This article is the third of the seven dilemmas series that discusses some of the most important questions that global mobility managers will have to address in the coming years. These seven dilemmas are not entirely new; however, demographic, technological, and business practice changes will give them a particular importance going forward. The discussion about the dilemmas is an invitation to move away from oversimplified visions of global mobility and understand that the complexity of the issues discussed also offers an opportunity for mobility and HR teams to become more strategic and expand their horizon. This article series is available as a PDF download.
Dilemma 3: Extended Business Trips and Commuters
By Olivier Meier, Mercer
Understanding the Dilemma: More Prevalent but Still Under the Radar?
The rise in millennial mobility is leading companies to redefine what they mean by global mobility by reducing the duration of assignments and introducing more flexibility in their policies. The increasing reliance on shorter assignments and business trips increases the risk of assignees falling under the radar.
Tracking assignments, in particular short-term ones, has been always been an issue. While long-term and short-term assignments are now better tracked by companies, the focus is now moving to extended business trips, frequent travelers, and commuters.
- Extended business trips: trips lasting up to three months. These extended business trips are shorter than short-term assignments (last from 3, 12, or 18 months) and have historically not always been considered as part of the company’s mobility policy.
- Frequent travelers: employees remaining based in their home country but traveling frequently to host destinations. In some cases, frequent flyers can be considered as “virtual assignees” when they are doing the same type of tasks as assignees relocated to the host location.
- Commuters: employees who carry out job-related tasks by commuting every week (or on some other schedule) from the home location to one or several places of work in another country while maintaining a principal residence in the home location.
These types of moves present a host of challenges for companies from compliance, tax, emigration, and security perspectives to cost issues. Global coordination questions, technology limitations (no system available or lack of integration of the different systems), and siloed teams (tax, immigration, finance, and HR) are limiting the efficiency of the tracking processes. Furthermore, in many cases, mobility teams or even HR departments are not managing these types of moves.
Companies have been facing these issues for a long time. In the context of the changing mobility landscape and the flexibility required to manage millennial mobility, fixing these issues becomes critical and is a pre-condition to develop more agile and better integrated mobility approaches.
A change is required – not just from a process perspective but also in terms of mentality and in the scope of responsibility of the various teams within the organization. This could also be an opportunity for mobility teams to become more strategic and demonstrate their expertise.
More assignments under the radar means more problems on the horizon
The compliance implications of extended business trips, frequent travelers, and commuters have to be assessed from different angles: from an assignment duration perspective (which is sometimes erroneously considered as the only possible trigger of compliance issues) but also from a frequency (number of trips between home and host destinations) as well as an assignment purpose perspective (the type of tasks the employees are performing in the host location).
Employees can find themselves in the situation of becoming “accidental expats” because they have involuntary triggered legal or tax rules that re-classify them as resident in the host destination.
There are a lot of misunderstandings about tax liabilities: all too often, assignees and their managers assume they are free from tax liabilities as long as they respect the 180-day rule (i.e. the tax liability in the host location is triggered after the employee has spent 180 days in that location during a calendar year). This rule is not universal and sometimes impacted by other considerations (the most common one being the number of days spent in the other destination in the past years).
The second misunderstanding is about responsibilities. In many cases, companies cannot escape the consequences of non-compliance and can be held responsible if employees fail to comply with the rules - even when employees have been warned and contracts stipulate that the company is not responsible. Future mobility is about introducing more flexibility, but flexibility should not be confused by “laissez-faire”. A laissez-faire approach can be risky in some cases and companies need to be proactive and anticipate issues.
While assignees can be become accidental expatriates, companies can set up accidental subsidiaries – in a number of locations permanent establishment rules mean that under specific circumstances, employees frequently flying to the country and conducting specific activities there (such as signing contracts) can lead the authorities to conclude that the company has a permanent establishment in that country. The companies then become taxable in that location and might need to comply with a series of additional legal requirements.
Companies need a holistic approach to compliance. The risks stem from the fact that the compliance monitoring is split between different providers and teams (tax, immigration, finance, HR, etc.) This might lead to partial compliance and create a false sense of security for the company and the employee.
Beyond strict compliance requirements, companies have a duty of care and even of ensuring fairness. Would the frequent trips or a commuter assignment place employees in a situation where they will face significant additional costs or problems they would not normally have faced? The cornerstone of the balance sheet approach for long-term assignments is the “no gain; no loss” equalization principle. Similar (but not necessarily identical) guiding principles have to be defined for other, shorter types of assignments to ensure consistency and fairness. There is no standard policy template that will answer all questions about extended business trips, frequent travelers, and commuters, so the logic and guiding principles behind these types of moves have to be clearly defined. These principles will help the HR team deal with questions not explicitly covered by policies.
Family issues are one of the top reasons which long-term assignments fail, and are also impacting shorter types of assignments and can ultimately make frequent travelers, extended business trips, or commuter assignments, as problematic as traditional expat assignments.
The introduction of more segmentation policy by companies over the past decade has given management more flexibility to select between different types of assignments and provide packages that more closely reflect the requirements of different categories of assignees. The side effect of segmentation is that it might create artificial barriers and categories. The boundaries between long-term, short-term and the various types of business trips and commuting assignments are becoming blurred. The transition and integration between types of assignments needs to be facilitated. In worse case scenarios, there is a disconnect between the assignment definitions in the policies and the reality experienced by employees or the categories used by tax and emigration authorities - internal classifications take precedence over actual practices.
We are seeing the same need for better integration from technical and process perspectives.
Are different systems (tax, emigration, HR?) in place to track trips and commuter assignments? How is the data consolidated? Assuming a monitoring system is in place, which team is doing the monitoring and how is the information circulated within the organization?
Resolving the dilemma
Here are tips and best practices to assess your readiness to manage extended business trips, frequent travelers, and commuters in the new mobility context:
- Re-open the debate about the role of mobility management and HR team. Should extended business trips and commuter assignments fall under the responsibility of the mobility team? Different responses are possible from expanding the scope of responsibilities of the team to include these types of moves to just providing expertise as in-house internal consultants on an ad-hoc basis.
- Connecting the dots: review your policies to ensure that they integrate the different types of moves and deal with the transition from one type of assignment to the other. Policy segmentation is a useful approach but it needs to be balanced with better integration. The review should also cover travel policies to secure better compliance but also to foster a better interaction with traditional expatriate assignments.
- If necessary, establish a facilitator who can monitor and integrate all the compliance questions and ensure that the company’s approach is fully integrated and cover all aspects of compliance.
- Education and training for employees and managers is essential. Flag typical issues and establish a list of the most common pitfalls. Establish a committee to review on a regular basis the most common questions.
- Ensure integrations of the different tracking systems: assess the need to better link travel or tax system to the HR and mobility management systems. Make data submission and reporting easier though mobile apps and real-time reporting systems.
- Reflect on how the frequent trips and commuter assignment impact family life. Family support should not be restricted to long-term assignment. Replacing a long-term assignment by a commuter assignment can lead to savings for the company. Some of these savings could be re-used to provide better support for the assignee and the family.
Conclusion: an opportunity to expand the role of the mobility team?
Should it be the responsibility of the mobility team to track and manage extended business trips, frequent travelers, and commuters? Wherever the responsibility lies, the HR and mobility teams are often better equipped to do it than other departments, and it is in the interest of the company to facilitate smooth processes.
In the new global mobility landscape, international assignment management should be seen as a continuum ranging from extended business trips to long-term assignment and localization. It should cover different types of moves that were not traditionally considered as part of global mobility. However, the challenges go further than just managing multiple types of assignments. Some of the future assignees might not even be employees of the company. That’s the next dilemma that companies will have to address: the rise of the expatriate gig worker.
Contact the author: Olivier Meier
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