expat playbook; best practices for sending employees abroad
TRANSCRIPT
© Radius 2016
EXPATPLAYBOOK BEST PRACTICES FOR SENDING EMPLOYEES ABROAD
Deploying and maintaining talent around the world is a
critical priority for multinational companies.
There are myriad reasons why companies choose to send employees overseas on
assignment, but employers typically must navigate a common set of challenges with regard to properly managing their expats.
Make no mistake: The stakes are high.
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Employing an expat typically costs two or even three times more than the simple cost
of the individual’s home-country salary.
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Expat assignments can and do fail, and improper immigration or tax compliance
management can lead to serious legal trouble for the employer and/or the employee.
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The Expat Playbook addresses the most common challenges faced by multinational companies sending employees abroad. Effectively managing a mobile global workforce is highly complex, touching on everything from immigration to taxes, insurance to talent development.
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Immigration
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Ensuring that an expat is legally permitted to work in a host country
is an essential preliminary step to any deployment.
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Permission to work in a host country CAN NEVER BE ASSUMED, and securing proper immigration status should always be considered ‘step one’ in the expat process.
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The length of stay, nature of work and whether or not the employer has a local legal presence are all likely
to influence the steps required to ensure that an expat is legally permitted to work in the host country.
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China is an excellent example of a country with a complex immigration landscape.
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Short-term expats must apply for a so-called F visa, which permits them to work in the country for up to six months. Long-term expats must apply for a so-called Z visa. No matter which visa the expat holds, if they stay longer than 30 days they must
also apply for a residency permit.
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Tax and Payroll
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When you send employees to work in other countries, you often expose them to
tax considerations.
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The tax and social security laws and treaties of both the home and host countries will determine how an expat employee will be taxed when on assignment, together with the length of the assignment, which
is a key taxation trigger.
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As a general rule, when an expatriate spends less than 183 days in any 12-month period in a country, it is usually possible to avoid triggering income tax and payroll withholding obligations
in that country.
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Tax equalization ensures that an expat employee’s take-home pay on non-assignment income will be the same as it would have been
had they remained at home.
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Typical expat payroll options: ›
• Using a host-country payroll
• Paying the employee from a “split payroll”
• Paying the employee from a “shadow payroll”
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A shadow payroll pays the employee from the home-country payroll but also
reports compensation in the host country, from which taxes can be calculated and
paid to host-country tax authorities.
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Compensation
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The most fundamental expat compensation decision an employer must make is whether to adopt a HOME-BASED or HOST-BASED approach.
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The home-based approach to expat compensation remains prevalent. Under this system, expats continue to receive the salary they received in their home country, often in
addition to assignment incentives.
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Under the host-based approach to compensation, expats’ pay is determined
based on the local labor market.
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Other Considerations
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Expat assignments can affect EVERYTHING from corporate structuring and intercompany agreements to employee health and safety policies.
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Employers must take reasonable steps to protect employees by understanding the risks of specific assignment areas and by having in place
monitoring programs and contingency plans.
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Don’t forget about the process of repatriating your assignees,
including related travel and moving expenses and any
outstanding payments in the host country.
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Download your copy of the Expat Playbook.
Be prepared for the challenges you will face when your employees enter a country.
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