the likely benefits involved in making these changes?
Implications of noncompliance
Where an employee, and their family, or attempt to enter a country without the required permission or paperwork, they could face refusal at port of entry or deportation. For more serious breaches there might be fines for the employee and the employer, or and even imprisonment.
Where tax is due on income under domestic legislation and this income is either not declared, or not paid in a timely manner, there may be potential tax penalties. It is likely that the “missing” taxes may have to be paid with interest.
Mobility compliance support for your organisation
For many employers, the HR function is either overstretched or without the internal expertise to drive mobility compliance effectively.
DavidsonMorris supports employers will all aspects of global mobility, including guidance on mobility compliance, combining strategic insight and industry benchmarking with technology and implementation expertise.