This is an excerpt from On the Edge, a monthly newsletter from EE that answers your questions regarding international assignments. This month we begin a two part series addressing the following:
- What are the key mistakes made when administering an international assignment program?
The list, certainly not comprehensive, is meant to provide you with a quick checklist of the basic mistakes made by international assignment program administrators. Hopefully, the list will help you fine-tune your existing program. So, with that caveat, let´s get started!
- No written tax equalization policy for international assignments.
Why have a written tax equalization policy?
- Enhances assignee mobility and satisfaction;
- Protects assignee cash flow;
- Minimizes special negotiations;
- Helps make international assignments tax neutral;
- Controls assignment costs; and
- Limits the risk of tax non-compliance.
- No written compensation policy for international assignments.
Why have a written compensation policy?
- Ensures the assignee´s purchasing power in the host location;
- Provides tax-effective delivery of base compensation and assignment allowances;
- Controls assignment costs;
- Ensures consistency; and
- Improves assignee perception as to the fairness of the program.
- Failure to Follow Policy
Why should the tax equalization and compensation policies be followed?
- Lowers assignment costs;
- Eliminates special deals;
- Increases assignee satisfaction; and
- Conforms to corporate strategy.
- Poor coordination/interaction with the payroll department
Why should HR interact with payroll?
- Produces seamless payroll delivery - especially assignment allowances;
- Reports tax costs on all assignee remuneration accurately and timely - both in home and host country;
- Eliminates costly redo efforts;
- Correctly records transactions for accounting and payroll; and
- Facilitates compliance with host country payroll reporting requirements.
- Inadequate oversight on hypothetical withholdings and advances
Why should one department be responsible for the management of hypothetical withholdings and advances?
- Provides a centralized reporting point for international assignee compensation;
- Supplies direction as to what needs to be hypothetically withheld during the year;
- Increases internal control of tax advances to, and tax payments on behalf of the assignees; and
- Increases assignee confidence in the tax equalization system.
Next month we´ll finish our list of mistakes made when administering international assignment programs.
