Why hire an international payroll service? Key Talent Management Considerations
International Payroll – During the worst of the bank crisis in 2008, it came to light that Swiss bank UBS was assisting ac- count holders in secreting fortunes away from the eyes of taxing authorities. As a result, in 2009, they were fined $780 million by the U.S. government1. As a direct outcome of this, claims Fox Business News, close to 2,000 expatriates renounced their U.S. citizenship in 2011, compared with only 235 in 2008 when the UBS case first hit the front pages2.
This group of expats included Facebook co-founder Eduardo Sevarin, who renounced his United States citizenship last September and expatriated to Singapore. The move, according to estimates, saved him $67 million in personal taxes. In response to this and similar scenarios, U.S. senators have proposed an “exit tax” that would remove such monetary incentives3.
These news items highlight not only the increase in expatriation to keep one’s money from being taxed, but also the increased scrutiny of expatriates by tax authorities, which has considerable implications for companies with employees on foreign assignment.
Consider the not-so-simple matter of tax advice. Although HR professionals are warned not to provide this, asking an employee to accept an international assignment virtually guarantees tax questions. Requests by employees to be “kept-whole” are only fair and natural, and need to be ad- dressed with accurate and sophisticated information.
However, this can be a challenge.
What typically begins as a small expatriate program administered by human resources leaning heavily on its in-house payroll group often changes, and the program outgrows its own capabilities. At the same time, country combinations are continually introducing new demands and levels of complexity – including continually shifting rules on taxable income – to an already busy and dead- line-driven payroll department.
Although many large corporations employ international accounting firms to track tax compliance and assist assignees in filing various related tax returns, this does little to alleviate the overall administrative burden associated with foreign assignments. Corporations wishing to fully reap the benefits of a globally mobile workforce should consider the advantages of employing an international payroll provider to manage international payroll in the very earliest stages. This will free your HR function from the minutiae of foreign tax, payroll, and compliance, enabling it to properly focus on the overall goals of the assignment program.
Companies undoubtedly reap rewards when encouraging an internationally mobile workforce; the benefits of tapping into emerging markets are irrefutable. As companies begin to leverage their international talent, they often face the challenges of maintaining their reputation and commitment to ensuring global compliance.
One of the key challenges in growing internationally is international tax compliance. This issue was in the spotlight during the development of the Sarbanes Oxley legislation introduced in 2002. As a result, many corporations that previously employed major international accounting firms employ separate firms to perform the corporate audit functions and manage international tax compliance.Download