Delving deeper at compliance and duty of care in global mobility

Written by
Changeboard Team

23 Sep 2015

23 Sep 2015 • by Changeboard Team

Tightening your global mobility function

The diversity of social security, taxation and employment laws, rules and regulations around the world is staggering. Navigating these different systems is one of the key challenges of global mobility (GM) functions. These different business systems are highly dynamic and HR staff should have constant updating and training. Therefore, it is small wonder that a high percentage of the more specialised and legally sensitive work is outsourced. In addition, the tensions between risk management, the orientation to reduce organisational and individual exposure and the interests of the business can run high, resulting in GM professionals being in a charged force field.

Individuals often want to avoid or minimise legal or regulatory processes and may regard the GM work as bureaucratic. Line managers tend to see certain processes as time consuming ones which get in the way of other duties. Organisations are normally willing to comply with the contextual constraints but may not track certain international assignees. For instance, frequent business travellers sometimes enter countries on a tourist visa when they should in fact have a business visa, etc. In short, the ‘expert on due diligence’ role of GM can be highly taxing for HR professionals and may be little appreciated by senior managers and expatriates alike.

Immigration Compliance

Immigration compliance work is highly important for multinational corporations (MNCs) in order to avoid costly problems with government immigration services, home office officials and other government employees. According to RES Forum research, about half of global organisations (52%) have mainly outsourced immigration compliance work with only 11% managing this work in-house. The others use a mix of own and outsourced service provision. Overall, the risk tolerance for immigration compliance can be categorised as low to medium.

It appears that several companies had a low tolerance for assignee-related immigration risks but were willing to take more risks for business travellers. However, several GM professionals suggested that their company’s sensitivity, or understanding of the risk, was low in the first place and that the GM function, consequently, was seen to be a barrier to speedy implementation of business plans and relocation activities.

23% of organisations do not track their business travellers, while the majority of organisations use various sources of information to find out about the international travels of their staff. Amongst those, information from corporate travel providers (23%) and the business units of travellers (13%) is more common than, for instance, the reliance on notification from employees (5%). Interestingly, only 26% of organisations think that the level of awareness of immigration compliance risk by HR and business stakeholders is good or very good. In turn, 34% think this awareness is poor or very poor.

Overall, it seems possible that a sizable minority of companies (28%) that do not track business travellers or rely on their own reporting, expose themselves to some level of risk in relation to immigration, working rights and taxation obligations in foreign countries.

Employee Tax Compliance

Three quarters of all MNCs outsourced their tax compliance work with only 2% managing these tasks mainly in-house and the rest using a mix of approaches. The low risk tolerance in the area of tax compliance was similar to immigration work.

Only a minority of MNCs described the process of gathering year-end compensation and assignment benefit data for the purposes of filing tax returns as working well or very well (45%). In turn, 20% outlined that the process was poor or very poor with the remainder pointing to an adequate process. Clearly, there is room for improvement with GM professionals complaining about it ‘taking too much time to collect the data’, having ‘no formal process’, it being ‘too administrative’, perceiving it to be ‘too manual’ or not having a ‘global system to store or retrieve the [necessary] data’. This situation is presumably not helped by half the MNCs estimating that the level of awareness amongst their HR/business stakeholders on employee tax compliance risks is poor or very poor.

Corporate Tax Compliance

The RES Forum survey also explored corporate tax compliance work. Corporate taxation is predominantly managed by in-house resources (53%) and it is much rarer for it to be done solely by a specialist provider (20%). In about a quarter of cases (27%) both in-house professionals and outsourcing specialists cooperate. Again, the data shows a low risk tolerance of MNCs in this compliance area.

Surprisingly, only about 15% of HR/business stakeholders are seen by their GM colleagues as having a good or very good awareness of corporate tax compliance risks. For instance, sometimes charge location decisions are made without consultation with tax specialists.

Social Security Compliance

In addition, social security compliance issues were explored in the survey. 36% managed these compliance processes mainly in-house while 42% mainly outsourced these. As with other compliance areas, mixing both in-house and outsourcing provider services was uncommon (22%).

62% of MNCs had a low risk approach to social security compliance while less than one in ten companies would tolerate high risk. In turn, most organisations thought that the level of security compliance risk awareness amongst HR/business stakeholders was at least adequate (55%). However, this left a substantial percentage of MNCs thinking that this risk awareness was poor or very poor (45%).

Expatriate Payroll Compliance

About half of organisations (47%) manage their expatriate payroll compliance in-house with only about a quarter mainly outsourcing this (27%). However, while there is likely to be a high level of expertise within these MNCs, there are still a number of challenges.

Duty of Care

The duty of care of employees is an important HR and organisational responsibility that is especially pressing when staff work outside of their country of origin. The RES Forum explores general planning and reaction issues in relation to humanitarian and other crises and recently investigated the Ebola planning and response of its member organisations. 

A third of organisations in a recent survey were operating in West African countries that experienced an Ebola outbreak and 44% of companies had comprehensive medical insurance cover that included medical evacuation for worst case scenarios.  It seemed that only 32% of companies definitely had alternative work plans should Ebola affect their organisation directly. Some organisations restricted international (and sometimes local) travel in order to contain some risks and almost one in ten banned all new expatriate staff going out to Ebola affected regions although little evacuation activity was undertaken. Only 17% of companies indicated that they had evacuated international assignees with hardly any companies (4%) evacuating local employees. Overall, however, it seems as if some organisations left themselves and their local staff exposed to a relatively high risk in West Africa.