Workshop: Payroll Policy for International Transfer of Staff

May 19, 2009

Speaker:
Alison Ward, Associate Director of Projects, Institute of Payroll Professionals

Multinational Employers Need Unified Policy

International payroll is becoming the “hot item” to know about, and U.S. companies must have a policy covering if, when, and how to transfer domestic employees overseas. Waiting to consider all the options and implications until after a person has been sent to another country is too late and very costly, Alison Ward told an APA Congress session on Payroll Policy for International Transfer of Staff—a Global Policy.
  
Complicating things is the fact that rather than having thousands of employees in a single foreign nation, companies are more likely to have 10 to 15 people in multiple nations, which makes the need for a general policy and good communication among departments even more important, said Ward, who is the associate director of projects with the United Kingdom’s Institute of Payroll Professionals.

A company’s policy should cover issues such as how it will handle double taxation, for example. Committing to a net salary is a complicated matter, Ward said, and an action that should not be taken without forethought. Companies should have general policies on how they will handle issues related to housing, schools, and even pets in the countries where they intend to have employees.

Another key issue might be how companies will handle health care benefits. Comparing the United States and England in this regard, Ward said that British employees are taxed 11 percent for “national insurance,” which is provided universally, so that companies generally do not pay for these benefits. People will get the same quality of care whether they have extra benefits in this area, but private insurance puts a person at the front of the queue for non-urgent care, she said.

Having an international transfer policy in place and in use companywide is critical, Ward said, and buy-in at the top of the organization makes a big difference.
 
The policy should be written in simple, clear language keeping in mind the purpose of communication, Ward said.

Payroll and HR need to share information like never before, she added, or risk being “two headless fish flapping at each other.”

Whereas in the past, payroll people often complained that they were getting information too late, now it is the human resources person who may be the last to know, Ward said, giving the example of getting a question about salary implications from an employee who was being transferred from Vietnam to China, well before HR had any information about the plan.

Besides various tax considerations, companies also need to be aware of the language, time zone, and cultural differences that will affect how business is done between domestic and foreign offices. Ward noted that time zone differences affect not only work hours, but what day of the week it is.

 “It’s tea time at home and I should be enjoying a slice of sponge cake and a nice cup of tea,” quipped Ward, noting that companies need to be aware of office and holiday customs that could affect their interaction with people abroad.

“If you get someone up at 4:00 a.m. for a conference call, how effective are they?” she asked.

Ward said companies should be aware that people in other countries have different attitudes about bringing in foreign workers, particularly in leadership roles. Some countries actually require a foreign company to fill out questionnaires about why it is necessary for them to bring in their own people rather than using local ones.

U.S. employers should ask themselves the question, even if it is not required by another country: “Why are we sending someone overseas?”

 “If it’s because it’s the boss’s daughter or that someone is losing his job here,” that is not a sufficient reason, Ward said.