Moving people around the world is a necessary part of doing business in a global economy. Many large companies have been doing this for a very long time. Newer companies entering the global marketplace may find it necessary to have an employee on-site, to look after their interests in another country. If your company is considering setting up expatriate assignments, here are four considerations to keep in mind.
The world of global compensation, and dealing with the details of payrolls, taxes, retirement, and deferred compensation is highly complex, and can’t be covered in any detail in this blog post. Before heading very far down this road, you’ll need to work with legal and tax specialists to make sure that you are meeting the requirements of all national and international laws that apply. However, we can cover the major considerations for handling an expatriate assignment, which are:
According to Brian Friedman, the founder of The Forum for Expatriate Management, in the past, the employees selected for expatriate assignments were typically those who were failing in the home office. It was thought they might have a better chance of success overseas, or maybe it was a case of getting a little distance from the problem. Today, however, that is no longer true. Due to the expense and impact potential of overseas assignments, the “best and the brightest” are being selected.
According to the Society for Human Resource Management (SHRM), employees should be selected according to the goal of the assignment (i.e., if the job is technical in nature, an engineer is needed). However, the job skill set is not the only issue that needs to be considered. As SHRM states, “Achieving the company’s goals in the host country hinges on that person’s ability to influence individuals, groups and organizations that have a different cultural perspective.” Thus, selecting for these abilities is as important as any specific technical skill. And while you may think only younger workers are interested in traveling, it’s important to note that there is an increasing number of baby boomers willing to take overseas assignments.
Friedman et al. and SHRM both emphasize the importance of understanding the assignment. What exactly is the company trying to accomplish? Is this a short-term assignment or a multi-year assignment? Does it make sense to have multiple positions overseas, or would a “global nomad,” someone who is willing to move from country to country, suffice? Or, can locally-hired individuals do the trick?
Having a goal for the return on investment (ROI) is also important. What are the financial goals? Can the person accomplish an adequate return, given the cost of an assignment, which, depending on the location, can easily top $1 million?
There are five approaches to use when compensating expatriate employees, as listed below.
It would be nice if the entire world operated under the same tax law, but it does not. Understanding tax laws in the country your employee will be working in is critical. Questions to ask include the following:
These are just some of the many considerations you should keep in mind when entering the world of expatriate employment. Take the time to study the complexities of your specific situation, and be sure to seek the help of legal and tax professionals, to ensure the success of your expatriate assignments.