Weichert Workforce Mobility: Optimise your mobile workforce - Stewart McCardle

As companies adopt more intricate structures for expatriate assignments, ascertaining compliance becomes even more convoluted, and a deeper understanding of regional employment regulations, tax considerations and immigration laws is required. Stewart McCardle, VP of global financial services at Weichert Workforce Mobility, discusses the implications of failing to conform and the need for greater ownership of relocation programmes.

In the era of globalisation, relocating staff abroad is simply business as usual for many multinational companies. And as nations continue to pursue ever closer economic integration, cross-border assignments become more common, whether they involve having specialists permanently established or completing short-duration business trips.

But even in economic trading zones like the European Union (EU), relocating staff abroad involves more planning than simply determining the logistics behind loading belongings into boxes and shipping them; cultural differences, legal compliance, tax issues and security risks are just some of the often complex considerations that companies and their workforce have to make when conducting multinational projects. Understanding these divergences has been complicated by the fact that assignments now commonly vary from a few weeks to many years.

"The difficulty comes from two different areas - you have the personal and physical challenges of actually relocating someone and their family, while you also have to contend with issues surrounding the company's compliance with all the rules and regulations of the countries they're moving to," says Stewart McCardle, VP of global financial services at Weichert Workforce Mobility, which specialises in making it easier, faster and more cost-effective for clients to deploy talent across the globe.

"On the personal side, you really have to consider what the needs of the family are," says McCardle. "You may be moving a single person or you may be moving a family with multiple children or an elderly grandparent. They'd all have different requirements. Not to mention they may have to contend with language barriers, a hugely contrasting culture and even security risks."

From the beginning

Since its establishment in 1969, Weichert has evolved into one of the world's leading providers of workforce mobility management services, with a service scope extending into approximately 175 countries and offices across the globe, including its EMEA Operations headquarters in London. With its expertise in relocation and assignment management, it is able to ensure its clients' mobility programmes advance their business and workforce strategies, while complying with regional regulations.

For companies, the challenge lies in understanding the nuances and conflictions of these local immigration, taxation and social-security laws, as well as the implications they can have on payroll and employee benefits. What's legal or taxable in one country may be different in another and complying with these conflicting sets of rules can complicate moves. With companies increasingly likely to sanction more short-term assignments - with some under three months - the situation becomes even more convoluted.

"With long-term assignments, everyone is aware of the fact you'll probably need some form of work permit and you'll probably have to pay taxes to that country," says McCardle. "As the trend moves towards trips of a shorter duration, there's a tendency to think of the project as more of a business trip and that these requirements aren't applicable anymore. As a result, the companies and employees stop taking the same precautions, placing themselves in danger of penalties.

"With regard to immigration, there's a defined list of business activities you can do on a business trip and though this varies between states, generally speaking, things such as attending meetings or training sessions are acceptable. Once you start getting into day-to-day business, you really do need a work permit."

All in the details

From a tax and social-security perspective, non-compliance will usually result in the country demanding retroactive payment of the taxes owed from employees, dated back to whenever the infraction started, and often topped up with penalty charges and accrued interest. While companies will face similar financial penalties, they could also see their workforce deported and future employees refused entry. If these infringements are picked up by the media, their reputation could also be devastated in that region.

For McCardle, it's imperative that companies do more to account for and manage these risks. "The first step is to understand what's going on within your company and then to assign ownership to manage this process," he says. "In a lot of businesses, the responsibility tends to be spread across many functions like finance, HR and legal, but because there's no ownership, everyone is siloed and focusing on different aspects.

"Given the size and diversity of companies, it's difficult to know where everybody is. By maintaining ownership of the process, it gives you an oversight into the amount of travel that's happening, the type that's occurring and the reason for it. All this information can be used to reduce risk and exposure to potential penalties. There's no single-bullet approach to solving everything, but there is a collection of tools and practices that will help improve ownership and address risk."

Change with the times

Many companies already have existing systems in place to detect potential compliance risks after the assignment has terminated. Others use proactive education to help combat the problem before it happens - teaching managers and senior leaders about the risks associated with mobility and providing a suitable process to follow in order to reduce that risk.

"I would recommend meeting with the mobility team, whether it's in-house or an external accounting firm and logistical provider, to ensure the policies and processes are in place to manage that risk appropriately," says McCardle. "The assessment should include oversight for all types of assignments, from short-term business travel all the way through to multiyear assignments. Commuter assignments, where an employee lives in one country and commutes to another for work, are a particular grey area and often overlooked by in-house mobility teams."

McCardle believes the three areas that tend to most jeopardise companies are immigration, tax and permanent establishment (when a company enters a new market where an office or entity is not already in place). These are the factors at the forefront of regulators' minds and gaps identified by mobility teams in these areas should be covered immediately.

Tax equalisation - paying all that is owed to the host country - usually accounts for 40-45% of an assignments' cost, followed by housing and physical relocation. By using permanent relocations more often, companies are able to reduce tax expenditure; however, it does mean that an employee's benefits could be disrupted upon termination of their employment. Though this is less of an issue moving within the economic zones like the EU, in countries such as China, which have no agreements
in place, it could mean pensions and social insurance benefits are impacted.

"When you're earning money in one location and employed in another, the rules are different and harder to navigate," says McCardle. "Within the EU, the immigration challenges are a little easier as there is a lot more agreement within the region; they're able to move more freely as long as you're a citizen, but you still have this challenge around earning money. It's easy to live in Germany and cross the border to the Netherlands every day, but the implications of that from a tax perspective
are not always straight forward."

Up to the challenge

Regional regulations are not the only entity causing confusion throughout the sector. With technology advancements, McCardle has witnessed a number of new challenges arise. "The biggest I've seen is the increase of telecommuting and virtual teams," he says. "They have similar compliance challenges in terms of knowing when people are working in another company, not just taking a business trip, but they're harder to find and manage as the employees are only in one location. Some of the tools we use for tracking travel or expenses don't exist if someone is sitting in their home country and working for a company in a different country. The expatriate management sector is going to have to address this and put the same type of processes in place to manage the risk."

Relocating specialists can provide huge cost and efficiency benefits for companies. But as more complicated laws are put in place and more intricate forms of assignment are issued, ensuring compliance becomes harder and more essential. Increasing ownership over mobility programmes could prove crucial to ensuring long, successful engagements in regions and to staving off any drastic impact to the benefits they produce.

Stewart McCardle, VP of global financial services at Weichert Workforce Mobility.