How is the home country housing contribution collected?

The home country housing contribution is collected as a part of the regular payroll process. It is a deduction from the employee´s pay. The contribution can be collected each payday or can be collected once a month.

How is the home country housing contribution communicated to payroll?

Housing contributions are not usually maintained as a part of the regular HRIS system. As a result, the payroll department manually enters the housing contribution into the payroll system. The amount may be set up as a recurring deduction or as a deduction reentered each pay cycle. Documentation of the housing contribution can be done as an email or a hard copy document based on the procedures adopted by your company. Regular communication is imperative between the program administrator and payroll regarding the housing contribution for international assignees.

A note of warning - do not combine the housing contribution and the cost-of-living allowance into one payroll entry. The housing contribution may not change at the same time cost-of-living allowances change. Also, the housing contribution will start or stop at dates based on what is happening with the employee´s personal residence.

As with many international assignment processes, communication between the assignee, program administrator and payroll reduces confusion and makes the assignee feel more comfortable with his compensation changes.

How is the home country housing contribution handled in the tax equalization calculation?

Your tax service provider will review your tax equalization policy to determine whether the housing contribution is ignored or included as a part of the annual tax equalization calculation. Some companies allow the housing contribution to be treated as an itemized deduction similar to mortgage interest. Other companies ignore the housing contribution in the computation of the assignee´s stay-at-home tax.

The tax equalization policy positions for housing contributions will reflect your overall international compensation philosophy. If you are concerned that you are not competitive with your compensation processes, review your policies with either your tax service provider or your international compensation provider.