The International Assignment Planning Dilemma – Where to Start?
It’s four o’clock Friday afternoon and your phone rings. The company has just received the go-ahead for a big job in Malawi, and Jim – one of your senior project managers – must head overseas ASAP to open a new office. He has to be on the next flight, with his family, pets and belongings to follow shortly. Work visas, payroll and tax implications are mere details taking a backseat as you focus on getting Jim to Malawi.
Too many of us have experienced this “first flight” syndrome, where an unexpected mandate requires that Jim be on the first available flight to Malawi . Rush travel is as much a part of today’s business world as e-mail and lattes, and the globalization of business has only made life more complex. Suddenly you are faced with language barriers, a whole new set of laws, overbearing immigration officers, and often a totally mysterious tax system.
On the other hand, many multi-national firms successfully arrange hundreds of international relocations daily, regardless of the complexity or time constraints of the assignment. What is their secret?
Assignment Documentation Plan
Successful international businesses plan, plan, plan and pay attention to comprehensive assignment documentation. CompassTax of Calgary have developed and published their Assignment Documentation Plan, a comprehensive system for ensuring that all necessary international assignment documentation is in place and all pre-departure tasks are considered, often well before an assignment even presents itself. All seven key components of the plan are linked and integrated to allow the international assignment to unfold seamlessly. No matter whether assignment managers are sending employees abroad or bringing foreign workers to head office, this plan aids in getting personnel established quickly and easily, ultimately ensuring a productive assignment.
Global Assignment Policy
The starting point in developing an assignment documentation plan is the creation of a Global Assignment Policy, a base policy for moving any employee anywhere in the world. CompassTax have been providing assignment managers with templates to modify for integration and alignment with their company’s existing policy. The result is a set of standardized procedures to be followed whenever an employee is sent abroad, and available for activation the moment an international assignment arises. All steps are mapped out, eliminating any last minute scrambling for paperwork.
Specific Assignment Provisions
Amendments to a company’s Global Assignment Policy take the form of Specific Assignment Provisions, and detail any exceptions to global policy specific to certain countries. These tailored policies make assignment managers and employees aware of tax details in the host country, and clarify policy on work permits and visas, contingency plans specific to that country and healthcare procedures. Employees have a clear reference source, and assignment managers appreciate not having the phone ringing off the hook, nor receiving floods of email questions from the other side of the world.
Well-prepared Specific Assignment Provisions can directly improve a company’s bottom line by providing up-to-date information on pay scales in the host country, recommendations for cost of living adjustments, etc. CompassTax have been helping assignment managers through this information-gathering process for a host of countries, and have found that by having such details close at hand, managers are less likely to unwittingly overpay or underpay assignees. This maximizes both employee satisfaction and profitability.
With these policies in place, assignment managers will have all of the information they need to complete the next step of an assignment: drawing up Assignment Letters for employees headed abroad – an item that is often forgotten, especially on last minute jobs. CompassTax encourages clients to carefully develop these contracts by providing them with one of many possible Assignment Letter templates. Once modified, the product clarifies details on remuneration, payments, and benefits, thus avoiding misunderstandings and disputes during the assignment. Assignees are more at ease – and more productive – in the knowledge that terms of employment have been clearly established, and employers avoid the possibility of litigation.
Assignment Tax Program
Of course, the real work for assignment managers begins after an employee departs. One of the main steps involves sorting out taxes and ensuring that the corporation’s assignment tax withholding, remitting and reporting integrate with employee tax return filings. This task can be extremely difficult for assignment managers as they try to navigate foreign tax laws, often with little support available from agencies in the host country. To make matters worse, assignees often expect help with complex personal income tax filings and find it almost impossible to file accurate tax returns from obscure foreign lands.
All of these difficulties are alleviated, however, through the creation of an Assignment Tax Program. In such a program, CompassTax provides assignment managers with comprehensive advice about tax withholdings, remittances to host country agencies, and reporting requirements. The tax program also provides for the filing of employee tax returns, and pre-departure tax briefings for the assignee. Assignment managers are spared the unfortunate situation of having to answer obscure tax questions.
An Assignment Tax Program not only helps in the host country, but also at home as assignment managers coordinate with regulators such as Canada Revenue Agency or the Internal Revenue Service. For example, employees abroad often qualify for tax exemptions, but many companies fail to properly plan for employees to receive and share these benefits with the employer. This oversight often means that employers must offer assignees higher compensation to make up for income lost to tax. A tax program avoids such pitfalls by ensuring that all tax opportunities are identified and utilized. Proactively coordinating with revenue agencies also keeps your company from ending up on the wrong end of a payroll or tax audit.
Assignment Costing Program
One final benefit of effective assignment planning: accurate cost projections and tracking. By implementing a comprehensive Assignment Costing Plan, assignment managers get a clear picture of the costs involved in sending an employee overseas, even before the assignment begins. Without precise cost projections, a venture that looks great on paper can quickly become a losing proposition as unexpected fees and penalties arise in the host country and at home.
Assignment Manager’s Planning Checklists
Development of an Assignment Documentation Plan is complemented by the use of Assignment Manager’s Planning Checklists, available for download at the CompassTax website (www.compass tax.ca). This linked set of prompts and pertinent questions walks the assignment manager through all necessary steps in the international assignment planning process. The checklists help the assignment manager to assess their current policies and documentation, identify opportunities for time and cost savings, and determine areas which may require assistance.
Pre-Departure Planning Checklist for the Assignee
CompassTax is also currently developing a Pre-Departure Planning Checklist for Assignees,a complete set of questions for employees embarking on an international assignment, to draw attention to the myriad of details which must be handled prior to departure.
With an Assignment Documentation Plan in place, next time a last-minute assignment comes in, you’ll know that everything is ready.