Global mobility compliance is the ability for companies to expand to and operate in disparate regions, while remaining compliant with all local regulations.
Because each country has its own set of rules and regulatory agencies, global mobility compliance is a demanding (but necessary) task for any company that wishes to function internationally.
For companies looking to improve their global expansion strategy, let’s break down some of the inherent challenges to global mobility compliance and tips for managing it.
Global mobility in a modern world
For fast-growing companies, rapid expansion into new international markets comes with significant and complex considerations, including workforce management, data privacy and cyber security.”
Thriving requires growing multinational companies to be adaptable and agile. For instance, they must:
- Navigate ever-shifting national tax regulations
- Manage local regulatory environments and their implications for outbound and inbound assignees
- Understand the fundamental risks of noncompliance, be they direct penalties, reputational harm, or the ability to operate
- Ensure robust data compliance and management
Embracing a global mobility compliance ethos can ensure that there are no expensive setbacks that derail expansion. And for that, you must consider and address the major challenges to compliance.
Challenges of global mobility compliance
Traveling or relocating from one country to another without a clear understanding of the local regulations can negatively affect efficient mobile workforce deployment.
When companies send employees abroad as short-term travelers, secondees or long-term expatriates, managing compliance can be expensive, labor intensive and time-consuming.
Compliance challenge 1: Taxes
One of the greatest hurdles of sending an employee to a new location involves taxes. Whenever you dispatch someone to foreign soil, you must account for national and regional tax laws.
Organizations not only need to understand the local regulatory environments; they must also consider the implications those regulations have for all their mobile employees.
Additionally, global mobility entails rigorous bookkeeping. You must identify and correctly code all potential forms of remuneration, including:
- Fixed pay
- Deferred compensation
- Cash benefits
- Home entitlements
- Share awards
- Pension contributions
All information must be properly recorded and filed while accounting for the specific regulations in both the home and host country. PWC explains it well in a recent paper on global mobility:
“Corporate tax departments should be involved when deciding the proper employment structure for any global mobile employee and how such structures should be implemented (e.g., proper documentation). Employment structures are a critical step to support desired tax and risk management positions, impacting both corporate and individual-level taxes.”
Permanent establishment risk
With globally mobile employees, you increase the possibility of unwittingly creating a permanent establishment (PE). When this occurs, companies are required to:
- Register the company as a taxpayer
- Remit taxes
- File local country returns
- Pay corporate income taxes
Even short-term business activities can trigger permanent establishment. Should an employee make a continuous return to the foreign location to perform company work, that could be a cause. Or if you have a mailing address or a bank account attached to the organization, that too could provoke PE.
Companies that wish to avoid permanent establishment risk must tread carefully. They need to understand the structure and nature of any short-term international assignment.
Compliance challenge 2: Payroll
Managing payroll domestically can be complicated. But when you also factor in regulations from additional countries, it becomes even more complex, requiring a business to collect all the relevant data, including:
- Employee earnings
- Business tax rates
- Currency exchange rates
- Social security obligations
- Reporting requirements
Additionally, companies must determine when withholding obligations commence and end. Knowing that you’re fulfilling global and domestic payroll obligations allows you to operate confidently. Payroll 360 solutions are available to help your company more easily navigate these new processes.
Compliance challenge 3: Immigration and visas
If you wish to operate in a global economy, you must be able to move your most critical assets—your employees—quickly and easily across borders. For starters, you need to secure work visas and residency permits, and to make sure that the employee will be able to travel unhindered.
This requires staying up to date with constantly changing immigration policies around the globe. Failure to comply with immigration laws can affect your ability to operate, create unintended tax liabilities, and impact employee satisfaction.
Benefits of global mobility compliance
Digital advances and data proliferation have unlocked possibilities that were previously unimaginable. Now, it’s more feasible and cost-efficient than ever for companies to expand and establish an international footprint. That is, if they have a global mobility compliance program in place.
By installing the right program, you can:
Manage risk – Companies don’t necessarily require a global mobility program to deploy workers to new markets and locations. However, without a program, they expose the employee and the company to various legal risks, including:
- Being denied entry or immigration status
- Becoming subject to tax in several locations
- Creating a taxable presence
- Damaging their reputation
- Impacting their ability to do business in country
Increase speed to market – To remain competitive, companies must be agile and able to deploy talent into existing and emerging markets at a moment’s notice. Having procedures in place between an organization’s various departments helps ensure that immigration, tax, payroll and relocation go smoothly.
Reduce costs – Careful planning can help identify regulations that add avoidable costs—whether domestic or international—particularly in relation to social security and taxes.
Improve employee satisfaction – Moving to a new place can be a daunting and frustrating experience for employees, especially if they lack relocation support. They have to consider immigration, taxes and housing plus, how they’ll get around, where their kids will go to school, etc. When they have the support they need, you reduce the likelihood of losing talent.
Understand data – Armed with technology, you can gather, organize and analyze data relating to mobile employees. This makes it easier to share information throughout the organization, make better decisions, and ensure that the right employee is sent to each location.
Steps toward managing global mobility compliance
There are three primary steps companies should take to promote global mobility compliance. These include:
Bookkeeping and data management – Staying organized is one of the most critical steps in achieving global mobility compliance. Payroll and taxes must be logged accurately and updated frequently. Accurate data and reporting ensure transparency and help maintain a consistent understanding of the company’s goals.
Here, selecting the right technology platform is of the utmost importance. Look for a system with:
- Data workflow linkage
- Accurate terminology
- Robust reporting functionality
- Integrated audit controls
Proactive management – Companies must be prepared to identify red flags and address them before they turn into a compliance issue or tax liability.
Eliminating noncompliance – Common compliance issues that are often avoidable include:
- An employee entering a country without the required paperwork
- Unpaid taxes or tax penalties
- Failure to uphold tax withholding and reporting obligations
- Expiring or expired immigration status
A guide to mobility compliance
Managing global mobility compliance can make all the difference between surviving and thriving in an international market. But wading international regulatory waters without expert guidance is nearly impossible.
Partnering with a global employment solutions provider that has expertise in your target local markets can help ensure compliance on payroll, tax and other HR regulations. These partners often act as the employer of record, assuming responsibility for employment compliance in the new markets—freeing you to focus on the strategic activities that provide a competitive advantage.
Want to learn more? See what actionable steps your organization can take to expand business internationally.