International HR Adviser Autumn 2020 by International HR Adviser

AUTUMN 2020

ISSUE 82

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International HR Adviser The Leading Magazine For International HR Professionals Worldwide

FEATURES INCLUDE: Virtual Assignments: Future-Proofing Your Mobility Programmes Global Tax Update • Long-Term Incentives: Mastering The Challenges Of Tax Business Transformation Through People Engagement, Innovation And Performance Cultural Adaptation: Is It Mission Critical In The ‘New Normal’ International Work Arrangements? Remote Working: Setting The Right Strategy • The Growth Of The ‘Economic Employer’ Concept Remote Control - Ensuring Your Organisation Has A Handle On Policies And Benefits To Better Support Your Remote Workforce ADVISORY PANEL FOR THIS ISSUE:

CONTENTS

In This Issue 3

Remote Working: Setting The Right Strategy Rumi Das, Debra Wardle, Robyn Ireland, Deloitte LLP

Global Tax Update Andrew Bailey, BDO LLP

Long-Term Incentives: Mastering The Challenges Of Tax Andrew Bailey, BDO LLP

Virtual Assignments: Future-Proofing Your Mobility Programmes Mario Ferraro, Vincent Hennequin, ITX

Cultural Adaptation: Is It Mission Critical In The ‘New Normal’ International Work Arrangements? John Rason, Daniel Weder, Santa Fe Relocation

Remote Control - Ensuring Your Organisation Has A Handle On Policies And Benefits To Better Support Your Remote Workforce Sarah Levy, Michelle Bishop, Gallagher

The Growth Of The ‘Economic Employer’ Concept Jeanette Ryan, Siobhan McDonnell, GT Global Tracker

Business Transformation Through People Engagement, Innovation And Performance Tim Ringo, Author, Solving The Productivity Puzzle

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www.internationalhradviser.com HELEN ELLIOTT • Publisher • T: +44 (0) 20 8661 0186 • E: helen@internationalhradviser.com International HR Adviser, PO Box 921, Sutton, SM1 2WB, UK Cover Design by Chris Duggan In Loving Memory of Assunta Mondello While every effort has been made to ensure accuracy of information contained in this issue of “International HR Adviser”, the publishers and Directors of Inkspell Ltd cannot accept responsibility for errors or omissions. Neither the publishers of “International HR Adviser” nor any third parties who provide information for “Expatriate Adviser” magazine, shall have any responsibility for or be liable in respect of the content or the accuracy of the information so provided, or for any errors or omissions therein. “International HR Adviser” does not endorse any products, services or company listings featured in this issue.

INTERNATIONAL HR STRATEGY

Remote Working: Setting The Right Strategy In recent years, many employers have seen a steady increase in remote working requests, driven by the employee looking to combine a successful career with a more balanced lifestyle. Whether this is as a result of the millennial challenge to a traditional approach to work-life balance, the increased importance of wellbeing, or trying to fit a busy work schedule in with the challenges of family life, many businesses have already started to take steps to introduce a more agile and flexible approach to this type of request. In the current environment, these changing demands have now been tried and tested worldwide with a scale and rapidity never previously anticipated. At the start of the

COVID-19 pandemic, remote working on-mass seemed to be a temporary necessity for both employers and employees but evolved in a short period of time into the “new normal”. This "new normal" is viewed by some as an improvement to the predominantly site-based, fixed working location of prelockdown culture. According to Deloitte research, 54% of people in the UK currently working from home because of the lockdown, say they would like to work from home more often than they did before lockdown once restrictions are fully lifted. Just one in 10 say they plan to work from home less often than they did before lockdown (1). The future of work has rapidly accelerated, and organisations are seeing a huge opportunity to reimagine work, workforce and the workplace. Supporting the future of work has moved up the corporate agenda. For some parts of the business and for some roles, where work is done may become location-agnostic and there will be an increased focus on

how work is done, leveraging robotics and automation, digital capabilities, connected platforms, tools and techniques. For many organisations, a key question is: How can we build on our 2020 remote working ‘experiment’ to harness benefits for our longterm employment strategy? Some large corporations have already publicly announced their new remote working stance, whilst others are beginning to explore how a broader remote working approach could be embedded as part of their longer-term talent strategy, increasing diversity through access to a wider talent pool. Where there is an international element, complexities inevitably increase. As we have seen through the pandemic, crossborder remote working can be enabled, but it can give rise to significant challenges and risks without appropriate assessment and mitigating actions. Human Resources and Global Mobility functions should be well positioned to

Figure 1 – The future of Work through three highly interdependent disruptors; work, workforce and workplace, Deloitte LLP

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assist in driving the remote working agenda, capitalising on lessons learnt from this forced period of remote working, and evolving current policy so that it is available as a key tool for the wider business strategy as companies look to recover from the impact of the pandemic.

Remote Working - Lessons learnt And Short-Term Actions

COVID-19 caused major disruption to “business as usual”, combined with a significant displacement of personnel globally. Whilst global mobility teams sought to identify as a priority the whereabouts of international assignees, assessing safety and compliance risks, many regular (“nonassignee”) employees have been working remotely out of location – some for many months, basing themselves in other locations, e.g. to be with family overseas or to care for relatives. Displacements are varied – some may be authorised, some unauthorised and others ‘unknown’, where individuals have not yet updated their current place of work. As businesses approach the last quarter of 2020, the questions below highlight some of the essential and immediate cross-functional aspects to assess and action: • Are you aware of employees (assignees and non-assignees) that are displaced outside of their normal work location due to COVID-19? Who is displaced, where and for how long? Which employees may have exceeded 183 days of displacement (or will shortly exceed this threshold) potentially impacting a whole spectrum of areas not just restricted to tax residence? • Is anyone working without the proper immigration or regulatory permissions? • Have you considered the type of roles and nature of the work being performed? Do you have a Permanent Establishment/

•

corporate presence risk (for corporate or indirect tax purposes) where someone is working in another location, which could expose company profits to taxation in another country? Have any employees triggered employment tax/social security liabilities and payroll/ registration obligations for the company and/ or the individual? What are the mandatory requirements to address by year-end? As regards policy and compliance authorisation - what is the company’s and the individual’s responsibility? Have you assessed any associated costs to avoid “surprises”? Have any employees acquired new or different employment rights by virtue of working outside of their normal location? Are there additional local employment obligations that need to be considered (e.g. in relation to health and safety)? Are any displaced employees creating data protection/security risks or obligations by working remotely? Are your business protections (e.g. obligations of confidentiality and/or non-competition) in relation to displaced employees still valid and enforceable? Are employees still covered for medical insurance purposes if they are working overseas without an international policy? What is the impact on other insurances like life cover and pension provision? Have you adapted your Work From Home, remote working, business travel policies and governance frameworks? Is a workforce review being undertaken, including categorisation of roles to asses those which can be performed remotely on a sustainable basis? Are you prepared for what happens in the event of a second wave? Do you have a clear communications strategy and plan?

Figure 2 – Remote working considerations, Deloitte LLP

Whilst some countries introduced limited COVID-19 easements in respect of tax and social security, with the passage of time these have diminished in applicability. Some individuals have already exceeded 183 days of displacement (or will shortly exceed this threshold), potentially reducing the availability of relief under double tax treaties. With government revenues under significant pressures, authorities will look to apply the existing rules and regulations more strictly. Identifying/re-identifying displaced worker cases is essential to enable businesses across the globe to assess and action their mandatory compliance actions, identifying increased and unbudgeted costs, documenting decisionmaking and policy exceptions. The lessons learnt in 2020 will be important in informing future business strategy as organisations look at the possibilities of a longer-term approach to remote working.

Remote Working - A LongerTerm Strategic Approach

The application of remote working will vary significantly from organisation to organisation and some may find a full or partial return to the workplace is their preferred approach. However, for those who wish to pursue it, the impact of implementing a successful global remote working approach could be far reaching. Adopting international remote working as part of an organisation’s long-term business and talent strategy may lead to a number of benefits such as attraction and retention of a broader, diverse talent pool; increased employee experience through increased work-life flexibility; cost savings, for example, through reduced or re-imagined office space. Whilst remote working is not an option for some roles because the nature of the work means it can only be performed on

INTERNATIONAL HR STRATEGY site or in a certain location, the pandemic has shown that some jobs can be done remotely, leveraging digital capabilities. Businesses may want to take the opportunity now to commence a broader operational workforce review to assess those roles which can be performed remotely on a sustainable basis, identifying the extent that additional support is needed from a technology, infrastructure, training, and wellbeing or performance management perspective. From an employee mobility perspective, this could lead to a new suite of policy types with staff undertaking roles outside of their usual location either employed remotely, or deployed “virtually” or potentially a hybrid arrangement involving some periods of “on the ground” work and associated business travel. When implementing a longer-term remote working programme, it is essential to adopt a holistic approach which incorporates crossfunctional requirements ensuring alignment across subject matter expert groups including HR, Talent, Global Mobility, Corporate Tax and Employment Tax, Immigration and Employment Law, Reward, Finance and Data/ Technology teams. This will ensure that the programme is not only fit for purpose from a talent and business perspective, but equally places a solutions-oriented focus on addressing the current and future tax, legal and immigration risks. A triage process is necessary to enable informed decision-making and the implementation of risk-based solutions, protocols and processes to meet the demand of the new ways of working. Leaders should consider the following questions when considering remote work as part of future workforce strategy: (see table). It will be essential to put in place a clear framework and operating guardrails when implementing a remote-working programme. At an operational level, employers will need to ensure process, systems and vendors can manage remote employees across jurisdictions. Tracking of remote workers will be key in identifying and managing risk. Four key steps can be identified to support organisations to successfully implement a longer-term remote working strategy: 1. Assess the feasibility of remote working by reviewing business needs and requirements, talent integration, job roles and people and compliance exposure and risks. 2. Define the purpose of remote working - what is the organisation’s remote work philosophy? What should remote working be able to achieve for the business? Are there any target geographies or certain types of roles that this would be suitable or unsuitable for? What is the preferred timeline for implementation – big bang or a phased approach? 3. Design and test the infrastructure to execute your approach including

HR/Policy

Tax/Social Security

Legal/Risk/Reward

• How does our approach to remote workers fit within our broader Talent Strategy? • Should employees be permitted to work from any location or just from ‘home’? • What is the remote work approval process including sign-off for any additional costs? • Are any HR information (HRIS) changes required? • How frequently can individuals change their remote work location? • Should remote working be offered to all personnel including new hires, or only for ‘established employees’? • What changes are needed to global rewards and benefits programs for remote workers? For instance, benchmarking to local salary and benefits of the remote work location for nonassignments? Consideration of international or regional pay scales? • What should a remote working or virtual assignment policy include and exclude? • What should the company be responsible for and what should be the employee’s responsibility?

• How will employees be tracked and are systems equipped to recognise different living vs. working jurisdictions domestically and internationally? • What happens from a corporate Permanent Establishment perspective when an employee is located in one country but working ‘for’ an entity in another? What are the risks/ mitigations? • Should specific roles or locations be excluded from remote working arrangements because they create unmanageable risk or unacceptable costs for the business? Which roles/ locations require additional levels of investigation and approval? • What are the mandatory employer and employee compliance requirements? • How to implement a process to ensure that tax and social security is withheld/paid in the right location? • Ensuring that clear cost projections are performed, where relevant, to ensure ‘no surprises’ approach for the business as income tax and social security costs can vary considerably. • Assessing the taxability of benefits and equity across jurisdictions and especially pension implications, which can be complex.

• What is the company’s tolerance for legal and compliance risk? For example, are there “no go” locations because of risk? • Have i m m i g rat i o n considerations been assessed including employees’ rights to work in a particular location? • Do we understand health and safety requirements? • Is there already an entity registered in the location from where the employee wishes to work? Or, is there a requirement for the entity to register in the remote work location? Should alternative deployment options be considered e.g. via a Global Employment Company? • Have employment co n t rac t s , w h e re applicable, been reviewed including jurisdiction and employment law requirements according to the remote work location? • Have the implications of changes to employment terms and remuneration been assessed? • How will intra-company agreements be adjusted and cross charging handled when costs are borne by one entity, but the employee is employed by another? • Is the location safe from an intellectual property standpoint?

technology, tools, tracking and analytics, policy and reward approaches, talent management support and governance frameworks. 4. Implement the programme with a robust change management, training and communications approach which is stakeholder targeted and clearly articulates the benefits and compliance considerations to be aware of.

What next?

The role of a remote workforce in the future of work is yet to be fully defined. However, the opportunity created by the necessity to work from home over recent months is clear. Indeed, according to our research, 55% of workers believe that their colleagues are just as, if not more, productive now than before lockdown.

Improved management of the workforce has always been high on the corporate agenda. However, leaders are increasingly looking at remote working as a potential solution to improve business efficiencies in terms of employee productivity, improved flexibility and reduced costs. It is imperative that any longer-term remote working programme engages cross-functional expertise, but HR and Global Mobility teams are well placed to leverage the learnings from their recent experiences to drive forward this agenda. References: (1) Research by Ipsos MORI on behalf of Deloitte LLP, screening a nationally representative quota sample of 2,213 UK adults, filtered to a sample of 1,321 workers aged 16-75, using its Online Omnibus. Fieldwork took place between 14th and 18th May 2020. Data

INTERNATIONAL HR ADVISER AUTUMN

has been weighted to the known offline population proportions for age within gender, employment status and social grade as well

as government office region. Percentages have been rounded to the nearest whole percentage. https://www2.deloitte.com/

uk/en/pages/consulting/articles/workingduring-lockdown-impact-of-covid-19-onproductivity-and-wellbeing.html.

Figure 3 – Example remote working tracking dashboard, Deloitte LLP

RUMI DAS

Director, Global Workforce Transformation, Deloitte LLP D: +44 20 7007 0433 rudas@deloitte.co.uk

DEBBIE WARDLE

Director, Global Employer Services, Deloitte LLP D: +44 20 7007 1805 djwardle@deloitte.co.uk

ROBYN IRELAND

Associate Director, Global Employer Services, Deloitte LLP D: +44 20 7303 5485 roireland@deloitte.co.uk

DELOITTE’S GLOBAL WORKFORCE PRACTICE

Deloitte’s Global Workforce team partners with organisations to establish future-proof global workforce strategies, tailored to client specific business and talent objectives. We embrace design thinking and are data driven to help clients reimagine and transform their approach to talent mobility, focusing on areas including policy and process design, strategic and operational transformation, global talent strategies, digital innovation, planning and deployment, and workforce analytics. Find out more here www.deloitte.co.uk/globalworkforce. This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 1 New Street Square, London EC4A 3HQ, United Kingdom. Deloitte LLP is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please click here to learn more about our global network of member firms. © 2020 Deloitte LLP. All rights reserved.

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Global Tax Update COVID-19/CORONAVIRUS

At the time of writing this update in mid-September, the world of global mobility continues to see an unprecedented challenge as a result of Covid-19/ Coronavirus. Ever increasing globalisation is under pressure and business travel has largely ground to a halt. Indeed, access to some countries remains prohibited for nonnationals/citizens. The reaction from Governments and tax authorities around the world has been relatively swift, with a variety of special measures and relaxations introduced to help employers and employees navigate the immediate issues that arise with filing deadlines, payment of taxes and lack of mobility. Summarising the huge volume of measures undertaken so far remains a challenge, with rules and positions changing frequently. This article sets out some measures introduced in Belgium, Colombia, Hong Kong and the UK in order to provide a ‘flavour’.

BELGIUM

The impact of coronavirus on international employment Following the coronavirus outbreak many countries, including Belgium, have taken measures to stop the spread of the virus. As of 18 March, 2020, companies in Belgium, with the exception of those who provided essential services, were obliged to organise working from home for every position where this was possible, and international travel restrictions were introduced. In this respect, you may wonder whether the disrupted work pattern of your employees, who normally work internationally, could have an impact on the applicable social security regime and the taxation of their employment income. We summarised the possible consequences in a previous update. In this article, you will find further information regarding bilateral agreements and formalities. Principles Of The OECD Model Tax Convention On Employment Income In order to determine which country will be entitled to levy income tax on employment income, the tax treaty between the home country and the working country will apply. In principle, remuneration is taxed in the host country (and the home country if residence continues), unless certain conditions are met. The host country will generally exempt the income from the charge to tax if: • The employee does not spend more than 183 days during the calendar year or any 12-month period in the working country and

• The salary is not paid or borne by a formal or material employer in the working country and • The salary is not borne by a permanent establishment or fixed base of the employer in the working country.

Ever increasing globalisation is under pressure and business travel has largely ground to a halt. Indeed, access to some countries remains prohibited for non-nationals/ citizens Bilateral Agreements The OECD issued a number of specific recommendations concerning the questions that have arisen with respect to cross-border employment situations in the lockdown period. The OECD confirms that the normal tax treaty provisions will continue to apply, but it will consult with the various countries in its efforts to prevent the unforeseen consequences of the tax shift as much as possible, and to mitigate the administrative burden as well. Where the normal provisions of double tax treaties concluded by Belgium and other countries remain applicable, the increased physical presence in the home country due to quarantine and teleworking measures could lead to additional tax liabilities. The Belgian and foreign authorities of the Netherlands, Luxembourg, France and Germany have therefore concluded bilateral agreements on taxation under the double tax treaty following Covid-19.

Employees who work from home solely due to Covid-19 measures can remain taxable in the state where they previously worked prior to the outbreak of the pandemic. Do note that this only applies in relation to days worked at home due to Covid-19. The same rules apply to situations where the worker is temporarily unemployed and benefits from a continued payment of his/ her wages by the employer, or is entitled to temporary unemployment benefits (only for the agreement with the Netherlands). These agreements are applicable as of mid-March (i.e. 14 March for France, 11 March for the Netherlands, Luxembourg and Germany) until at least 30 June, 2020. We expect that further agreements will be concluded between the various member states of the European Union and possibly also with third countries. Special Tax Status A foreign executive who benefits from the Special Tax Status in Belgium is taxed on their worldwide professional income as well as on other Belgian source income. The most important advantages of the application of the Special Tax Status are: • The individual will be considered a Belgian non-resident for tax purposes • The individual will receive nontaxable allowances provided it can be demonstrated that the allowances are justified by actual costs incurred (i.e. taxfree allowances) • Income related to non-Belgian working days are excluded from the taxable basis (i.e. travel exclusion). Due to the pandemic, these expats have not been able to travel as much as they normally would. No specific tolerance has been introduced regarding these foreign executives. As a result, they will be not be able to exclude the teleworking days which they would have normally spent abroad and they will be taxed in Belgium on a higher tax basis. This has been explicitly mentioned in a FAQ issued mid-June. Logically, it would also mean that employees benefiting from the Special Tax Status who were forced to stay and work outside Belgium due to the restrictions, should be able to claim these days as foreign business days. The tax authorities however, have not taken any formal position in relation to this.

COLOMBIA

Tax burden on individuals/expatriates in Colombia impacted by coronavirus Due to current circumstances, taxpayers that were affected because of border closures in

GLOBAL TAXATION Colombia just before they reached 183 days within the country have consulted before the Tax Authority concerning the impact this has on their residence for tax purposes. With regard to the 183 days test to trigger permanent tax residence and tax on worldwide Income, the Colombian Tax Authority has stated that the Covid-19 measures that affect travel out of Colombia would not impact the day count. The Tax Authority has also stated that, as long as the individual declares a due force majeure argument, individuals who were not able to leave the country during the lockdown due to airport closures will not be considered to meet the day count for permanent residence. The Colombian Government has not extended tax filing deadlines for individuals for 2019. This still remains 11 August to 21 October.

to undertake to spend all the wage subsidies on paying wages to their employees. The Government has also set requirements for two leading supermarket chains (Park’nshop and Wellcome) and large-scale estate management firms to undertake extra commitments upon receipt of the 2nd tranche of subsidies under ESS: • The large-scale estate management companies will be required to contribute 80% of the 2nd tranche of the subsidy they receive to subsidise the residents and/ or the incorporated owners of properties for the maintenance fee and property management fee; and • Park’nshop and Wellcome will be required to contribute the 2nd tranche of the subsidy they receive to either provide discounts for customers, or offer coupons for socially vulnerable groups.

HONG KONG

Second tranche of subsidies under the Employment Support Scheme (“ESS”) unveiled by the HKSAR government The Government announced on 18 August, 2020, details concerning the application of the 2nd tranche of subsidies under the Employment Support Scheme (“ESS”). Below are details of the application: 1. Subsidies will cover which period of staff wages? Employers are expected to apply the fund to subsidise their payment of staff wages from September 2020 to November 2020. 2. When can employers expect to receive wage subsidies? The 2nd tranche of subsidies would be disbursed in mid-September 2020 (the earliest). 3. Application procedures for second tranche of subsidies under ESS The eligibility and procedures for application of the 2nd tranche as well as the formula on penalties and claw-back of the subsidy because of employers’ failure to fulfil their undertaking will remain unchanged as that of the 1st tranche, except for the following: • The employers may change the specified month previously selected from either December 2019, January, February, or March 2020, as the “specified month”, as the basis of calculation of the subsidy (whilst there will be no change of headcount measured against the employer’s headcount as per MPF/ORSO contribution record in March 2020); and • The employees whose age reached 65 or above, even if their employers have not paid salary and made MPF voluntary contribution for them in March 2020 or thereafter, but if they still maintain their MPF accounts with the MPF trustee, will get HK$5,000 per month per employee in subsidies. The employers of the elderly employees who receive the subsidies have

Calculating National Insurance contributions where current location of assignee impacted by coronavirus The rules for National Insurance contributions depend on which country your employee is going to work in. Due to coronavirus, HMRC has agreed to allow an easement for employees temporarily returning to work in the UK from a country outside the EU, EEA or Switzerland, where the UK does not have a reciprocal agreement. Where an employee returns to the UK to work on a temporary basis, the situation will depend on the nature of the duties being carried out. If the duties are incidental to the overseas employment such as a briefing or further training for that employment then treat the employee as still abroad. You should continue to deduct Class 1 contributions until the 52 week period of Class 1 liability is met. If the duties are not incidental to the overseas employment and the 52 week period of liability has ended, you can: • Disregard the first 6 weeks of employment in the UK. This is not a legal requirement but a concession to ease administration when an employee briefly returns to the UK - it only applies where they return to the UK for the same employer • Pay contributions in the normal way for any further period in the UK. Where the 52 week period has not ended, it is not extended by any period of employment in the UK which falls within it. If the employee goes to work abroad again once it is safe to do so and any existing liability period has ended, Class 1 National Insurance contributions will continue to be paid for 52 weeks starting from the contribution week in which the overseas employment begins. A further period of liability will arise only if: • The employer has a place of business in UK • The employee is ordinarily resident in UK

• Immediately before the start of the employment the employee was resident in the UK. For employees working in an EU, EEA country or Switzerland due to coronavirus, social security contributions or UK National Insurance should continue to be paid as usual, unless you’re advised otherwise. Please note that that majority of countries covered by the EU Social Security Regulations are now advising that A1 certificates must be obtained after an initial relaxation of this obligation. For those working in a country where a reciprocal agreement is in place, advice should be sought on the correct course of action.

Due to coronavirus, HMRC has agreed to allow an easement for employees temporarily returning to work in the UK from a country outside the EU, EEA or Switzerland where the UK does not have a reciprocal agreement Coronavirus/C-19 Testing Provided By Employers For Their Employees It has been confirmed recently by HMRC that Covid-19 testing supplied to employees by the employer is treated as a benefit in kind. As this particular benefit in kind is directly related to Covid-19 it can be reported through the PAYE Settlement Agreement where the employer can either pay the

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income tax or national insurance on behalf of their employees. HMRC Clarification On Statutory Residence Test Relaxations As A Result Of Coronavirus Over the past few months HMRC has provided a number of comments in relation to the impact of Covid-19 on UK tax residence and the Statutory Residence Test (SRT). They recognise that the pandemic has hampered the ability to move freely to and from the UK and the knock on effect this may have on an individual’s tax position. The SRT has always allowed certain flexibility in counting UK days where an individual is in the UK due to exceptional circumstances. This very much has to be reviewed on a case by case basis however. HMRC has now published guidance to help taxpayers understand where they consider days spent in the UK to be “exceptional” due to Covid-19 and therefore where these days can be disregarded when counting total days spent in the UK for SRT purposes. This must be read in conjunction with the current published guidance on exceptional circumstances along with the SRT guidance and legislation as a whole. The guidance has been included as Annex D of the SRT and covers areas such as: 1. Whether government imposed travel restrictions count as exceptional circumstances. 2. Confirmation there is no relaxation to the maximum 60 day count for exceptional circumstances. 3. How periods of self-isolation are treated. 4. Working remotely in the UK. 5. Coming to the UK to care for vulnerable family members. 6. Interaction with double tax treaties. Although the published guidance is very welcome, its application must be considered within the wider context of the SRT and preexisting HMRC materials and tax legislation. Each scenario must still be reviewed on a case by case basis. This is not a blanket agreement to allow up to 60 days spent in the UK to be disregarded for any taxpayer spending additional time in the UK due to the pandemic. The practical application of these measures and HMRC’s approach will be seen over the coming months and years, especially with regard to 2019/20 and 2020/21 UK tax returns and current payroll processing for companies. As the situation continues to unfold there may also be further guidance published by HMRC. Travel And Subsistence Expenses Paid By Employers To Employees Travelling To Temporary Workplaces It has been advised by HMRC that if your employee was furloughed when they were travelling to a temporary workplace, the period of furlough is classed as a period of continuous

work. A period of working from home will also be classed as a period of continuous work. However, the workplace stops being temporary from the date that attendance there is expected to be more than 24 months. Tax and National Insurance contributions will then become liable on any payments of travel and subsistence expenses.

It has been advised by HMRC that if your employee was furloughed when they were travelling to a temporary workplace, the period of furlough is classed as a period of continuous work Working From Home - Becoming The New Normal? Permanent Establishment Creation? Due to the current situation and the UK entering into the “new normal”, more and more people are working from home more frequently, this trend may continue beyond any reduction in the levels of coronavirus. One of the issues that arises from this however, is the potential creation of a Permanent Establishment for a non-resident entity. A Permanent Establishment is created under the following conditions: • Where there is a fixed place of business in the UK through which the business is operated • Where there is an agent acting on behalf of the business which habitually concludes contracts in the name of that business. For there to be a fixed place of business, the following three features must be present: • There must be a geographical place of business • That place must be fixed • The non-resident’s business must be carried on through that place. An employee working from home will not usually create a permanent establishment

however, if the work that is being done by the employee is considered as trade such as closing contracts and/or making strategic decisions for the company, this can be seen to create a permanent establishment. Each case is judged individually by HMRC and more guidance has recently been released stating that the rules allow flexibility due to Covid-19. That being said, the case is different for self-employed individuals, as the work being carried out will constitute as trade. However, each case is judged individually by HMRC depending on facts presented. As well as the potential of creating a Permanent Establishment, other aspects need to be considered when making the decision to allow your employees to work from home, such as whether it is practical for the employee to work from home. For example, if the equipment the employee needs to be able to work isn’t readily available for them or cannot be moved from the original workplace to the home, it would not be practical for the employee to work from home. Also, in some countries an employee may incur extra income tax to be paid if they are in a different jurisdiction from where they usually work. Following on from this point, social security may be an issue, but only if the home of the employee is in a different country from the one in which they usually work. Whilst working from home might seem to be an ideal response and situation for employer and employee alike, do consider all implications before agreeing to permanently change working practices and contractual arrangements. BDO General Comment As mentioned at the outset of this article, global taxation and social security rules continue to change and relaxations are being introduced and then varied as we continue to live with the impact of the coronavirus. Do check with your adviser and our BDO Global website www.bdo.global/en-gb/home for the latest information. We will undoubtedly see future legal challenges by international assignees, business travellers and employers where adverse fiscal impacts arise as a result of coronavirus restricted travel, coupled with a genuine lack of choice. However, given the increased flexibility demonstrated by tax authorities and governments to date it is certainly worthwhile approaching them first to see where compromises and agreements can be reached without relying on formal action. We might yet be surprised by their response. For current up to date global changes, please do visit the BDO Global website www.bdo.global/en-gb/home. Prepared by BDO LLP. For further information please contact Andrew Bailey on 0207 893 2946 or at andrew.bailey@bdo.co.uk

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Long-Term Incentives: Mastering The Challenges Of Tax Designing an effective employee remuneration structure is critical to the success of any business. The remuneration structure is an investment decision where an employer and its shareholders choose how much of the company’s money they are willing to spend or how much shareholder dilution they are willing to accept with the expectation that this cost or dilution will increase the overall profitability of the business and build shareholder value. In practice, the decisions around remuneration are highly complex and the return on investment is impossible to accurately measure. Whilst there is empirical evidence to suggest that businesses with long-term incentives tend to show higher growth, it is much harder to quantify how much shareholder value an incentive really delivers. In practice, the performance of a business will always be driven by a host of factors. As businesses become more complex and their remuneration strategies become more sophisticated, so do the tax issues associated with them. The nature of this complexity may be shown by comparing two opposing scenarios;

Scenario 1 - A Simple Scenario

A company with a small, fully UK resident employee group who are each just paid a basic salary and an annual discretionary bonus. The business in this scenario has tax reporting and withholding obligations but these are not onerous.

Scenario 2 - A Complex Scenario

A complex corporate group with a large workforce that is globally mobile between a number of diverse jurisdictions and operating 3 or 4 different share option and long-term incentive arrangements as well as salary, benefits and bonuses. The global tax issues in this case become far more significant with issues such as:

• The reporting obligations relating to the different elements of the package in the different jurisdictions • The employer tax withholding obligations relating to the different elements of the package in the different jurisdictions • The social tax burden arising to the employing companies in each jurisdiction • The availability of corporation tax relief across the group • The application of all of the issues above to individuals who have been mobile and working across different jurisdictions. The contrast between the two scenarios is stark. In scenario 1, the issues are relatively easy to address and can be managed easily by an in-house payroll team or outsourced relatively cheaply. In scenario 2, the corporate group will need to formulate a strategy to ensure that it is fully compliant and efficient. Failure to do this may cause the remuneration package to become a huge burden for the company and put pressure on relations with local tax authorities around the world. Of all of these different areas of complexity relating to remuneration, the most complex issues tend to be driven from having a global group with mobile employees who are awarded long-term incentives. These issues are addressed in more detail below. Whilst the complexity undoubtedly creates a compliance burden for employers which unfortunately is just a consequence of operating a complex (and hopefully successful) global business, it also creates opportunities. If the challenges are approached in the right way, an employer can operate incentive plans that are highly effective in achieving their strategic goal – to recruit, retain and incentivise the best people.

Long-Term Incentive Design And Implementation

One of the reasons that tax obligations often become a challenge that companies struggle to overcome is that the tax treatment of the incentive is not generally a “day 1” issue. If the long-term incentive is a share option plan, the tax charge is likely to arise when the share option is exercised at the end of a vesting period. This may be some years away and is subject to changes in tax law and consequently understanding these issues may not be seen as a priority. In any event, the company has numerous other non-tax issues to focus on in launching the scheme: • Obtaining shareholder approval and support • Designing performance criteria that

fit best practice whilst motivating the participants • Preparing communication material that maximises the positive impact on the overall business. In the context of these priorities, the subject of tax can seem a rather dull and unwanted distraction. However, to neglect tax issues at the outset is to miss a number of important tricks. Being mindful of tax issues from day 1 is a big opportunity for a company to maximise the positive impact that it will have on participants and also make the schemes as cost-effective as possible for itself. Key areas in this regard are: • Whilst a tax charge on the grant of an incentive such as a share option is rare, it can arise. Australia and Belgium are two jurisdictions where “tax on grant” is a genuine risk if the option is not effectively structured. These pitfalls need to be identified and pre-empted to avoid the incentive plan having a demotivating effect on participants • Qualifying or tax advantaged plans exist in a number of jurisdictions and to take advantage of the opportunities that these plans present can be a material tax benefit. In the UK, there are 4 HMRC tax advantaged arrangements, but the benefits of qualifying plans (share options or free shares) in France or tax concessions in Australia are other examples of valuable tax incentives. It is generally the case that tax advantaged arrangements need to be planned for on set up • As well as being important to the employee’s outcome, qualifying arrangements may also give the company material savings in employer social taxes (for example, employer’s national insurance contributions in the UK) • Corporation tax relief for the employing companies in the group can be an important factor in the overall cost the incentive arrangement. The existence of an intra group recharge arrangement is often necessary for a company to claim corporation tax relief when share options are exercised, and therefore appropriate planning at the outset can have a significant overall impact on the cost for the employer. There are clearly material opportunities for companies by including a review of tax matters as part of the implementation of the long-term incentive.

TAXATION Global Tax Compliance

The group’s tax compliance obligations relating to its incentive plans are seemingly straightforward: process the gains through the relevant payroll at the right time. Whilst this may not necessarily be simple, for a sophisticated global company, one may anticipate that this is very much part of the day to day business. To take this view underestimates the complexity that is likely to exist. This complexity breaks down as follows:

1. Understanding The Rules

Whilst the global employer will be likely to operate payroll in all of its relevant jurisdictions, the application of payroll withholding to the long-term incentive will not necessarily follow the same rules as salary or bonus. Income tax withholding may not apply, or it may depend on the overall structure (withholding may depend on whether there is a corporate recharge in place). The same questions apply to social taxes and other taxes. Then there is a question of whether flat rates or marginal rates apply, and this may also differ from cash payments. The company will need to understand the rules and ensure that the payroll operator applies the rules correctly in each jurisdiction.

2. An Effective Process

The overall process for withholding on the long-term incentive will also not reflect the process for withholding on salary or bonus. If the incentive delivers shares (i.e. in the form of a share option), it is not simply a case of withholding cash in the way that would be done for a cash bonus. The employee needs to notify of their desire to exercise, the share plan administrator coordinates the process and updates the records, shares need to be sold by the broker (on the instruction of the employee) and the proceeds of sale need to be passed to payroll. The parent company and the employing subsidiary would also need to be aware of the transaction and the shares issued or transferred accordingly. There are various techniques that companies use to help in managing this process. Net settlement is one where, in practice, the company delivers shares with a value equal to the net gain and delivers cash for the remainder of the gain that can then be used to settle the tax liability. Alternatively, an exercise process may be conditional on the sale of the shares to address the risk that the shares cannot be sold in an illiquid market.

3. Timing

Whilst the process for processing the exercise and withholding is complex, this is compounded by the fact that it needs to be completed immediately when the employee exercises under the incentive

plan. The deadlines for processing gains through payroll and remitting tax to the tax authorities will differ between jurisdictions, but the requirement to remit the tax may be as soon as a matter of days. Perhaps more importantly, if the above process is not immediate, share prices will move and this could create exposure. At its most simple, if an option is exercised and a tax charge generated based on a certain share price but the shares are not sold until the share price has fallen, more shares will need to be sold to pay the tax. Both net settlement and conditional exercise (addressed above) are geared at addressing this timing challenge, but in any event, the complex process needs to executed at speed.

4. Mobile Employees

The “icing on the cake” in this area is how to deal with mobile employees. This is hugely complex. If an individual has been working in more than one jurisdiction over the vesting period of the award, the expectation is that there will be tax obligations in more than one jurisdiction. As well as needing to review the movements of the individual and understand how the taxable gain is allocated to each jurisdiction, the specific rules for each jurisdiction then need to be applied and these may differ for mobile employees when compared to local nationals. Social tax in particular may give a surprising outcome depending on the facts and not be aligned to income tax. The layer of complexity that arises around mobile employees can sometimes be “the straw that breaks the camel’s back” for groups that want to be fully compliant. To take a challenging process that needs to be executed immediately and then multiply that burden by two or three times to account for the additional burden that comes from an employee having been mobile, may prove to be too challenging. Employers who do not manage to allocate tax accurately to the correct jurisdiction may seek solace having at least paid full tax in one jurisdiction, and that if tax may have been underpaid in one case, there is an equal chance that it has been overpaid in another. In the current climate where tax on large corporate entities is under so much scrutiny, both of these views unfortunately reflect nothing more than a “head in the sand”. If a tax authority in a particular jurisdiction determines that it has not received the right amount of withholding and social taxes for employees who have been working in that jurisdiction, the fact that too much tax may have been paid elsewhere will have little impact on its approach. This will then bring the distraction of tax enquiries and settlements and may trigger tax authorities to want to review other areas of the business.

Conclusion

The complexity that tax brings for global businesses operating long-term incentive plans is extremely daunting and can feel like a real distraction from the real purpose of the long-term incentive – to motivate and reward a highly performing workforce. However, the complexity is a reality, and if it is embraced by the employer, it can give a competitive advantage. Planning the structure to ensure that the most tax efficient approach is pursued from the outset can deliver significant efficiencies to the company and its employees. All of the challenges of ensuring that full global tax compliance is achieved, including those relating to mobile employees can be navigated. Whilst the issues are not easy to address, these are systems and solutions that a company can implement (such as BDO’s Global Equity Mobility Solution) which will mean that it can move forward in the comfort that it will meet its global obligations thanks to the appropriate systems and technology that it has in place. This is a level of comfort that in reality all companies should aspire to.

ANDREW BAILEY

Head of Global Employer Services at BDO LLP. He has over 30 years’ experience in the field of expatriate taxation. Andrew is indebted to Andy Goodman who has written this article. BDO is able to provide global assistance for all your international assignments and related issues. If you would like to discuss any of the issues raised in this article or any other expatriate matters, please do not hesitate to contact Andrew Bailey on +44 (0) 20 7893 2946, email Andrew.bailey@bdo.co.uk or Andy Goodman on +44 (0) 20 7893 3437, email Andy.Goodman@bdo.co.uk

VIRTUAL ASSIGNMENTS

Virtual Assignments: Future-Proofing Your Mobility Programmes The Genesis Of A New Type Of Assignment

Technology has profoundly changed our personal and professional lives over time. We now routinely work in virtual teams with colleagues and clients who are in different physical locations. On this basis, many HR professionals had predicted that some international assignments would eventually be replaced by employees working remotely in cross-border roles, i.e. without physically moving, an arrangement commonly called “virtual assignment”. Whilst the concept is not entirely new, very few organisations have integrated virtual assignments in their Global Mobility frameworks, due to a variety of challenges that would need to be addressed. The recent COVID-19 pandemic turned out to be a catalyst for change: most organisations had no choice but to repatriate their international assignees, put on hold all new assignments, and ask both international and domestic employees to work from home. Suddenly, remote employment had become a reality. Despite the disastrous impact on people and businesses, the crisis provided an important “reality check” on how much work can be done remotely. It is not surprising, therefore, that the topic of virtual assignments gained popularity amongst Mobility professionals. But is it feasible to take an arrangement that was borne out of a crisis, and recognise it as an official assignment type? The answer is “maybe”, provided the implications and complexities are understood and addressed. Let’s look at some fundamental considerations.

Why Virtual Assignments?

The pandemic, together with the associated lockdowns and travel restrictions, definitely played a key role in pushing Virtual Assignments higher on the agenda of Mobility professionals. But other factors provided the right context too. The digitalisation of many aspects of work made it possible for some roles to be performed remotely. At the same time, workforce demographics are changing, with a growing representation of a younger workforce that grew up in the digital age, and generally more tolerant of flexible working practices.

Virtual assignments also provide a potential alternative in situations where employees may be reluctant to move physically, due to personal or family considerations, which can be real barriers to mobility. This means that virtual assignments may allow organisations to secure the best talent, irrespective of their location and propensity to relocate. Some employers may one day also use virtual assignments to optimise human capital costs, by reducing the need for expensive expatriate packages and leveraging salary differentials across locations. It appears, therefore, that the timing may be right: virtual assignments have the potential to meet the needs and expectations of both employers and employees, albeit in different ways. Technology tools that enable us to work remotely have already become mainstream in many organisations, and the pandemic forced us to learn quickly how to run a business with a geographically distributed workforce. It is unlikely that virtual assignments will fizzle out once the pandemic blows over. More likely, they will be increasingly recognised as a legitimate assignment type and formally integrated in mobility programmes.

Key Challenges

Nevertheless, virtual assignments are fraught with challenges, which need to be understood and addressed in order to succeed. Here’s a few: Feasibility, Eligibility And Cost For a start, it is important to define the eligibility criteria for virtual assignments, by identifying which jobs could be realistically performed remotely. In addition to the practical requirements of the role, it may be wise to consider other factors such as time zones, geographical scope of the role, the presence of a local subsidiary, access to IT support, and more. It would be unwise to assume that a virtual assignment will always cost less than a traditional assignment, as this is often not the case. Therefore, it would be advisable to run some simulations to estimate the financial impact.

Regulatory And Compliance Considerations One of the key considerations for virtual assignments is to determine which entity is the “employer of record” and who will be responsible for compliance obligations such as tax withholdings, payroll reporting, employer’s social contributions, and so on. If the organisation has a local subsidiary, this could be used to host and support the virtual assignee, but if the company has no legal presence in the country, the situation becomes slightly more complicated, since some countries allow such “employment without establishment”, whereas others don’t. It is important to remember that the prevailing labour law will be that of the country where the virtual assignee is physically located. Hence the HR team managing these virtual assignees needs to ensure compliance in all applicable jurisdictions. This is an important point to remember, especially in the event of disputes, disciplinary procedures, separations, etc. It is also worth bearing in mind that in some countries there may be collective agreements applicable to specific industry sectors. Local legislation will also dictate any minimum statutory benefits that need to be provided, such as medical, life, accident and disability. In locations where the headcount is low, these insurance plans may be expensive, due to lack of critical mass. Lastly, there is the well-known issue of Permanent Establishment risk, which could be created when an employee is performing work in one country on behalf of an overseas entity. The details of what constitutes a Permanent Establishment are generally to be found in tax treaties, and there is no universal definition. Typically, such situations could give rise to Corporate Tax and/or VAT liabilities, which need to be taken into account. Cultural Readiness Any organisation considering the introduction of any form of “remote employment” should carefully consider whether the organisation is culturally ready for it. The “cultural readiness” could be specific to a geographic region, or it could depend on the organisation, its leadership and the demographic profile of the workforce. In some cultures, both

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leaders and employees find it culturally hard to accept the idea of not being physically present in the workplace with the rest of the team. Likewise, there are some organisations where leaders prefer a more traditional working culture and struggle to embrace the idea that a team member may be present only virtually. In addition, there could also be generational differences in the readiness to accept virtual employees. Performance And Career Management In a virtual assignment scenario, it is important to ensure that the virtual assignees continue to feel a strong sense of affiliation and shared identity with the rest of the organisation, function, and team to which they belong. The quality, frequency and mode of communication should be just right, in order to preserve engagement and alignment without eroding productivity through unnecessary meetings. In addition, there should be a consistent and conducive company culture, where virtual assignees are accepted. Failure to achieve this may result in virtual assignees being disadvantaged during performance, salary, and career reviews, compared to peers who are physically closer to their leaders. Working remotely from managers and colleagues will test the virtual assignees’ ability to self-motivate and work independently, especially if working from a location where there is no local company. In such situations, non-technical attributes such as planning, communication skills, adaptability and problem-solving skills would definitely help the virtual assignee’s performance and productivity. In fact, any analysis of the costs and benefits of virtual assignments would, ideally, also include an assessment of the potential impact on performance and productivity. Infrastructure And Employee Support In situations where the virtual assignee is physically in a location without a local subsidiary, it is important to establish what infrastructure would be available to the employee and how support would be provided, if required. If there is no local subsidiary, the employee may be expected to work from home, or from a shared office. This may raise some concerns regarding security and confidentiality. HR, IT and Finance Department support could be provided remotely for most situations, but time zone differences may introduce some delays that could impact productivity and morale. It is therefore a good idea to proactively ensure that the virtual assignees have a conducive working environment and are adequately supported.

Managing Virtual Assignees

Having reviewed some of the key challenges, it may be useful to review some practical

options for the operational management of virtual assignments. There is no “silver bullet” solution that works for every organisation, and it is important that each company designs a model that perfectly fits its objectives. Nevertheless, there are three broad approaches that could be adopted, with the necessary modifications, to manage a population of virtual assignees.

The next couple of years may well shape the future of Global Mobility, and the current pandemic is just the latest reminder of the importance of having the organisational agility to respond to the unexpected Employ The Virtual Assignees Through Local Subsidiaries If local subsidiaries exist in the location where the virtual assignees are based, it is almost natural to use these entities to employ and support them. This would be an easy and convenient approach. However, in companies with many virtual assignees this could become a rather messy and cumbersome model, since each entity may be hosting virtual assignees who are supporting other overseas entities, as well as perhaps receiving support from virtual assignees based overseas. In this scenario, the potential exposure to Permanent Establishment risk is multiplied, and it is difficult to ensure that in each location there are the necessary skillsets to

keep all these virtual assignees compliant. Such a decentralised model it is also likely to create duplication of effort and make it harder to aggregate data. The model is also not very scalable, since the complexity will increase as virtual assignments are created in more locations. The model also relies on having subsidiaries in the right locations, and therefore does not always provide global coverage. It is also worth pointing out that if the virtual assignee goes on a real assignment (i.e. a physical relocation), the employing entity will change. Employ The Virtual Assignees Through A Professional Employer Organisation (PEO) Under this arrangement, the PEO becomes the “Employer of Record” of the virtual assignee, which means that, legally speaking, the virtual assignee is employed locally by a third party. PEOs tend to have global coverage, which makes this model more scalable and not at all reliant on having local subsidiaries. From a client’s perspective, PEOs also provide some level of central coordination and aggregation of data. Arguably, PEO arrangements may be more suitable for virtual assignments of a finite duration, and perhaps less suitable for openended contracts. Since the virtual assignee is employed by the PEO, the organisation will have slightly less control over the “employee experience” and will need to work a little harder to ensure that the virtual assignee doesn’t feel like a “contractor”. In this case too, if the virtual assignee physically relocates to a different location, the employing entity will change. Employ The Virtual Assignee Through A Global Employment Company (GEC) Under a GEC arrangement, the virtual assignees would all have an employment contract with a legal entity (a Global Employment Company) fully owned by their organisation. Therefore, these virtual assignees will continue to be employed by the company, rather than by a third party, and will always have an employing entity hosting them, regardless of their physical location. The GEC provides a central point of coordination as well as central consolidation of the necessary skills, experience and infrastructure. The GEC can host both virtual and traditional assignees, thereby providing even greater economies of scale. This also implies that if a virtual assignee becomes a “real” assignee by physically relocating, he/she can remain employed by the GEC, hence there will be no change of employing entity. Furthermore, by aggregating the headcount of virtual assignees in a single legal entity, it is easier to create the critical mass required for international insurance and retirement plans.

VIRTUAL ASSIGNMENTS The GEC arrangement can also help to centralise and potentially mitigate Permanent Establishment exposure by having a single legal entity (rather than multiple entities) employing the assignees. The GEC would be responsible for support and compliance in the various locations where the virtual (and non-virtual) assignees are located.

Preparing For The Future

Several companies are now taking the first steps to assess the feasibility of virtual assignments. The good news is that there are options, each with its own set of implications. Therefore, it essential to do some thorough homework to evaluate costs and benefits, before putting something in place. Specialist mobility consulting firms, such as ITX, are pioneering viable models to help organisations prepare for the future and to design solutions that are fit for purpose. The next couple of years may well shape the future of Global Mobility, and the current pandemic is just the latest reminder of the importance of having the organisational agility to respond to the unexpected. In today’s uncertain and volatile world, it is highly likely that virtual assignments will continue to evolve, enter mainstream Mobility practices and become an absolute necessity for most organisations.

VINCENT HENNEQUIN MARIO FERRARO

Mario Ferraro is internationally recognised as a Thought Leader in the area of Global Mobility and International HR. During his career he helped some of the world’s best organisations to design and implement effective Global Mobility solutions. His experience spans 3 decades and includes leadership roles with some of the world’s leading consulting firms, as well as global roles in International HR and Mobility. E: mferraro@itx-sg.com.

Vincent Hennequin assists international organisations achieve simplification and cost-effectiveness of their expatriation programmes, in full compliance with international regulations. He works with clients to explore their organisational needs and identify suitable interventions ranging from bespoke studies to full operational solutions. Vincent’s experience includes people development and coaching within multinational companies in different industries and geographies, including the Nordic and Baltic Countries, Russia, Germany and France. E: vhennequin@itx-ge.com.

INTERNATIONAL HR ADVISER AUTUMN

Cultural Adaptation: Is It Mission Critical In The ‘New Normal’ International Work Arrangements? This article will address why organisations need to recognise the impact of cultural adaptation and integration when deploying talent internationally. As we move into a new decade, organisations and governments are coming to terms with surviving and adapting to new opportunities and challenges in both emerged and emerging markets. Organisations are increasingly drawing on diverse talent from new sources on a global basis, yet, paradoxically, governments seek to pursue more nationalist agendas. As the current COVID-19 pandemic is only likely to add greater complexity to these trends, organisations will seek to fulfil their objectives, while mitigating any risks in this ‘new normal’. • Subsequently, traditional Global Mobility models are shifting to address different business and talent agendas • Even with a variety of policies available, how effectively do organisations ensure that their employees and their families are culturally and emotionally prepared for life in a new arrival country?

This article will address why organisations need to recognise the impact of cultural adaptation and integration when deploying talent internationally 18

• Historically, organis ations have particularly used cultural and language development programmes for those traditional international assignments that are expected to have critical, strategic impact for the host entity. • Often, the decision is based on the leadership acknowledgement that this is a sound investment, rather than a soft cost that can be eliminated from budget. How much more critical though, will this be in a post COVID-19 environment as new work arrangements emerge, with a continuum of modified assignment and relocation provisions - including virtual assignments - as there are so many more aspects to consider?

The Growth Of Differential Investment In Mobility Programmes

Prior to the COVID-19 outbreak, the use of a wide variety of international assignments reflected the key strategic direction multinational organisations were continuing to follow to manage global activity. Undoubtedly, this strategy is likely to shift significantly as the world comes out of lockdown; most likely with a rise of virtual assignments over more traditional options. How these will be managed post-COVID-19 is still to be determined, with this fluid picture mostly likely to continue evolving over the next 12-24 months.

Does Familiarity Breed Contempt?

We have become acclimatised to often living in a volatile, uncertain world. Regardless, this is certainly not a precursor to a slowdown in the war for talent. We live in a global village where social media would make us believe that, via shared content found on the internet, in videos and documentaries, we all have a common understanding of cultures, language and shared values. However, the opposite is probably closer to the truth, exacerbated by the increasing number of nationalistic agendas. In the Global Mobility industry, this remains ever clear, as policies are often adapted for hardship, or challenging locations.

Fig. 1 - Most challenging assignment destinations #1

USA

China

India

Source: Extract from Santa Fe Relocation GMS 2019 p.56

Fig. 2 - Why are destinations challenging? Top four challenges. #1

Cultural Differences

40%

Immigration Complications

38%

Concerns About Personal Security And Safety

34%

Language Difficulties

34%

Source: Santa Fe Relocation GMS 2019 Fig 34 p.56: Why are these destinations most challenging

In the midst of this, organisations are seeking to: re-balance how they attract people with the right future and culture-proofed skills and competencies, nurture global and local teams that associate with organisational culture, and embed new workplace systems and processes that leverage Artificial Intelligence (AI) and digital platforms that drive workplace analytics. • With the advent of more virtual working, the ability to interculturally integrate with virtual, global teams will become absolutely vital • This is never truer than in today’s global talent market, brokered by organisations’ talent teams in their insatiable quest for the next ‘super’ talent, who will be globally mobile and able to integrate seamlessly into local communities, embrace new work-life experiences and deliver day-one business outcomes.

The Assignee Lifecycle

Unarguably, an international assignment is defined by numerous stressors. These include the uncertainly and shifting demands that come with a new role while having to adapt to a new culture and way of life (and potentially a new language).

CULTURAL ADAPTATION Additionally, there is the pressure that comes with ensuring the accompanying family settle in and adapt quickly and adequately, without the usual support network and social outlets previously in place at home. All this must occur while dedicating the additional commitment of time and energy necessary to face the increased pressures to succeed. Resultingly, assignment failure becomes a real and present danger, creating both significant financial and strategic risks for the organisation. How many organisations experience assignment failure, resulting in unachieved objectives and or early return?

Physical And Mental Wellbeing: A Duty Of Care

Additional risks for assignees and family members extend beyond the failure of meeting organisational goals, and include their personal wellbeing; physically, emotionally and mentally, regardless of length of assignment, or whether ‘live’ in person, or virtually. With the added risk COVID-19 places on international assignments, ensuring a Duty of Care in any assignment policy - and throughout the course of the entire assignment, whatever that assignment looks like - now takes precedence over other considerations. Preparation is recommended at every stage of the assignee lifecycle in order to enable talent to succeed, which may also include incorporating adjacent services and training support.

In response to ‘How Global Mobility prepares employees to understand host location norms’*, the highest approach:

34% Employees are required to self-manage their own cultural preparation. *Source: Santa Fe Relocation GMS 2019 Fig. 36 p.61

The Good News

Fortunately, there are ways to mitigate these risks, while equally supporting the objectives of the assignment, as well as the employee and family. Such targeted training - whether delivered pre-departure or post-arrival,

Interestingly, these solutions are readily available and typically at a cost less than

2% of a traditional long-term placement: assignment-related intercultural and language training.

live face-to-face or virtually, have shown a significant ROI, helping to mitigate the risks and ensure assignment success.

Virtual working has, for some, been their normal work methods for a long time. For others, it has been forced upon them as a result of the coronavirus pandemic Why Is Cultural Adaptation In Managing Virtual Assignments Critical?

Virtual working has, for some, been their normal work methods for a long time. For others, it has been forced upon them as a result of the coronavirus pandemic. Acknowledging - but not focusing - on the compliance aspects of potential immigration, employee taxation and corporate permanent establishment risks, we have highlighted the personal aspect of international assignments, whether live, or virtual. Throughout this article, we have considered the challenges and opportunities of investing in intercultural training for both internationally mobile employees, their families, as well as potentially their local counterparts. As international work arrangements shift and organisations re-think their talent investment strategies, intercultural effectiveness will become even more business critical. There are many familiar, and new, social media applications that enable teams to visually interact and socialise. However, the success of the team will, ultimately, be based on the dynamics of effective team collaboration, underpinned by recognising the cultural filters in place and demonstrating pluralistic empathy. How many organisations

are considering this as they opt for virtual rather than physical assignments?

Summary

We have highlighted the case for investing in intercultural preparation and integration between all stakeholders. As the impact of the return to the ‘new normal context’ in global work arrangements evolves, it will be critical to ensure that both preparation protocols reflect host country adaptation– for social and work arrangements, as well as in the methods used to prepare talent for their new roles and lives. • Within Global Mobility networks, there are increasingly frequent discussions around more flexible international work arrangements; increased numbers of split family assignments, virtual assignments, smarter use of short-term assignments, rotational assignments and hosted assignments, where the ’international’ remains in their home location! • What is absolutely critical in all of this, will be a stronger focus on the duty of care of employees, to recognise the additional pressures and need to support the wellbeing and security of employees who will either - voluntarily or involuntarily mobilise to thrive in these uncertain and variable times • Now is the time, if not done so already, to reflect on optimising your relocation management employee value proposition through more agile practices, re-imagining cultural integration for more virtual working - not only internally but also in client interactions • Human ingenuity will continue to adapt but, how more effective could it be with enhanced intercultural development? Will this also impact the talent selection processes by use of intercultural adaptability assessments - which many corporations already embed in their process? Latterly, talent selection has been based on who is available with the required skill sets, easy to deploy and able to hit the ground running. Differential investment in international talent decisions, for some organisations, will become less likely to be decided through informal networks and cost estimates. Recognising the full investment required to deliver a true competitive advantage will become more thoughtful—and by including intercultural training, the difference between success and failure. References and extracts from: Santa Fe Relocation’s white paper: ‘Cultural adaptation: Is it mission critical in the ‘new normal’ international work arrangements? Download the full white paper: www. santaferelo.com/en/mobility-insights/

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white-papers/cultural-adaptation-isit-mission-critical-in-the-new-normalinternational-work-arrangements/ Download: Santa Fe Relocation’s Global Mobility Survey 2019 ‘REVISION: Mobility through the looking glass’: www. santaferelo.com/en/mobility-insights/ global-mobility-survey/ Visit www.santaferelo.com for more information.

We have highlighted the case for investing in intercultural preparation and integration between all stakeholders

JOHN RASON

Group Head of Consulting, Santa Fe Relocation. Recognised as a thought leader and speaker on strategic international HR, talent management and Global Mobility, John has 15 years of global consultancy experience. Having previously held senior HR leadership roles in numerous global businesses across a range of industry sectors, John now works with global organisations to create value and improve the structure of Global Mobility programmes; focusing on aligning strategic objectives with operational delivery. John can be contacted at: john.rason@santaferelo.com.

DANIEL WERDER

Group Head of Client Development, Santa Fe Relocation. A seasoned professional with more than twenty years Global Mobility industry experience, in a variety of roles focussing on both operations and account management. Daniel has particular expertise in the intercultural and communication fields and has worked for large American and European Relocation Management organisations. Having lived and worked internationally for many years, he is passionate about sharing the impact of culture on international assignees as well as their organisations. Daniel can be contacted at daniel.werder@santaferelo.com.

The Global HR Conferences 2021 FOR IN-HOUSE GLOBAL HR PROFESSIONALS ONLY

We are hoping to organise two Global HR Conferences next year in

May & October 2021 To register your interest in these events and ensure you are sent an invitation please email helen@internationalhradviser.com and put The 2021 Global HR Conferences in the subject. Please note that these events are for Senior Global HR Professionals only, but there are sponsorship opportunities available, so if you are interested in being part of these informative events please email Helen Elliott – helen@internationalhradviser.com

REMOTE WORKERS

Remote Control - Ensuring Your Organisation Has A Handle On Policies And Benefits To Better Support Your Remote Workforce As we are six months post lockdown and with a rise in flexible working arrangements and remote working, how can HR manage such requests when working “from home” is in a different country? For many of us, remote working has become our new normal. Technology has enabled us to breeze through our meeting schedules with ease from our new temporary workspaces. Or are they temporary? A recent survey1 from the Chartered Institute of Personnel and Development (CIPD) revealed that the proportion of UK workforce who work from home continuously will rise to 22% post pandemic, compared with the previous rate of 9%. Business leaders are reviewing how these new patterns may benefit their strategies and models of working, reviewing office space leases and questioning the need for full occupancy. Employers are showing flexibility with their teams, and remote working continues to be a valid option for many. But how flexible should an employer be when employees are working remotely in another country? Can employers’ flexible new working practices extend to work anywhere? What if the employee is working in a location where the business does not have a legal presence or entity? We all have familiar examples of individuals getting stuck in locations when borders closed, or started new roles before being able to fully transfer to their new locations perhaps waiting for a visa service to reopen. Such cases were temporary and in most cases, easier to manage as the intention was always to move as soon as borders reopened. However, we are now six months post lockdown and in some parts of the world longer. You may have employees who have been temporarily located during this crisis who are considering a more permanent arrangement. Employees are experiencing increased family commitments, and accommodating requests for ongoing remote working are becoming more common.

A policy outlining the scenarios when such requests are feasible and can be accommodated may prove useful for line managers who want to keep their teams motivated and on board.

A key factor is whether your organisation has an entity in the location where your employee will be working. The simplest route would be to transfer employment to a host entity The willingness to support personal requests needs to be balanced with an understanding of the key issues: legal presence, employment rights, tax and social security withholding, payroll obligations, PE risk, right to work and employment benefits. To support your organisation’s retention goals, by ensuring your employees feel valued and can fully engage in their work, it

will be important for employers to prioritise addressing these questions. A key factor is whether your organisation has an entity in the location where your employee will be working. The simplest route would be to transfer employment to a host entity. This will ensure that the employee is paid in the right location, is paying tax and social security to the correct authorities and employment benefits are provided where they are needed. However, the situation becomes more complex when there is a lack of corporate presence in the new location. A common arrangement is to have the employee on a contract and payroll in one country (e.g.,UK) but working in another. This arrangement may seem the simplest approach, but means that any taxes or social security payments which may be due in the country in which they sit may not be being made. Benefits delivered in the UK are unlikely to be of use to an employee living in Belgium, for example. How does the employee access local services such as healthcare? Mandatory payroll and tax withholding will need to be managed in the host location usually through the set up of a shadow payroll, this of course involves greater administration and unplanned cost. Variances in rates of pay between the base country and host will also present issues if not reviewed and benchmarked. The following compliance areas will need to be reviewed and addressed: 1. Legal Rights – An employee with an employment contract issued in one country but working in another on a permanent basis is likely to raise questions regarding employment rights. An employee may gain rights in the country of work so a full assessment would be recommended to avoid any challenges later on. 2. Tax Withholding – Remote working is likely to trigger a tax liability in the country of work and even a double liability if there are cross border duties. There may be a requirement to file tax returns and complete registrations to remain compliant. Where does the social security liability exist and is the correct paperwork

INTERNATIONAL HR ADVISER AUTUMN

in place? For UK employers, what are the implications with Brexit? 3. Payroll Obligations – What are the requirements for payroll both in the country of employment and overseas? Such obligations need to be checked to ensure reporting is done accurately and the business remains compliant. 4. Permanent Establishment – are the activities of the employee giving rise to a corporate tax presence? A sales generating role on behalf of one entity, for example, may unintentionally create tax implications for the business in the new location as well as for the employee. 5. Right to work checks – Does the employee have the correct immigration status in the country in which they are working? If the employee’s right to work in a country is linked to their partner’s presence in that country, does this create a risk for the individual working for you? There may be an appetite to go ahead with setting up an entity. A costly exercise for one individual but worth exploring if business is expected to grow in the future. This approach also facilitates hiring future

A costly exercise for one individual but worth exploring if business is expected to grow in the future employees in the longer-term and works for a long-term investment. A Global Employment Organisation (GEO) offers a more efficient option if the organisation chooses not to go through the formal entity set up. Employment and payroll are managed by a third party in the host country acting as the employer of record. This ensures that payroll and mandatory requirements are adhered to correctly without the lengthy formal entity creation. Whichever route is most suitable, one of the most important areas to consider in any scenario are the employment benefits, and a review is essential. If an employee is not employed in their primary location then how do they access local services

such as healthcare? Are the insurances in place for the organisation sufficient to cover employees permanently located in a different location? Are employers failing to comply with local regulation? How flexible are the benefits available? Do they support employees’ financial, physical, and emotional wellbeing, particularly at a time of such significant change and in preparation for what is anticipated to be a period of economic downturn? Do they support a robust framework for delivery of Duty of Care? Do they maintain a positive culture upon which to ensure continued business success? Of particular focus for employers are benefits such as employee assistance plans (EAP), access to virtual medical services/ doctors, return home policies? How do your procedures, policies and benefits cover the costs associated with a pandemic and help mitigate the risk to your organisation’s wellbeing? Do your schemes offer access to testing, treatment or vaccinations? How does the new working arrangement affect the employee’s pension and retirement benefits? Are there restrictions on the right to maintaining this benefit with

SARAH LEVY

Senior Consultant, Global Mobility Advisory Multinational Benefits & HR Consulting Sarah_Levy@ajg.com As Senior Consultant in the Global Mobility Advisory team Sarah provides operational direction and advice to a wide range of clients, promoting flexible mobility programmes and cost effective solutions that ensure organisations remain compliant. Sarah advises on best practice in mobility policy, encouraging talent retention. Sarah has gained over 20 years global mobility expertise in both consulting and inhouse roles and spent three years in her early career working in Paris.

being overseas for a fixed period or longterm? Are there options for transferring the benefit to an overseas plan and if so, is it a Qualified Recognised Overseas Pension Scheme (QROPS)? Providing the right level of benefits comparable to the local market and the provision of services elsewhere within your organisation is key. A holistic approach to your people strategy that delivers the right benefits and compensation to your workforce will help you attract, retain and engage top talent and set your organisation apart as better than its competitors. With this strategic approach, your benefits will meet the business needs and equally support a focus on duty of care. Twoway communication with your employees on their benefits and the impact to their wellbeing is critical to maintaining their engagement. As the Mobility industry evolves to accommodate our new ways of working, it is clear that HR & Mobility teams need to have clear oversight and control over the policies, programmes and benefits that support remote workers. The issues are complex and require careful review and planning to avoid costly surprises later on.

MICHELLE BISHOP

Growth Leader, Global Mobility Centre of Excellence Multinational Benefits & HR Consulting Michelle_Bishop@ajg.com Michelle Bishop is the UK Growth Leader for Gallagher Mobility COE, Multinational Benefits Practice. She focuses on benefits provision for international assignees, including health, business travel, life and disability insurances. Prior to joining Gallagher, Michelle gained over 15 years of experience in international benefits, through consulting, insurance and HR roles.

Arthur J. Gallagher (Employee Benefits) and Arthur J. Gallagher (Wealth Management) are trading names of Gallagher Risk & Reward Limited, which is authorised and regulated by the Financial Conduct Authority but not all business carried out by the company is regulated. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Arthur J. Gallagher & Co and its affiliates, including Gallagher Risk & Reward Limited, do not provide accounting, legal or tax advice. © 2020 Gallagher

GLOBAL MOBILITY

The Growth Of The ‘Economic Employer’ Concept For many years, the Global Mobility profession have relied on the so called “183 day rule”. This so called rule assumes that there are no tax issues for an employee working on a short-term basis in a country other than their home country as long as the employee is not present in a host country for more than 183 days and that they are paid by their home location. However, the “183-day rule” is not actually a rule but rather an exception to the rule that tax is paid in the location an individual’s employment is exercised. Article 15 of the OECD Model Tax Treaty Convention (1), the dependent personal services article, provides that employment income is taxable in the country where the employment is exercised. However, paragraph 2 of Article 15 provides exemption to the general rule, and employment income may be taxable in the country of residency if the following three criteria are met: a. The employee is present in the other State for a period or periods not exceeding in the aggregate the 183 days in the relevant treaty period (e.g. calendar year, fiscal year, any twelve-month period), and b. The remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and c. The remuneration is not borne by a permanent establishment which the employer has in the other State. It is from this that the so called “183-day rule” has stemmed. However, in recent years, in determining whether this exemption will apply, more and more emphasis has been placed on determining whether conditions (b) and (c) have been fulfilled and questioning who should be considered the “employer” under the provisions of such double tax treaties. Is it the entity with which the employee has his/her legal employment contract, or should other aspects be considered as well? In 2010, the OECD revised its commentary relating to Article 15 and introduced the concept of the economic employer. The commentary plays an important role in this context, as it indicates that the "employer" of a globally mobile employee may not necessarily

be the legal employer. In determining who the employer is, other factors such as the following should be considered: (2) • Who has the authority to instruct the individual regarding the manner in which the work has to be performed? • Who controls and has responsibility for the place at which the work is performed • The remuneration of the individual is directly charged by the formal employer to the enterprise to which the services are provided • Who puts the tools and materials necessary for the work at the individual’s disposal? • Who determines the number and qualifications of the individuals performing the work? • Who has the right to select the individual who will perform the work and to terminate the contractual arrangements entered into

with that individual for that purpose? • Who has the right to impose disciplinary sanctions related to the work of that individual? • Who determines the holidays and work schedule of that individual? Based on this approach, substance should prevail over form. This means that the term “employer” should be considered in a broader sense and the whole context of the employment should be reviewed to determine which entity is the economic employer of the employee under the provisions of the treaty in order to be able to decide whether exemption under Article 15 can be granted to avoid host country taxation. Many countries such as Germany, Luxembourg and Sweden are increasingly considering not just the duration of the assignees stay but

Does the Country use the economic employer approach?

OECD Member State

China

Yes

United States

Not explicitly applied

Yes

Germany

Yes

Japan

Possibly (1)

Yes

United Kingdom

Yes

France

Yes

India

Yes

Korea, Republic of

Yes

Italy

Yes

Brazil

Canada

Yes

Australia

Yes

Spain

No clear position

Netherlands

Yes (3)

Yes

Russia

Possibly

(2)

Yes

1. Japan does not currently adopt the economic employer approach. However, employment income is considered Japanese sourced when remuneration is earned for services rendered in Japan, regardless of where or when the remuneration is paid. On this basis, the Japanese authorities would consider the facts and circumstances of particular cases.(4) 2. The Spanish Tax Authorities have not established a clearly defined position in relation to the economic employer approach.(5) 3. The Dutch Supreme Court has adopted an economic employer approach for the interpretation of the term “employer”. The Supreme Court has ruled that the host entity is considered as the employer for treaty purposes if the following conditions are met: a. The host entity holds a position of authority over the assignee. b. The host country/jurisdiction entity bears the costs; associated employment expenses are traceable and specifically and individually recharged to the host entity. c. The risks and benefits of the duties performed by the assignee are attributable to the host entity(6).

INTERNATIONAL HR ADVISER AUTUMN

also the nature of the work performed, who controls that work and who benefits from it. The table, on the previous page, provides an overview of the top 15 countries for business travel spending in 2017, as outlined by the Global Business Travel Association (GBTA), and whether they adopt the economic employer approach (3). It is clear from this summary table that when assigning employees abroad on short-term assignments, employers need to be mindful of the host country’s interpretation of the definition of employer for the purpose of determining whether an exemption from taxes will apply on employment income under the terms of the Double Tax Treaty. We discuss in more detail below the adoption of the economic employer approach by the following countries: • Germany • Sweden • United States.

The Economic Employer Approach In Germany

Germany fully supports the economic e m p l oye r t a xat i o n co n ce p t . ( 7 ) I n considering who is a seconded employee’s employer for the purpose of taxing rights, the German tax authorities do not rely solely on the civil law aspects of who is the employer, but also place weight on the economic considerations. A German company will be considered a seconded employee’s economic employer where the German company financially bears the wages for the work performed. Therefore, salaries that are paid by a foreign employer (who does not have a permanent establishment in Germany) but are recharged to the German company, would be subject to withholding tax in Germany. The same applies as of 2020, for salary that is not actually recharged but should have been recharged under an arm's-length perspective. The German company is deemed to be the economic employer and thus required to calculate and transfer the appropriate wage tax return to the tax office on day 1. (8) Many jurisdictions have taken a similar approach with looking at cross charging of costs as the deciding factor. Such an approach places emphasis on the need for global companies to be aware of where their employees are, what they are doing and for how long. Companies need to be tracking these employees and counting their days present in these jurisdictions.

The Economic Employer Approach In Sweden

Sweden’s government have presented a proposal to introduce the economic employer concept into law effective 1st January, 2021. If Sweden implements

the current draft proposal into law on 1st January, 2021, factors beyond who pays the employee’s salary would have to be considered in assessing who is the employer and identifying if the employee is liable to tax in Sweden when working there on a temporary basis. Under the current proposals, the government provides an exemption for employees working within a corporate group, if the employee works for a maximum of 15 days in a row or 45 days in total during a calendar year. (9)

Sweden’s government have presented a proposal to introduce the economic employer concept into law effective 1st January 2021 The Economic Employer Approach In The United States

The United States have not explicitly adopted the economic employer concept, but a non-resident alien will not be subject to tax on income received for personal services performed in the United States where the following three conditions are met:(10) a. The employee performs services of or under a contract with a non-resident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or the employee works for an office or place of business maintained in a foreign country or possession of the United States by a US corporation, a US partnership, or a US citizen or resident. b. The employee performs these services while they are a non-resident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year. c. The pay for these services is not more than $3,000.

Where these conditions cannot be met, most Double Tax Treaties with the United States will provide an exemption from US tax on employment income earned by nonresident aliens provided the following 3 conditions can be met: a. The individual is present in the United States for a period or periods not exceeding 183 days in any 12-month period that begins or ends during the relevant tax year. b. The remuneration is paid by, or on behalf of, an employer who is not a resident of the United States; and c. The remuneration is not borne as a deductible expense by a permanent establishment that the employer has in the United States. If a foreign person pays the salary of an employee who is employed in the United States, but a US corporation or permanent establishment reimburses the payor with a payment that can be identified as a reimbursement, neither condition (b) nor (c), as the case may be, will be considered to have been fulfilled and the US will deny this treaty exemption.(11)

Conclusion

It is essential to consider that the OECD issues guidelines, not legislation. OECD member countries are not required to follow its advice in drafting and interpreting treaties or local tax legislation. But it is certainly true that the definition of the economic employer is gradually being accepted by many countries, with some implementing it more vigorously than others. Challenges for international business travellers are increasing, and countries with new policies and guidance are upending the traditional 183-day principle. What is glaringly obvious from the above short analysis, is that companies with a mobile workforce need to be tracking and monitoring these employees. Employers will need to know on a real time basis where their employees are and what are the risks associated with it. Adequate records will need to be kept on all employees in relation to any tax positions taken. More recent developments in the areas of Remote Working will only exacerbate these issues. If your employees have been working remotely during the Covid-19 pandemic, they may already have triggered economic employer liabilities – remember they are ‘working’ not ‘visiting’. Problems that were traditionally part of business traveller management could now be part of remote worker policy. While many tax authorities have issued holding notices about being flexible on overstays or displacement during Covid-19 Spain has recently broken with this policy

GLOBAL MOBILITY

More recent developments in the areas of Remote Working will only exacerbate these issues. If your employees have been working remotely during the Covid-19 pandemic they may already have triggered economic employer liabilities – remember they are ‘working’ not ‘visiting’ and has announced that they will not make exceptions for days of presence due to Covid-19. Companies that have a distributed workforce should now carry out a ‘Look Back’ audit of their displaced workforce to gather data around potential thresholds that have been or may be about to be breached. To discuss how we could help you with such a ‘look back audit’ contact us or any of our partner company Services, BDO Quicktrip, Weichert Global Organizer, Santa Fe Business Travel Tool, Altair Orbit, Blick Rothenberg International Trips App, Baker Tilly Travel Mapp, GTN Whereabouts, Aires TravelTrax, AAB, tpa and more to come. We have a robust technological solution that can be deployed in days and results achieved in hours.

References: (1) The OECD Model Tax Convention serves as a guideline for establishing tax agreement between members of the OECD. (2) https://read.oecd-ilibrary.org/taxation/ model-tax-convention-on-income-andon-capital-2017-full-version_b0354940en#page16 (3) https://www3.gbta.org /l/5572/2018-0813/5wq3k1 (4) https://taxsummaries.pwc.com/japan/ individual/income-determination (5) https://home.kpmg /xx/en/home/ insights/2011/12/spain-income-tax.html (6) https://home.kpmg /xx/en/home/ insights/2011/12/Netherlands-incometax.html (7) https://www.pwc.com/gx/en/services/ people-organisation/global-employeemobility/global-mobility-country-guides/ assets/pwc-ias-folio-germany.pdf (8) h t t p s : / / t a x s u m m a r i e s . p w c . co m / Germany/Individual/Incomedetermination (9) h t t p s : / / w w w . r e g e r i n g e n . se/49e251/contentassets/ c361b7ec783a48c7b7291fa84cb69ecf/ ekonomisk t-arbetsgivarbegrepp-forandrade-skatteregler-vid-tillfalligtarbete-i-sverige-prop.-201920190.pdf ( 10)https://www.irs.gov/individuals/ international-taxpayers/nonresidentaliens-exclusions-from-income (11) www.irs.gov/pub/irs-pdf/p515.pdf.

We have a robust technological solution that can be deployed in days and results achieved in hours

JEANETTE RYAN

Head of GT Global Tracker’s Research department. Jeanette has been working in the Tax and Immigration field for 20 years. Her experience crosses multiple jurisdictions and includes immigration and tax application processing and the provision of technical and compliance advise to large multinational corporations to small indigenous companies and private individuals. Before joining GT Global Tracker, Jeanette worked for a ‘Big Four’ tax firm for 9 years and spent 5.5 years working in two global immigration firms in London. Her time was spent providing Immigration advice to large multinational companies and leading a team of Immigration advisors dedicated to these accounts. Jeanette is an AITI Chartered Tax Adviser (CTA).

SIOBHAN MCDONNELL

Siobhan McDonnell is our Tax and Social Security Research Manager. Siobhan trained and worked in one of the Big4 accountancy firms for a number of years, advising large multinational clients as well as small indigenous companies on tax technical and compliance matters. Siobhan has also spent several years working for a large Fortune 500 multinational company in their International Tax department while she lived in the United States. Siobhan is a Fellow of the Institute of Chartered Accountants in Ireland and an AITI Chartered Tax Advisor.

INTERNATIONAL HR ADVISER AUTUMN

Business Transformation Through People Engagement, Innovation And Performance I often start my speeches with a seemingly simple question to the audience: ‘How many of you know exactly how many employees you have as of today? Please raise your hand’. Surprisingly, on average, only about 35-40 per cent raise their hands. I then ask those who have their hands up to keep them up for the follow-on question: ‘How many of you know exactly how many employees you will need 18 months from now, and what type of skills they will require?’. Almost all the hands go down, followed by some nervous laughter. Add to this that most organisations struggle to know exactly where their workforces are deployed around the country (or the world) on a given day, and you have a formula for, at minimum, confusion and at worst, dysfunction. Fact is, most leaders in organisations do not have a basic grasp of the make-up of their workforces, both now and in the near future. From the workforce’s perspective, things are equally as challenging. Being forced, in many cases, to work from home trying to get stuff done while living at the centre of a maelstrom of data and technological change, it’s no wonder that people productivity has been declining in most regions, for years. With all the “amazing” technology that we have, one would think we must be significantly more productive than we were, say, 20 years ago. Unfortunately, this is not the case. It is true, studies show that technology and gadgets have made us more productive at home, but when we get to work, it’s like 1997 all over again. We sit at a desk with a PC, a mouse and most of us still use Windows as our interface to the organisation. Additionally, most organisations are constantly throwing new systems and processes at the workforce, with very little training or explanation of what they are supposed to do with the latest system. So, it’s no wonder that most economists are finding that increases in human productivity levelled off around 2004, and are now heading downward.

There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don't like because you think it will look good on your resume. Isn't that a little like saving up sex for your old age? - WARREN BUFFET

This story of work in 2020, is illustrative of where we are today, yet few would argue against the fact that this is a fundamental aspect of running a business effectively. In fact, many would argue that as a result, they feel like pilots at the helm of an aircraft, in a fog, with faulty navigation systems, with passengers (employees), hanging on for the white-knuckle journey. An extremely uncomfortable position to be in while the turbulent winds of an unprecedented global health and economic crisis buffet us around. So, this begs the question: what would the world of work be like if we could turn technology and technological change to our advantage and use it to match the perfect person to the perfect job in the perfect location? A job that gives purpose, the opportunity to master new things, and the opportunity to be left to get on with that work, without too much interference by others? What if we change the mindset (and processes) to think differently about bringing in new talent and deploying it at the right time, right place, right skills, right motivations. Most would say, this is impossible in today’s workplace – the tools we have are very one dimensional, and are not set up to think and do, differently. Add to this, today’s economic realities in a crisis, where there is a complete focus on quarterly results, profits, cutting costs, growing the top line, saving the taxpayer money (in Public Sector) etc., override many people’s desires and motivations; just get on with the work! Produce more with less, meet objectives, meet the deadline, and at all costs, deliver! Most of us get caught up in these whirlwinds and we put heads down and plod through, quarter after quarter, a treadmill. But does the world of work have to be this way? Is there a different way to do things, a different way to look at things? There is a certain truth to what Warren Buffet says here, however, when one must worry about a mortgage, school fees, a car payment or a student loan to pay back, the mind becomes focused on this at the expense of aspiration and desire. The real reason that so many of today’s workforce ends up in a rut, is far more complex than just pulling up your boot straps and going out to find that perfect job. In fact, many of the reasons people fall into uninspiring work are outside of their control.

PEOPLE ENGAGEMENT

If you think about the current state of the world of work, the method by which people find careers and careers find people is largely unchanged since the beginning of the Industrial Revolution If you think about the current state of the world of work, the method by which people find careers and careers find people is largely unchanged since the beginning of the Industrial Revolution. True, today we have LinkedIN and some digital job posting boards, but largely the process is the same as it has always been: employer posts job, prospective employee finds posting (mainly online, these days) and applies. From there, the process of interview and assessment, selecting candidates and getting them onboarded, is also largely unchanged. It’s a very twodimensional world controlled by supply and demand, navigated with a bit of luck (for both employee and employer). Highly inefficient, time consuming, and rarely gets the right person, with the right skills, with the right motivations in the right job at the right time. Throw in the whims of the normal business cycle: growing economy followed by shrinking economy, (supply and demand) and the complexities multiply. This traditional way of finding and deploying the workforce in constantly changing market conditions, I would argue, is the fundamental reason why so many people find themselves doing uninspiring work and feel trapped in it. Pull up your bootstraps and go find that job! Good luck with that. The other challenge organisations deal with is getting the right people in the right place at the right time. Global mobility of the

workforce is at an all time high. With barriers to moving talent around the globe falling in most regions, there is a great opportunity to turn a challenge into a major opportunity. If we can set aside a local focus on talent and expand it to regional, even global, the opportunity to increase engagement of the workforce, and subsequently, performance, is great. In the 21st century, more people are willing to move to new locations to find that perfect job. In my opinion, once we turn the corner on the Coronavirus Pandemic, the desire to move around to find that perfect role will be great. Are you ready to facilitate this in your organisation?

Everyone has been made for some particular work and the desire for that work has been put in every heart - RUMI So, how do we capture these opportunities? What if we created a workforce “marketplace” that not only balances supply and demand of resources, but also maps people’s skills, motivations, aspirations to the right job at the right time in the right place: Maybe a simple “equation” can illustrate a way forward: People Engagement, Innovation and Performance (PEIP): • Right people + Right place + Right skills + Right time + Right motivation = PEIP PEIP is a strategic capability that not only creates higher performance it creates a more engaged workplace. It is, first, a new mindset, second a set of new processes to support the organisation and lastly, underpinned by next generation HR Technology (for example, SAP SuccessFactors, or Workday, or similar). Who doesn’t want to work in an organisation that makes an effort to work with employees to optimise them, their skills and their career aspirations? A workplace that tries to align

people to what they do best. An engaged workplace is a fun place to work, but it is also a competitive advantage. Some of the highest performing companies like Google, Microsoft, Accenture, IBM and SAP, have implemented PEIP strategies to create competitive advantage, and this is reflected in their people engagement scores as well as share price performance. The chances that people “made for some particular work and the desire for that work”, find and succeed in that work, go up dramatically. The benefits for individuals, organisations, and society at large, would be tremendous. Imagine then, if we “turbo-charged” this equation with emerging “intelligent” technology; using AI and Machine Learning to further maximise the efficiencies of PEIP, individuals and organisations leveraging smart technology to find each other. People doing jobs they love for organisations they love will be highly productive and great places to work. Lastly, also imagine that once in place, doing desired work, people could leverage smart technology to help them be even more productive and engaged. Robots working for us, and with us, to make work more fun and fulfilling. Sounds like science fiction, but it is not, the technology to make this happen is available today, and the time for this to happen is here and now. Additionally, demographic and other trends in the work environment are rapidly emerging alongside the latest technology trends and are creating a “perfect storm” of challenge, but also opportunity. One where “everyone has been made for some particular work and the desire for that work” can be realised.

TIM RINGO

Tim Ringo is an author, speaker, board advisor and senior executive. His new book “Solving the Productivity Puzzle” is out now www.timringo.com.

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International HR Adviser Autumn 2020

Articles inside

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Business Transformation Through People Engagement, Innovation And Performance

The Growth Of The ‘Economic Employer’ Concept

Global Tax Update

Remote Control - Ensuring Your Organisation Has A Handle On Policies And Benefits To Better Support Your Remote Workforce

Virtual Assignments: Future-Proofing Your Mobility Programmes

Long-Term Incentives: Mastering The Challenges Of Tax

Cultural Adaptation: Is It Mission Critical In The ‘New Normal’ International Work Arrangements?

Remote Working: Setting The Right Strategy