All leaders and managers aspire to move quickly to achieve their professional objectives, based on the adage: «time is money».
When the company expands internationally, it sends one or more employees abroad.
It is therefore confronted with many issues and problems in terms of immigration, labour law, taxation, social protection, remuneration, payroll, safety and security.
Poor management of these different disciplines leads to criminal, financial and image risks for companies that confuse speed with haste without taking the time to address each issue.
Some examples will be given to make managers aware of the different risks in international business
In immigration: take the situation of a department awaiting the arrival of a Japanese employee who is a world expert in his or her field. The procedure for obtaining a visa and work permit to work in France can take several weeks or even months. Although the company has diligently put together the file, it remains totally dependent on the incompressible delays of the administrations both in France and in the country of departure.
To anticipate the arrival of this non-European employee in France, the company would be tempted to offer him or her the opportunity to start his or her activity by coming to Paris on business trips while the case is being examined.
Working in France during these return trips, even for a short period, is considered to be undeclared work and is subject to criminal sanctions for the employer.
In another situation, the French manager who is impatient to see his Japanese talent at work will take all the necessary steps to ensure that the latter is immediately operational on arrival in France: installation of the office with the computer connected, updating of the telephone directory, writing the employee’s name on the office door, etc., all during the immigration procedure. Beware of over-zealousness: it can be costly as all these preparations are forbidden until the employee has obtained his or her visa and work permit. This is also tantamount to undeclared work, for which there are heavy penalties.
It should be added that a tourist visa does not mean a work permit and the right to work. Human Resources departments will have to temper the pressure of business.
In Qatar or the United Arab Emirates, without a local sponsor, the employee cannot work in the country. All these steps take time.
With regard to labour law, the company will have to consider whether it is imperative to draw up an employment contract in the host country or whether it can be satisfied with maintaining the active employment contract in the country of departure without envisaging a contract in the country of assignment, provided that the link of subordination (the person who gives the work orders, controls its execution, etc.) is in the country of departure
Immigration and labour law violations are subject to criminal sanctions.
Poorly managed tax or social security issues will result in heavy financial penalties for the employer.
In the area of taxation, it is necessary to manage corporate taxation and the individual taxation of employees.
The first point concerns corporate tax and the risk of permanent establishment.
Depending on country regulations, certain seemingly trivial acts such as signing a commercial contract in a country where the company is not established can create a de facto legal entity in that country and lead to the payment of a heavy corporate tax that is often unbudgeted.
We should also mention the VAT on re-invoicing, particularly in China, where re-invoicing a salary entails a 12% VAT that should be anticipated.
For personal taxation, the rule is usually the territoriality principle. Tax is due in the country where the employee physically works, regardless of whether the remuneration is paid in that country or not. With the deployment of artificial intelligence tools, the authorities no longer know what is being paid. The «not seen, not taken» approach that once prevailed would be far too risky nowadays.
In terms of social protection, let’s take the example of retirement, which is a very sensitive subject in these times. There are rules between countries, more or less easy to find, allowing or not the accumulation of contribution periods. If an employee has worked for several years in France and in the USA, the periods of contribution will be added together for the calculation of pension rights. The same applies if the employee has worked in France and Germany. However, the time worked in the three countries cannot be added up unless specific measures have been taken, such as contributions to the CFE (Caisse des Français de l’Etranger). However, if the career was spent in France, Brazil and Germany, all the contributions made in each country are taken into account for the calculation of pension rights. A detailed analysis of the entire career by specialists is necessary to avoid any disappointment when the pension is paid out.
A company that fails to comply with the rules of the countries in which it does business runs a high image risk with respect to local authorities, the business community, including customers, and creates great frustration among its employees. These failures could lead to a ban on doing business in a country for several years.
The regulatory framework does not necessarily help employers.
In addition to the fact that it covers several disciplines and is constantly evolving, it is not uncommon for the authorities and the legislator to forget the situations of internationally mobile staff.
International Mobility managers sometimes find themselves faced with legal loopholes. They have to make decisions based on common sense alone. This was particularly the case during the Covid crisis. So many situations had not been legally envisaged. We had to manage the emergency by mobilising our network of expert lawyers in immigration/labour law/taxation/social protection, and our counterparts in other companies.
Beyond the regulatory framework, we are currently facing a shortage of international talent. Management is under great pressure to retain talent. In order to retain them, managers will bend to the demands of this sensitive population by imposing very creative, even somewhat «Sioux» schemes on Human Resources without measuring the complexity of the operational implementation in terms of contracts, social security coverage, remuneration and payroll.
The demands and even the whims of these employees do not make it easy to manage the international transfer population either. Since the Covid crisis and the development of new technologies, requests to telework abroad in warmer climates are pouring in.
Employees applying for this type of organisation, and even their employers, are often unaware of the legal and tax consequences that this new way of working will have on them.
When an employee decides to work remotely from his or her home in Spain rather than from the company’s premises in Paris, the company will have to register in Spain and pay Spanish social security contributions unless it sets up a «portage salarial» in Spain to facilitate the administrative procedures and save precious time.
Another example: an employee has recently asked his employer to continue his activity remotely while travelling around the world for a year. The management of this company was at a loss as to which contractual scheme to put in place. They were wondering which country to pay social security contributions and taxes in.
Any company wishing to attract talent can hardly close the door to these requests. It is therefore necessary to define the conditions under which it will accept them, or even the reasons why it will refuse them.
International Mobility remains a field that touches on several interconnected disciplines.
It is difficult to tick all the boxes, to reconcile business urgencies with compliance.
Managing employees on International Mobility is risk management. Often those in charge of these issues will have to arbitrate and validate the least risky situation.
Sometimes it is possible to move forward while knowing that the positions taken are limited, but in this case they must, at the very least, be provisioned.
As each country has its own rules on immigration, labour law, social protection or taxation, an in-depth study covering each field will be necessary for any new International Mobility file. There is no room for copying and pasting.
The added value of the International Mobility Manager lies in his or her ability to teach his or her various clients (management, HR colleagues, employees, etc.).
He will have to be persuasive, knowing that they are more or less passionate about the technical aspects of tax, social protection and immigration issues, but this remains the only way to protect employees and even their families, to avoid any «waste», particularly financial, for the company and to enable it to develop in a serene and robust manner over the long term.
