Editor's Note: As
stated in Part
I of this article series, companies
trying to establish a global presence are often faced with a dilemma.
They realize the need to develop their expatriate presence abroad
and seize opportunities. At the same time, overseas assignments
represent a tremendous cost center.
However, as Part
II of this article series explains, there a number of areas
that companies can
monitor closely to ensure that they are not "incurring
added expenses or overlooking costs that can be recouped."
• Tax equalization. When an employee goes
on international assignment, employers often choose to assume liability
for foreign taxes, which puts the assignee in a neutral position
during the assignment to ensure that he or she neither suffers
financial hardship nor collects a windfall as a result of varying
tax structures in different countries. Employers typically pay
taxes in the home and host location and deduct a hypothetical tax
from the employee’s pay. The hypothetical tax is an estimate
of the taxes the employee would have paid if he or she had continued
working in the home country. On an annual basis, companies should
monitor and reconcile these tax payments to identify instances
where employees may have been overpaid or underpaid in terms of
tax equalization.
• Deposits for expenses. Some international
locations require significant upfront deposits on housing and rental
cars. Companies can use an automated solution to track and manage
these deposits and initiate a collections process after an assignment
ends rather than risk writing these funds off as a loss.
• Assignment budgets. Using a technology
solution to manage budgeted versus actual expenses of an assignment
can help identify areas where costs are too high or which assignment
locations cost the company the most. In turn, this information
can help companies determine how they can reduce expat packages
on an individual or geographic basis. In addition, ongoing monitoring
and tracking can serve as an advanced "warning" system
to indicate when the dollar amount that was initially set aside
for the assignment is being approached.
• Fees paid to vendors. Companies can
track payments to vendors for “used and unused” services
related to relocation, as well as for services provided throughout
the term of an assignment. These services include everything from
transportation and moving costs to programs to help the expat’s
family adjust in the country of assignment (i.e., language services
and employee assistance programs). In addition to helping better
manage assignments, companies can create an aggregate report on
fees paid and use this information to negotiate better pricing
when renewing vendor contracts.
Qualities of a Best-of-Breed Solution
Multinational companies should look for a number of core features
when choosing a comprehensive global compensation solution, including:
• Technology Partner. Companies should
look beyond purchasing “out-of-the-box” solutions from
a vendor and toward engaging a technology partner that understands
the complexities and nature of administering compensation for domestic
and expat populations.
Flexibility and customization are integral in a global compensation
solution. While multinational companies may share some commonalities,
there are widespread differences in organizational structure (i.e.,
assignments and management hierarchies), compensation formulas,
and policies. Flexibility in a compensation and payroll solution
is paramount simply because each end-user is different.
• Proactive Support and Client Service. Of
course, no best-of-breed solution is complete without a support
and client service component to ensure effective implementation.
Support should also be evident on a proactive basis to ensure the
ongoing efficacy of the solution—i.e., periodic follow-up
is automatically conducted in addition to providing immediate response
to inbound calls from clients requesting assistance or information.
Ongoing communication also ensures that client needs are addressed
and, if necessary, enhancements are made to products or services.
Finally, support staff should speak your language—i.e.,
they should not only be familiar with the technology, but also
with the challenges multinationals face in administering and managing
compensation in a global landscape and among different countries.
• Flexible Technology Platform. A web-based
Application Service Provider (ASP) can manage and deliver application
solutions to multiple entities from data centers across a wide
area network. An ASP also helps companies better manage IT costs
by providing predictable expenses for applications and services
and by reducing the total cost of technology ownership.
By freeing companies from the complex and time-consuming burden
of technology management, ASPs also help end-users better focus
on their core business requirements and avoid the risks of making
costly planning and implementation errors.
About the Author: Thomas
Shelton is Founder and Chief Executive Officer of HRToolbox,
Inc. (Atlanta.) For more information, e-mail twshelton@hrtoolbox.com,
or visit http://www.hrtoolbox.com
|
