International assignment policies - Grant Thornton LLP

Cost Effective Management of a Global 

Workforce 

A Handful of Expats – A Fistful of Dollars? 

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Presenting 

Linette Barclay 

IES Senior Manager, 

Houston 

Beth Penfold 


Chicago 

Jerry Zukauckas 

IES Director, 

Atlanta 

Panelists 


Brooke Schnitker 

IES Senior Associate, 

Chicago 

Peter Sid 


New York - Midtown 

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Poll 1 

How many employees are in your global mobility 

program? 

A. Fewer than 10 

B. Between 10 and 50 

C. Between 50 and 150 

D. Between 150 and 300 

E. More than 300 


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Learning objectives 

• Recognize how to design a standardized global workforce 

policy 

• Identify essential ingredients of assignment letters 

• Be aware of how to manage payroll details for cross 

border employees 

• Identify and manage risk of stealth 

expatriates 


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Agenda 

• International assignment policies 

• Secondment agreements and assignment letters 

• Managing the payroll details 

• Stealth expatriates 


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International assignment policies 

• Overview 

• The value of an IAP 

• Creating an IAP 


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Poll 2 

Does your organization have a written international 

assignment policy that applies to all assignees? 

A. Yes 

B. No 

C. Sort of – individual ‘deals’ are negotiated 

D. Don’t know 


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International assignment policy - overview 

• Written statement of policy for the organization’s 

international assignees 

• Comprehensive guide to direct the administration of all 

aspects of an international assignment 

• Components – Will be unique to each organization and can 

include: 

Pre-assignment policies 

IA compensation 

Tax equalization policy 

Repatriation 

General policies 

Uniform assignment letters 


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The value of a written IAP - case study example 

Facts: 

International Inc has three individuals on assignment from the 

U.S. to Country A. All are executives operating at a similar 

level of responsibility. They are married with school age 

children; the spouse and children accompany the executives 

to the international assignment location. 


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The value of an IAP – Case study example 

Compensation/Benefit Exec 1 Exec 2 Exec 3 

Base salary/bonus X X X 

Home leave trips 1 per year 2 per year 4 per year 

Housing allowance None $10,000 All rent paid 

Cost of living allowance $5,000 $10,000 $15,000 

Tax equalization No Partial Yes 

Relocation allowance Limited $5,000 Full 

School allowance (children) None Partial Full tuition 


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The value of a written IAP 

• Standardization – Manage exceptions 

• Consistent with business objectives of the organization 

• Enhances communication and understanding 

• Eases administration 

• Controls costs 


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Creating an IAP – the process 

• Use a team approach to devise a policy – include 

stakeholders and experts: 

Mobility Payroll Security 

Tax HRIS Benefits 

Accounting Immigration Transition 

• Assess and determine objectives of the policy 

• Address assignment types: long term; short term; 

commuter; permanent transfers 

• Benchmarking – General and custom 

• Implement; evaluate; revise; improve 


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Agenda 

Questions? 






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The value of secondment agreements and 

assignment letters 

• What should be included in a secondment agreement or 

assignment letter? 

• Why is it important to use a secondment agreement or 

assignment letter? 


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Poll 3 

How familiar are you with secondment agreements and 

assignment letters? 

A. Very familiar: We issue secondment agreements or 

assignment letters for all of our international assignees. 

B. Somewhat familiar: We typically only issue assignment 

letters for exceptional cases. 

C. Not familiar at all: We never use assignment letters. 


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Meet Frank Jones, HR Manager 

• Frank coordinates international assignments within 

ABC Company 

• He knows the secondment agreement includes 

the general terms of the assignment 

• He has heard complaints from the assignees 

that the letter is too general and does not cover 

all the aspects/issues 


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Frank asks… 

“What should be included in the secondment agreement 

or assignment letter?” 

• Basic information and assignment details 

• Additional information 


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“What should be included in the assignment letter?” 

Basic information and assignment details: 

• Assignment location and duration 

• Compensation (base salary, bonus, incentive 

compensation) 

• Assignment allowances (Host country housing, 

transportation, COLA, home leave, relocation) 

• Other benefits (Health Insurance, pension) 

• Tax matters – U.S. and foreign / Tax equalization 


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“What should be included in the assignment letter?” 

Additional information: 

• Career management 

• Personal matters (visa process, bereavement leave, 

spousal assistance) 

• Taxation of personal income / Personal tax planning 

• Treatment of personal residence/home 


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Frank asks… 

“Why should we use a secondment agreement or 

assignment letter? It seems like a lot of extra 

administration.” 

• Set clear expectations and identify responsibilities 

• Risk management 

• Document intended length of assignment – Aids tax 

planning in home and host country 

• Manage cost 


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Frank agrees… 

“A written assignment agreement with details of who will be 

responsible for the foreign taxes on all the assignment 

allowances would definitely be helpful. It would avoid time 

consuming and costly misunderstandings.” 


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Agenda 

Questions? 






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Managing the payroll details 

• Who is the employer? 

• Shadow payroll issues 

• U.S. form W-2 reporting 


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Poll 4 

How comfortable are you regarding your company’s 

payroll reporting in both the United States and the foreign 

country with respect to your international assignees? 

A. Very comfortable: I am confident we have appropriate 

payroll reporting in both the US and the foreign country. 

B. Somewhat comfortable: I believe we have the reporting 

correct in the majority of cases. 

C. Not comfortable at all: We could use some assistance with 

the payroll reporting for our international assignees. 


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Frank asks… 

“Why are the payroll issues for our international 

assignees always so complicated? I spend too much 

time working with the payroll manager on just a few 

individuals.” 

• Identify the employer, as well as where the pay will be 

delivered 

• Address foreign withholding obligations – Possible shadow 

payroll 

• Ensure complete U.S. form W-2 reporting 


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Managing the payroll details 

• Often the home country employer will continue to pay the 

assignee’s wages and home country benefits 

• The additional assignment allowances may be 

paid/delivered in the host country – Housing, COLA, 

education 

• Shadow payroll may be required (penalty for not complying 

with the local foreign country tax withholding requirements) 


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Frank asks… 

“What should be included in the US form W-2? We seem 

to be constantly issuing corrected forms W-2 for our 

international assignees.” 

• Base salary and bonus 

• Assignment allowances: Housing, COLA, education, foreign 

tax reimbursement (even if paid/delivered by foreign entity) 

• Gross ups: Social security, Medicare, federal or state tax (if 

applicable) 


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Frank concludes… 

“By consistently issuing secondment agreements or 

assignment letters and by managing the U.S. and foreign 

payroll details upfront, we can save time and money!” 


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Agenda 

Questions? 






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What is a “stealth expatriate”? 

Employees who are: 

• Outside their home countries for extended periods of time; 

• Not included in formal global mobility programs; and 

• Not tracked by human resources as global employees 


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Poll 5 

Are you concerned about Stealth Expatriates in your 

organization? 

A. Very concerned: We have identified more than one 

situation within the past 6 months. 

B. Somewhat concerned: We are fairly certain we have 

situations but have not formally investigated. 

C. Not concerned: We have processes in place to identify and 

manage these situations. 


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How are stealth expatriates found? 

• Visa and immigration issues 

• Increased travel and/or project costs 

• By chance 

• Company initiative 


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Visa and immigration issues 

Paul is the project director for an engineering team working in 

Malaysia. HR assisted the core team to obtain visas when the 

project started. You have heard through the grapevine the 

project has had some set backs. Over the weekend, Paul 

contacted HR because a new team member, 

who was called in to provide technical 

expertise, was denied entry to the country; 

she did not have a current visa. The project 

is at a critical point. 


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Increased travel and project costs 

Nigel is the new project manager for a virtual design team. 

He is concerned about the consistently high level of travel 

expenses being submitted by some team members based in 

Northern Europe. Upon further investigation, he learns the 

employees have been traveling to Germany to meet and work 

in a hotel every other week for the past year. 

The original project budget included 

only modest travel costs. 


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Chance identification of stealth expatriates 

Mary is a high performing software designer who has been 

with the company for three years and is based in Chicago. 

She has a flexible work arrangement and generally works 

from home when she is not on the road, which is the majority 

of the time. Payroll notices that she has put in a change of 

address, effective immediately and the new address is in the 

UK. 


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Adverse consequences 

• Tax issues 

• Visa and immigration issues that delay projects 

• Tracking employees during emergencies 

• Additional expenses not included in contract pricing or in 

budgets 


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Isn’t this old news? 

• Increased enforcement of rules by immigration and tax 

officials 

• Safety and security of employees becomes a focus after 

natural disasters and political turmoil 

• The trend in some industries is away from “formal” 

expatriate assignments and toward extended or “as 

needed” business trips 


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Managing the problem 

• Communication of issues 

• Employee tracking system 

• Evaluate results of tracking on a regular basis 

• Monitor travel requests 

• Management awareness 

• Use facts to assess risk in each location 


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Poll 6 

Of the topics presented today, which one concerns you 

the most? 

a. International Assignment Policy 

b. Secondment Agreements/Assignment Letters 

c. Payroll Matters 

d. Stealth Expatriates 


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Any final questions? 

Jerry Zukauckas Atlanta jerry.zukauckas@gt.com 404-475-0070 

Linette Barclay Houston linette.barclay@gt.com 832-476-3663 

Beth Penfold Chicago beth.penfold@gt.com 312-602-8284 


For additional information visit Grant Thornton’s 

Tax Accounting and Risk Advisory Services 

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International assignment policies - Grant Thornton LLP

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