In today’s highly competitive market, global mobility has become one of the main factors for a growing company to spread its wings around the world.
But for any company relatively expanding into the global market, it is important to understand some checkpoints before sending an employee abroad. Many factors are overlooked when it comes to sending an employee as an expatriate. In this article, we will focus on the important points that a company should check before sending one of its employees abroad.
Identify appropriate candidates.
Capabilities.
It’s expensive to send an employee abroad. You want to ensure that your employee has the knowledge and ability to perform the job successfully. An important consideration is the candidate’s level of education relevant to the assignment
Language skills
Language barrier can turn out to be a massive drawback for an employee when it comes to foreign assignments. An expatriate must be proficient with English because it is the universal language that every corner of the world acknowledges and understands. However, it will bring an added advantage to the company if the selected expatriate knows the language of the foreign place where he/she is going to work.
A client or partner would always appreciate it if the expatriate addressed him in his native language.
Families
Often enough, it is the family members of an employee that come as a barrier in the way when it comes to foreign jobs. Many employees have family liabilities where they cannot shift to another country. In many cases, it turns out to be difficult to shift with the family because of monetary reasons and troubles at bearing the expenses of the family abroad. Hence, a company should look at the family liabilities of an employee before boarding him/her as an expatriate.
Overseas Risk Management of An Expatriate
Overseas employee managements are no bread-and-butter stuff. The company must consider various other factors before sending an employee to a foreign country for work purposes. For instance, a company must be aware of the personal security of the expatriate when he/she lives and works in a foreign land.
The company should also consider the political situation of that country as it can create social unrest among people. In such cases, an employee might face difficulty in working in that country.
Employers may be required to dispatch employees to other countries where they may be exposed to safety and hazards that they don’t usually face.
In these circumstances, companies must be upfront about the dangers and provide employees with the information and resources they need to minimize the risks and help them relocate safely
Foreign Aids and Compensations costs
When a company decides to send an employee to another country for work, it should also bear the foreign aids, compensations, and additional costs. The standard of living and housing costs usually vary from one country to another. So, before sending an employee aboard, the company must consider the costs of living and housing allowances.
In addition, the company should provide the expatriate with tax preparation services while they are living in a foreign country.
Employee Compensation Package
Employees who go to work in other countries will be entitled to extra benefits. Housing allowances and higher-than-average living expenses are frequent.
Providing tax preparation services is common among employers, who modify compensation to offset the higher tax obligation. Other concerns such as schooling and the job of one’s spouse must also be taken into account.
Companies are required to compensate the employees working in other countries apart from the salary and benefits offered in the home country.
Expatriate compensation packages vary from company to company and location to location.
Components of compensation are as follows:
- Base salary: usually in the same range as home-country salary
- Housing allowance: to maintain home country living standards or for accommodation
- Cost of living allowance: differences in the expenditure between the home country and foreign country
- Children education: tuition fees, books, uniform, transportation
- Spouse assistance: to help guard against or offset income lost by the spouse as a result of relocation abroad
- Pension contribution
- Foreign service premium: payment depends upon the hardship caused due to relocation to a challenging location, length of the assignment, tax paid to a foreign government, etc.
- Travel allowance: expenses of trips
- Health benefits: medical insurance
Identifying and obtaining Immigration (Visas & work permits) Support
Immigration and its associated regulations are, without a doubt, critical. Therefore, border restrictions, regulatory environments and immigration legislation are all issues that need to be addressed.
The fact is that they can be daunting and confusing. Yet, it is essential to be fully prepared, as they are among the first issues to be overcome when sending an employee abroad on a temporary or permanent basis.
You must ensure that your expatriation complies with the national and international immigration policies of the country from which you are coming and the country in which you will reside.
Visas, as well as applications for temporary or permanent residence, must also be completed and submitted. The continuation of your expatriate’s mission abroad will be impossible without them.
The simplest, quickest and most secure solution is to call upon an external company specialized in the field, which will allow you to manage this part of your expatriate’s file with serenity.
Understanding employment regulations
Each country has its own rules and regulations for employment. And in some cases, the rules are different for locals than for expatriates. MNCs get bound by domestic legal requirements.
The company should ensure that adherence to local employment and payroll laws in which they manage assignments.
Before hiring expatriates and commencing foreign projects, the company should thoroughly research and review the local employment and payroll laws to ensure compliance and avoid litigation issues.
The rules specified by the company while working abroad must conform with the laws of the host country.
For example,
- payroll,
- allowances,
- working-age restrictions,
- average workweek hours,
- payment for overtime,
- Health care coverage
- Retirement rights
- mandatory vacation, etc.
- Health care services
However, all these constraints are eliminated if your company uses the services of a company offering Professional Employment Outsourcing (PEO) or Employer of record (EoR) services.
Tax compliance
It is crucial to understand the tax laws of the country in which the employee will be performing the assignment.
The company should check the following points:
- Tax treaty between the two countries
- Tax rates based on citizenship and residency
- Expatriate taxation
- Grossing up and tax reliefs
- Time limits (if any) until the local tax laws are applicable till the expatriate resides
- Tax implications on the salary, allowances, and compensation
- Tax credits available to help expatriates avoid double taxation
- Tax return filing requirements
It is always advisable to seek the assistance and guidance of tax and legal professionals on complex issues.
Another important point is the possibility of tax burden , with an abroad assignment, an employee might face with an increased tax burden, especially if a worker shifts from a low-income tax rate country to a higher one. Therefore, before sending the employee aboard, the company must take the necessary steps to prevent the reduction of their net income due to excessive tax burden.
An Employee Must Be Aware of the Tax Situation. In most cases, when an employee sets out with an international project, he/she doesn’t know about the tax system in that country. So, it’s the company’s duty to explain to the would-be expatriate all the particulars of the tax system of the foreign land. The company can hire a specialized person who can provide a complete assistance to the employee regarding tax norms.
It is crucial for an employee to file his/her tax and also report obligations to avoid any tax-related issues. Otherwise, both the company and its employee can face serious legal issues for violating tax laws. In addition, they could also face some financial and reputational damage in the process.
Estimating the cost to the company
Knowing the full cost of an expatriation, the employer will have to estimate the budget related to this expatriation and decide if sending an employee as an expatriate in another country is the right choice at the right time.
In this case, the Finance, Development and Sales teams will have to be consulted to decide the best course of action.
Assignment letter
This is an important stage in the process of being assigned to a foreign country.
An assignment letter is a crucial document to structure an expatriation to provide legal security and safeguard the interest of both parties company and expatriate.
The letter should contain the following key elements:
- Duration of assignment
- A precise description of job role and responsibilities
- Terms of remuneration, including basic pay, allowances, and bonus plan
- Health and family benefits
- Social benefits, housing assistance, children schooling
- The name of the new supervisor/manager of expatriate
- Tax equalization agreement
- Assistance in obtaining visas and work permits
The letter should be dated and signed by both parties
A correct assignment letter avoids potential conflicts and eliminates misunderstandings between the company and the expatriate.
Cross-cultural training
The primary challenge of managing expatriates is culture shock. It is hard to adjust to a new culture, work environment, and social structure with no immediate support system.
Posting employees to a new country can present unique personal and professional challenges. The reasons include – language differences and cultural gaps, different social customs, perspectives, business practices and, the culture of the foreign country where they will be working.
The company should not assume that the employees performing well in the home country would also be successful in the host country. Instead, those who can live comfortably in a different culture and adjust to new business practices would perform well. The project would be unsuccessful if the candidate possesses technical know-how but is culturally illiterate. The company should assess the cultural sensitivity of the expatriate and the ability to accept diverse viewpoints.
It is necessary to train the employees about the language and culture of the foreign country to get a grip on the basics and ensure that they live comfortably in other countries and perform assignments successfully. The company should also assess the ability of an employee to change their behaviour to fit into a different culture.
Departure and Arrival Support
Another piece of advice for expatriates preparing for foreign assignments is to ensure that their families are supported.
Some expatriate workers have children and spouses, which makes relocation to a foreign country more complicated. It may be difficult to recognize them since many employees are apprehensive about discussing them with their colleagues in the workplace. As a result, these difficulties are often hard to identify.
The individuals who are most likely to be able to assist may be the ones who are the last to know, which is another situation in which effective communication may be beneficial.
In addition to regular communication, it is necessary to provide on-the-ground assistance
to the employee and all the planning must be done before departure.
When he lands on foreign soil, he must not feel any difficulties
The task falls to human resources departments, which may assist the expatriate employee and their families (if appropriate) in adjusting to their new surroundings. This kind of assistance includes:
- Obtaining a place to stay.
- Establishing bank accounts and setting up payroll following the laws of the host.
- Providing medical insurance coverage.
- Enrolling children in formal education (if applicable).
- Planning and executing correct taxation procedures.
- …
An expatriate management company (PEO) may assist you with this, as they can serve as local Employers of Record, handling and deducting taxes and charges at source to be complaint and also that the expatriate receives all the necessary support during his/her expatriation
In conclusion, expatriates help their companies establish operations in other countries, expand into new markets and transfer skills and knowledge to their companies’ business partners, among other things. Therefore, the success of their expatriation is paramount to the success of the company’s international development.
