An international mobility policy must serve the strategic objectives of the company.
When a company draws up an expatriation package, it defines the reasons for sending employees abroad and the profiles of the employees, and then details the accompanying measures contained in the expatriation package.
Although labour law does not regulate the duration of assignments abroad, companies usually make a distinction between short-term assignments (STIA: Short Term International Assignment), generally up to 12 months abroad, and long-term assignments (LTIA: Long Term International Assignment) beyond this period.
For each type of assignment, the company will offer a remuneration and benefits package.
For the STIA, the employee goes abroad as a geographical single person, as the family usually stays in the home country.
The employee keeps his or her remuneration from the country of origin. This is supplemented by a Per Diem. This is a daily lump sum calculated on the basis of the number of days spent in the host country, whether worked or not.
This allowance should cover the costs of food, accommodation and taxis in the host country.
The amount of the per diem may be set by an external service provider (in principle, the one used by the company to define the cost of living and hardship allowances of expatriation packages), or by the administration (ACOSS scale in France = long-distance travel allowances also known as the chancellery scale), or it may be the result of a company’s own internal scale.
The amounts vary from country to country depending on the cost of living in each destination.
The payment of a fixed daily allowance saves the company valuable administrative time by eliminating the need for numerous small bills.
If the company pays a per diem within the limit of the ACOSS scale, this sum is exempt from social security charges and tax in France for 3 months without justification according to URSSAF rules.
Beyond that, the social and tax exemption ceiling is reduced by 15% up to the 24th month and then by 30% from the 25th to the 48th month on presentation of supporting documents.
Where the employer provides accommodation for the employee by providing furnished accommodation or renting a hotel apartment, the ACOSS scale is reduced by 65% per day since it is intended only to cover the cost of food.
See the amounts of the lump-sum allowances for exempt foreign travel on the website of the Ministry of the Economy.
Although the ACOSS allowances are generous, the employer may still pay a higher per diem. In this case, the employer will have to reintegrate the part exceeding the scale into the calculation of the social and tax base, unless there is justification, as the excess must remain very reasonable.
In addition to these allowances intended to cover travel expenses, the employer may pay an expatriation allowance to compensate for the hardship of working abroad (fatigue linked to travel, working in a foreign language, occasional separation from family, etc.). As this bonus is not intended to cover expenses, it does not have the same social treatment. However, it may be tax exempt in France within the limits of certain conditions contained in Article 81 A II of the French General Tax Code.
If the STIA assignment does not go beyond 6 months and there is no re-invoicing in the host country, there is a strong likelihood that there is no tax to pay in the country of assignment. However, this point should be checked for each mobility.
After 6 months, in many cases, taxation will be due in the host country in addition to the generous per diem amount, accommodation costs, the bill figures.
After two years, the host country’s tax system will apply and the social and tax exemption of per diems in France will be reduced, resulting in higher mobility costs.
Also, if the assignment is prolonged, the employer will tend to switch the employee to a remuneration scheme offered to employees initially on long-term assignments (LTIA).
For the latter, the employer usually calculates the net salary after social security charges and taxes in the home country. The employer adds a COLA (Cost of Living Allowance) if the cost of living in the city of assignment is higher than in the city of departure. In such cases, this allowance is calculated only on the part of the salary that is intended for the employee’s current consumption (food, clothing and leisure expenses), excluding the part of the income that is used to pay social security contributions, taxes, housing or even a possible savings capacity.
Finally, the employer often pays for the employee’s accommodation at the place of assignment abroad. This package for long-term assignments, although comfortable for the employee, is less costly for the employer than that of an STIA.
Let’s take an example: Employees A and B have a salary of €6,000 per month in France.
Employee A goes abroad for 6 months: he/she receives a per diem of 180 € / day + an expatriation bonus of 10% of the fixed salary, i.e. 6,000 € / month.
His colleague B is going to the same country for 4 years: he receives a cost-of-living allowance of €800/month and a housing allowance of €2,200/month, i.e. a package of €3,000/month.
Employee A’s assignment is extended from 6 months to 6 months. Therefore, employee A should be switched to an LTIA package with a cost of living allowance (COLA) vs. a costly Per Diem + expatriation bonus (81 A II).
The transition from the STIA to the LTIA package, which was necessary for obvious reasons of cost and equity between employees, is proving difficult to manage from the employee’s point of view.
The employer will pay for the family’s moving expenses if necessary, and may then propose a “phasing out”, a gradual reduction of the package in order to align the conditions of the two colleagues sent to the same country for different initial periods.
The easiest way to do this would be to move the A employee more quickly to an LTIA package by granting him a mobility bonus, either paid in a single instalment representing one or two months’ salary, which is significant in terms of display for the employee, or to pay him this bonus on a degressive monthly basis (e.g. 15% in the first year, 10% in the second, 5% in the next, and then no more mobility bonus beyond that).
This scheme is more flexible for the business and less abrupt for the employee, whose motivation must be maintained.
Whatever method is chosen, the company must support the employee by teaching. It must remain agile without setting up a complicated process to be managed with too many phases so as not to generate difficulties in operational implementation and employee understanding.
Beyond the financial aspect (bonuses), it is important to look at the employer’s approach in terms of support and the impact on the employee’s personal life.
In the first few months, the employee has shown that he/she is adaptable by leaving on his/her own, and should be allowed some flexibility if the assignment is prolonged. Family life remains one of the keys to professional success. Therefore, a systematically accompanied approach beyond a certain period spent abroad appears necessary, while leaving the organisational freedom to do otherwise.
Very often, the HR or International Mobility departments have to intervene in an emergency, proposing a package even though the vision for the duration of the assignment is unclear. They will have to be pragmatic in combining business objectives, fairness and employee commitment.
