"March 21, 2011 at 1:39 pm by: HR Hero Line
By Hector A. Chichoni
Because of tremendous advances in technology and transportation, companies are able to locate resources and skills in different parts of the world and manage them as if they were in one place. Competition for resources and skills is brutal and requires speedy and fluid access to global markets. When U.S. employers have a global workforce, HR is responsible for strategizing, planning, and frequently implementing transfers of employees internationally.
That can be a daunting task considering the many variables and barriers that can come up regarding transfers. Those barriers can include but aren’t limited to numerous international immigration laws and regulations that are often confusing. HR also must consider employment and benefits laws, types of assignments, compensation, allowances, taxes, social security, housing, and health care.
Many employees will have family concerns, including a spouse’s ability to find work and schooling for children. Finally, global transfers can be made even more difficult by cultural, social, and language differences as well as other factors, such as the war against terrorism, tsunamis, and many other different kinds of unforeseen events.
HR is essential to the strategic management of global mobility. Great care must be taken for transfers to work well and efficiently. Moreover, strategic management of global mobility must take into account employees’ expectations and allow sufficient time for a smooth transition to take place. Failing to manage expectations or rushing a transfer will irreparably hinder the international assignment. No wonder it is not uncommon to hear of global transfers that end in vain.
In most instances, the key to successful global transfers is planning well in advance. In general, HR managers have many methods at their disposal to strategically manage global mobility. For example, international HR managers can establish forward bases in other countries to allow the processing of employees as well as subcontract country-specific providers of specialty and allied services, which can assist to resolve any local issues and barriers.
Here are a few of the most important variables and barriers HR needs to know about to ensure smooth global transfers.
Each country has its own immigration system. Some immigration systems are well developed with their own sets of laws, regulations, rules, and policies regarding visa and/or work permit options for employees on foreign assignment (e.g., the United Kingdom, Singapore, and Brazil).
Most of the world’s developed countries have established bureaucratic systems to determine who has access to their internal markets. For many, those systems are administered by a combination of at least two or three distinct government ministries or agencies under those ministries (e.g., ministries of labor and employment, interior, justice, foreign relations, and, in some cases, law enforcement). However, almost all countries, with rare exceptions, have their consular offices involved in visa issuance overseas.
Visas are generally obtained from embassies and consulates in the country of departure before entering foreign countries. Processing times vary depending on the consulate or embassy involved and the applicant’s nationality. Some exceptions exist.
Usually, employees and businesspersons may enter a country to engage in business negotiations and to begin or finalize a transaction or services agreement (the equivalent of the B-1 visitor for business visa in the United States).
The number of professional work visas available varies greatly from country to country. Countries often have a basic visa category for professionals with college degrees entering on a temporary basis (the H-1B visa in the United States).
The validity periods also differ significantly from country to country. They usually range from three months to a year, with renewals or extensions still possible. It can take from two or three weeks to three or four months to obtain work visas. Larger companies/employers with good track records tend to receive faster visa approval.
A great number of countries favor multinational corporate transferees — in other words, visas for “intra-company” transfers, which allow managers, executives, and those with specialized knowledge to enter and work in the country on a temporary basis (similar to the L-1A visa for managers and executives and the L-1B visa for specialized personnel employees in the United States).
Most HR managers and employees on foreign assignment are aware that processing times can be lengthy and unpredictable, especially as the security environment has become more rigorous since September 11, 2001. As a general rule, the key to visa approval is to present well-documented and well-qualified cases with the assistance of local specialists with excellent track records in providing legal immigration services.
Different types of assignments are involved in global mobility: long-term, short-term, business trips, and more. Within each, there are definitions and requirements, and needless to say, every assignment also contains the potential for success or failure.
Depending on the employer/company, assignments longer than a year could be considered long-term assignments. Companies usually transfer the employee, as well as her family, with full relocation benefits provided. Assignments lasting less than one year could be considered short-term assignments. Short-term assignments usually come with benefits like housing, modified per diem/cost of living and hardship allowances, and tax equalization coverage.
Business trips are regarded as assignments lasting between one and 90 days. Employees in those types of assignments typically are paid by the home country. Instead of housing, the company places the employee in a hotel and provides a per diem allowance or reimburses her for expenses incurred.
Some different types of incentive allowances are overseas mobility, premium, hardship, cost of living, housing, and home leave. Roughly half of U.S. companies provide mobility incentives to employees going overseas, basically paying an additional 10 to 20 percent of the gross home salary. Some companies have a salary cap for location and hardship allowances, but the majority don’t.
Location-dependent mobility allowances may cap at 30 or 35 percent, but some companies add additional allowances for such things as remoteness, being in a war zone, and security. For cost-of-living adjustments, a large number of companies use outside service providers (e.g., ECA International) that use a calculation of base salary, net salary, home spendable income, index, and host spendable income. Cost-of-living allowances are calculated by applying an index of spendable income.
Meanwhile, HR often will have to determine whether the company will provide free host housing or whether an employee contribution is required. Limits for housing allowances may also have to be set. Those limits often are determined by such things as the employee’s seniority, position/title, salary, and family size. Many of the determinations would have to include consideration for home leave and car/transportation allowances.
Like immigration, tax issues can have a great effect not only on the employee but also on the employer. Advance tax planning is highly recommended before any international assignment, especially in cases involving long-term assignments. Advance tax queries should include qualifying periods for tax residence, treatment of foreign-source income, consideration of income tax treaties, and even social security tax equalization (totalization agreements).
Labor and Employment
Many countries don’t have “employment at will” like most of the United States does. Employers can be surprised by the extensive compensation or penalties that other countries require them to pay to employ or dismiss workers.
Employers expanding internationally should consider addressing not only immigration and visa issues for personnel working internationally but also things like taxes, assignments, and other issues that are a part of the much larger employment picture. While addressing those issues likely will continue to be a challenging responsibility for HR, long-term economic planning suggests that global mobility will continue, and therefore, its barriers are likely to get worse before they get easier. HR is well advised to plan ahead."
Posted by Hector Chichoni
@ March 22, 2011 07:44 PM EDT