International HR Adviser Spring 2016

SPRING 2016

ISSUE 65

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International HR Adviser The Leading Magazine For International HR Professionals Worldwide

Features Include: Knowledge Is Power! - A Global HR Insight Making Your Global Mobility Data Work For You Does Your Exchange Rate Policy Respond To Your Expatriates' Needs? • To Be, Or Not To Be, Local-Plus Documenting Expatriate Reward • Pensions: Currency Risk, A Long-Term Savings Challenge For Mobile Employees Tax Risks Within The Assignment Life Cycle Lean Out: Engage With The Unseen Spouse To Reduce International Assignment Refusals Advisory Panel for this issue:

Expatriate Adviser Summer

Autumn International HR Adviser

CONTENTS

In This Issue Page 2

Global HR Insight: Knowledge is Power Karen O’Brien, AECOM

Page 5

To Be, Or Not To Be, Local-Plus Yvonne McNulty, Singapore Institute of Management University, John Rason, Santa Fe Consulting Services & Karen McGrory, Human Capital Services BDO LLP

Page 10

Global Benefits - Pensions: Currency Risk, A Long-Term Savings Challenge For Mobile Employees Stewart Allanson, Zurich Corporate Life & Pensions

Page 13

International HR Strategy: Making Your Global Mobility Data Work For You Phil Crossman, Deloitte LLP

Page 16

Global Taxation Update Andrew Bailey, BDO LLP

Page 20

Taxing Issues: Tax Risks Within The Assignment Life Cycle Andrew Bailey, BDO LLP

Page 23

Does Your Exchange Rate Policy Respond To Your Expatriates’ Needs?

Gordon Zovko, ITX S.A.

Page 26

Documenting Expatriate Reward Juliet Carp, Dorsey & Whitney (Europe) LLP

Page 29

Accompanying Parters: Lean Out: Engage With The Unseen Spouse To Reduce International Assignment Refusals Veronica Lysaght, Mobus Consulting

Page 32

Serviced Apartments: Operators, Agents, Hybrids And Now Aggregators Jo Layton, The Apartment Service

Page 35

Leadership: Britain’s Most Admired Leader Angela Podmore, Kinetic

Page 38

Diary Dates

Page 39

Directory

International HR Adviser, PO Box 921, Sutton, SM1 2WB, United Kingdom Publisher • Helen Elliott +44 (0) 20 8661 0186 • Email: helen@internationalhradviser.com Publishing Director • Damian Porter +44 (0) 1737 551506 Email: damian@internationalhradviser.com Global HR Operations & Strategy Director • Kim Miller • Email: kim@internationalhradviser.com www.internationalhradviser.com In Loving Memory of Assunta Mondello While every effort has been made to ensure accuracy of information contained in this issue of “International HR Adviser”, the publishers and Directors of Inkspell Ltd cannot accept responsibility for errors or omissions.

Neither the publishers of “International HR Adviser” nor any third parties who provide information for “Expatriate Adviser” magazine, shall have any responsibility for or be liable in respect of the content or the accuracy of the information so provided, or for any errors or omissions therein. “International HR Adviser” does not endorse any products, services or company listings featured in this issue.

Cover Design by Chris Duggan

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GLOBAL HR INSIGHT

Knowledge Is Power!

(Though A Little Knowledge Can Be A Dangerous Thing!)

As Global Mobility and HR Professionals we are, all of us, very adaptable to change.

We are however, about to undergo a period of unprecedented change. You don’t want to end up looking like a rabbit caught in headlights and I am sure you would much rather look like the shining paragon of Global Mobility and HR knowledge that you really are.

Therefore to help you in this quest I have taken the liberty of highlighting some of the key changes coming your way so that you can start to prepare both yourself and your business.

BEPS First off are you familiar with BEPS? If not you might want to familiarise yourself, even if just at a superficial level. It is the most significant shake up in International taxation in almost a century. BEPS is the Base Erosion Profits Sharing initiative which due to the “Google Effect” has led the OECD and G20 countries to focus on ensuring profits are being taxed where the economic activities generating those profits occur. Part of this review has led to changes in how Permanent Establishment is assessed, meaning that going forward it will potentially be much easier to create a PE with all the consequential headaches which that brings with it!

Action: Set up some time with your in-house corporate tax people to get some discussions going on how your company may be impacted by these reforms and then start communicating to your business how to best manage these risks.

Pension Reform At the time of writing, the UK was about to undergo some significant pension reforms, mainly that we were moving from EET (exempt-exempt-tax) to TEE (taxed – exempt- exempt)? EET is the current pension taxation model whereby contributions are not taxed as they go in and are instead taxed at the point in time they are drawn down. This arrangement costs the UK Government 27 billion pounds per annum apparently. Changing to TEE would have meant contributions International HR Adviser Spring

were taxed at the point they went in but then tax free at the point they were drawn down. The reform has now been put on hold as it seems George Osborne does not have the appetite for this particular battle at the moment, perhaps choosing to focus on the campaign to remain in the UK instead. We can therefore breathe a sigh of relief, albeit temporarily, that we don’t yet have to concern ourselves with this issue for now. Some other pension changes are still afoot.

Lifetime Allowance You will be aware that the lifetime allowance is already reduced to 1.25 million, which means tax is applied to contributions in excess of this amount.

From April the allowance is reducing to 1 million. Now this may not impact most of us mere mortals but you may find some of your very senior and well paid executives being caught out. In addition, the annual allowance is reducing to as little as £10k for people earning in excess of £210k per annum. There is a sliding scale where the relief available to people earning between £150k and £210k is reduced by £1 for every £2 in excess of £150,000. You might not think you have a lot of employees earning those salaries, but do bear in mind that it is not just base salary that is considered, it is anything that is quoted on a P60 and also pension contributions.

Action: Do yourself a massive favour and sit down with your pensions colleagues to understand what the potential impact is on your employees and how best to manage this. You may need to revise the wording of your tax equalisation policies depending on how you agree to handle this, but if you find the gross up on taxes is the reason why an employee is losing some of their pension tax relief you may find you need to compensate for this.

Per Diem Dispensations Per Diem dispensations are being removed from April. If your company uses the HMRC subsistence rates you will not need to do anything but if your company uses alternative per diem rates, say from

your external data provider, then you need to apply for an Approval notice. In order to do this you have to conduct a sampling exercise of your per diem claiming people, to evidence the per diem broadly equates to the costs being incurred. Thereby defeating the whole purpose of a per diem in other words! HMRC want to ensure companies are not delivering compensation under the guise of subsistence. Even after your approval notice is in place you will need to ensure your employees start keeping hold of their receipts so that you can do a random sample of 10% of your people every 6 months. Without an Approval Notice in place you may need to start paying tax on your per diems.

Action: Have a conversation with your payroll colleagues to assess if an Approval notice is already in place. If not you may need to let your business know there may be a spike in the cost of delivering per diem payments. Consider moving to the published HMRC rates as an alternative to your current per diem rates.

Payrolling Benefits Were you aware that you can now voluntarily payroll benefits? If your company provides employees with health insurance, gym memberships, car and fuel allowances, you can now process these benefits through payroll and do away with having to issue a P11D. You will still need to submit an end of year summary, but if your company only offers one or two benefits it may be worthwhile considering payrolling these benefits as it may remove some of the admin burden of the P11D process.

Action: Set up a meeting with your payroll colleagues to discuss switching benefits to payroll and assess if there is any reduction in admin by doing so.

Short-Term Business Visitors One of HMRC’s priorities for this year is a focus on the STBV process. If you haven’t got a process sorted you might want to make this a priority pretty quickly. Bear in mind there is now a 30 day special arrangement available to employers which allows companies to include non-treaty employees on the STBV report

GLOBAL HR INSIGHT which is definitely a huge improvement.

You do however, need to make a separate application to avail of this 30 day agreement.

There is some anecdotal evidence that even if you have issues with your tracking process, so long as you can evidence that you have “good intentions” and are on the “right track”, HMRC should be satisfied. The STBV process is one that sometimes falls through the cracks in terms of ownership.

Corporate tax may think its Global Mobility’s responsibility and vice versa.

Action: Set up a meeting with Corporate Tax to agree where the responsibility lies, then agree the process on how best to track your STBV’s. Apply for your Appendix 4 and 30 day agreements if they are not already in place.

Brexit There is no way anyone can have escaped the media maelstrom surrounding Brexit.

It is difficult to say at this stage what impact will be felt by any of us if the UK does opt to leave the EU. The uncertainty of the situation in itself is already causing headaches as no-one really has the answers. The referendum has come about due to the increasing number in migrants to the UK and David Cameron’s pledge to

reduce emigration to tens of thousands.

Polling is currently inconclusive and even if there is a clear mandate from the people to leave, the decision will still need to go through Parliament for a further vote.

Therefore, if Britain does leave the EU, the impact will not be felt immediately and it is thought that negotiations to leave the EU could take between 2 – 10 years.

While we await the outcome of the Brexit campaigns, net migration to the UK continues to be under the spotlight and the latest statistics for the UK show net migration in 2015 was 336,000, this is a very long way off the Prime Minister's target. Mr Cameron knows he cannot curb EU migration so the only area he can tackle, once again, is the sponsored work permits. As a result immigration costs continue to rise; UKVI’s processing costs have just been increased, and significantly so in some categories, the International Health surcharge is being more widely applied and we continue to await confirmation that the MAC’s proposals are going to be implemented. If their recommendations are implemented we will see salary thresholds increase dramatically rendering visa applicants unaffordable to many of our businesses.

Action: Set up a meeting with your resourcing / talent acquisition people and bring this to their attention as they may have to start becoming even more creative in their recruitment methods!

I realise that not all of these changes sit wholly within the remit of Global Mobility, BUT if you find yourself in a position of influence, or if you would like to establish yourself as a person of influence, you can at least draw attention to these changes and ensure that your company has a strategy in place to handle each scenario.

Look at this period of change as your chance to shine, and just think how satisfying that end of year performance review will be!

Karen O'Brien is from Co. Kerry in the beautiful South West of Ireland. Karen has worked in Global Mobility for over 15 years and is currently Head of EMIA Global Mobility at AECOM. She has previously worked at Diageo, Tesco and Aon Hewitt.

She has travelled extensively in her various Global Mobility roles and cites Zanzibar and Mexico city as her top two favourite business trip destinations.

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Expatriate Adviser Summer

Autumn International HR Adviser

LOCAL-PLUS

To Be, Or Not To Be, Local-Plus

A successful compensation strategy involves keeping expatriates motivated while maintaining a competitive advantage by achieving a company’s corporate goals and budgets. While in theory this seems achievable, in practice there are many challenges with expatriate compensation that cause problems for companies. Many are in a battle to win external talent, and to retain internal talent. At the same time, cost pressures to reduce the expense of international assignments is increasing. The balance-sheet approach is expensive relative to the fact that a very small proportion of a company’s overall total employee workforce (e.g., perhaps 5 percent of employees in total) may be incurring 60 or 70 percent of total salary costs. Not surprisingly, for many years this was a major reason why expatriates agreed to go. There is also the tax equalisation expense when assignees relocate from low tax to high tax countries.

But with an increasing number of home-and host-country combinations, administering the balance sheet can be a burden on global mobility staff. Further, it distracts the global mobility department from focusing on new strategic initiatives such as ‘return on investment’ (ROI) or ‘talent management.’ Unsurprisingly, local-plus compensation has been touted as an effective ‘middle ground’ compensation approach that reduces the costs of the balance sheet without the risk of losing talented expatriates through localisation. But is local-plus the solution it claims to be?

Local-plus is an approach in which

expatriate employees are paid according to the salary levels, structure, and administration guidelines of the host location, as well as being provided, in recognition of the employee’s foreign status, with special expatriate benefits such as transportation, housing, and the costs of dependents’ education. It is worth noting that not all expatriates on local-plus receive the full range of additional benefits, these being at the discretion of the employing organisation and largely determined by the location of the assignment (e.g. hardship versus nonhardship location), among other factors.1

Does Local-Plus Work?

Without a doubt, local-plus has some clear advantages.

1. Because more employees are asking for international assignment experience, fewer financial incentives are needed to entice them to go. This is especially the case in Asia where reduced packages such as local-plus represent nearly half of those offered to expatriates.2 2. Local-plus compensation facilitates better global talent management because it is not linked to repatriation.

This means that, unlike the balancesheet approach which maintains a link to expatriates’ home-country or headquarters (despite that many expatriates may never return there), the lack of ties to ‘home’ that host-based local-plus affords enables expatriates to re-assign to other locations with greater ease of mobility 3. Local-plus is ideal when recruiting local foreign hires. A recent study found, for example, that reduced expatriate

compensation is used when a job has a combination of: (a) a permanent position in the host-country; (b) the assignment location is in the same region as an employee’s home-country; (c) there is not likely to be a suitable role in another location for an employee to relocate to; and (d) cost reduction is a priority.3 4. Local-plus can be used as a proxy retrenchment tool for expatriates whose performance in the host-location no longer warrants the expense that the balance-sheet approach demands.

5. Reducing assignee compensation via local-plus helps to minimise perceived inequities between expatriates working with local staff, many of whom perform similar roles but whose salary and benefits often vary significantly.

6. L ocal-plus can further facilitate a company’s strategy of local responsiveness particularly when there is a need to demonstrate long-term commitment to a particular hostcountry or region.

The upside of local-plus compensation is that it reduces global mobility costs for companies, widens talent pool and sourcing opportunities, and provides employees with more job opportunities on the international labour market.

Why Local-Plus Sometimes Doesn’t Work While the balance sheet is expensive, it also binds expatriates to their company because of the increased financial gains they acquire above and beyond what they once earned in their home-country. Although local-plus saves companies money, there is an undeniable opportunity cost that is also incurred. Because it only includes one or two additional salary ‘perks’ such as schooling or housing, the financial gain to assignees is less and there are fewer sacrifices an expatriate would need to make if they left their company to join a competitor.

Local-plus, then, pits expatriates on a level playing field with local employees in the host-country, meaning that changes in job roles across companies can occur more easily for those on local-plus compared to those on full packages.

A further challenge with local-plus is ‘process untidiness.’ A recent study found, for example, that introducing Spring International HR Adviser

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LOCAL-PLUS local-plus compensation to assignees part way through an assignment without any prior notice, left many of them feeling they had been abandoned and taken advantage of by their companies, to their own detriment. This means that when assignees do not initially undertake an international assignment with local-plus in mind, their eventual lack of access to allowances and incentives coupled with unplanned income losses leads to resentment, thoughts of leaving, and decreases in expatriate engagement. 4 Conversely, when local-plus is offered from the outset of an assignment, or within a two-year timeframe (but that assignees know from the outset that some form of localisation will occur), they tend to stay with their employees for a longer period of time and display higher levels of engagement. In this sense, how localplus is introduced and communicated to assignees (‘the process by which it is enacted’) can determine the opportunity costs companies are likely to incur.

Poor enactment of local-plus can lead to many problems. While it is true that some assignees welcome the opportunity to engage in international work experiences irrespective of the compensation offered (balance-sheet, local-plus, localisation), there are just as many assignees accepting local-plus as a means of staying employed and/or staying abroad because they perceive there is no alternative. Not surprisingly, the major complaint made by full-package assignees about local-plus is that it is too often introduced during an assignment which leaves many of them feeling they are backed into a corner financially.5 Others resent that once they are established as career expatriates, senior management then “moves the goal posts” by reducing compensation packages at the point of re-assignment or assignment extension, knowing that assignees have few alternative employment opportunities in their home-country.

The problem with local-plus, then, is that it often creates a heightened sense of unjustified loss, not necessarily because assignees are unhappy with their salary package, but instead with the process.

Denise Rousseau, author of I-deals: Idiosyncratic Deals Employees Bargain For Themselves, gets right to the point when she says that “changing the deal while keeping the people” is one of the greatest challenges in today’s employment landscape.6 The best way to alleviate tension relating to reduced compensation International HR Adviser Spring

is to engage in a much closer dialogue with assignees and to ensure absolute transparency about the process.

A further challenge with local-plus is that it creates an “organisational hierarchy” or hierarchical “pecking order” wherein companies treat assignees differently on the basis of those considered (full package) “expatriates” versus those considered (local-plus) “locals” from a policy standpoint. Traditional balancesheet expatriates, for example, typically represent the elite class of international assignees being of higher strategic value, while local-plus assignees are often viewed as lower-order expatriates stuck beneath a type of expatriate glass ceiling - a limbo status of being neither a traditional expatriate nor a true local employee. This glass ceiling frequently presents strategic and operational restrictions to assignees in terms of career advancement, often resulting in reduced morale. Indeed, assignees that perceive they are not sufficiently supported or ‘valued’ by a company in comparison to other types of expatriates are at risk of looking for job opportunities with competitors because they are working in a business environment where there are lucrative career opportunities available elsewhere.

The Pensions Conundrum for Local-Plus One of the biggest challenges with localplus is addressing an assignee’s concerns around retirement provisions: it may not be possible to provide one approach to retirement provisions that suits all of a company’s local-plus locations. For example, while some locations will have state-sponsored local pension plans, foreign nationals are often not eligible to participate. However, even where assignees are eligible to participate, the pension plan may not be as generous as the homecountry plan to which the assignee currently belongs. The assignee may therefore be reluctant to join the local state sponsored scheme and, where participation in the state sponsored scheme is mandatory, may request that a supplementary plan is put in place so that their retirement benefits can be topped up.

For most assignees on a local-plus package it is important to remember that maintaining the same level of retirement benefits as in their home country is going to be a key priority. Some of the following solutions may prove effective: A. Have the assignee join a local company-

sponsored plan. Keep in mind, however, that there are many locations, particularly in Asia, where companysponsored plans are not common-place, so implementing a plan only for localplus assignees may seem contradictory to the local-plus philosophy B.If a company-sponsored plan is not available, then remaining on the homecountry plan or participating in another company-sponsored plan may be suitable alternatives. It is worth noting that these plans may contain limitations on plan participants in relation to nationality and/or location. There may also be wider and unintended consequences; for example, care needs to be taken when assigning employees to EU countries as there are specific rules on how pension plans need to be funded C. Setting up an international pension plan (IPP) is another option and can be used not only for career expatriates but also for those on local-plus packages.

The advantage of using an IPP is that it can help mitigate the thorny issue of fragmented benefits.

In addition to the above, there are also the tax consequences to consider. The availability of tax relief on contributions may be limited and may be determined by the level of contributions. Tax relief may simply not be available. The assignee is therefore likely to request additional compensation to cover the increase costs of their retirement provisions.

Exchange rate and exchange control issues also need to be considered, particularly where the assignee’s contributions are made in a different currency from their salary payments and especially where the currencies are volatile. These issues may also arise once the pension is drawn.

Linking Local-Plus to Talent Management Is local-plus the magic bullet many companies perceive it to be? The latest research suggests that the use of “cheaper” assignments that seem appealing to many companies can also lead to unintended outcomes in terms of unforeseen opportunity costs (such as the loss of critical talent) arising from “shortsighted decisions”.7 Further, if expatriation is so critical to an organisation’s competitive advantage, why is it so difficult to link global mobility to global talent management? In their ground-breaking article about the seven myths of global

LOCAL-PLUS talent management, Dana Minbaeva and David Collings show that the connection between global mobility activities and talent pool acquisition remains weak: many companies continue to engage in global mobility without linking it to developing future global leaders or to meeting their assignees’ career development expectations.8 Nonetheless, it is these same companies that espouse the hiring of global staff as broadening their organisation’s understanding of global markets, and helping it to develop a global mindset. What, then, can companies do to overcome the problems that local-plus creates in relation to effective talent management?

• Align and integrate expatriate compensation with broader talent management initiatives. This requires transitioning from “expatriate” to “global” compensation. The shift in terminology reflects a shift in mindset, firstly, that while expatriates clearly perform in an international context, many are nonetheless employed in jobs similar to those of their local counterparts, or in jobs that locals can also do at some point in the future. Additionally, local employees often relocate domestically for much the same reasons as expatriates do internationally (e.g. for career development and promotion), yet even when locals’ standard of living is impacted, they are not compensated for it like expatriates.

The distinction, then, is to focus less on “expatriate status” as the defining criteria for compensation, and more on the international nature of the job.

Essentially, global employees engaged in international work require global compensation. This suggests that global compensation needs to move away from remunerating assignees to instead remunerating international employees.

How can this be done?

• Expatriate compensation works best when it is not based on an assignee’s home-country status, but instead on the role that the assignee performs. This can then negate the need for an employee to have ‘assignee’ status because it is the role that expatriates perform that should ideally dictate whether they are compensated according to local, regional or global wage and salary considerations.

In this way, a global compensation approach enables companies to find the most appropriate candidate and then compensate them accordingly, not because of who they are, but according

to what they are expected to achieve. A global compensation approach, then, is more equitable because it is performance-based, thereby eliminating overpaying and perceived unfairness. In reality, global compensation is much simpler to administer than a balancesheet approach because it represents an extension of most organisations’ already existing domestic (home-country) payfor-performance model.9 • A global compensation approach allows organisations to expand their global talent pool by targeting candidates eager to pursue international and global careers. That is, targeting candidates who are willing to expatriate. It is inherently more flexible than the balance sheet because, being based on payfor-performance, it can continue even after an assignee repatriates or decides to relinquish their “expatriate” status.

Global compensation is not necessarily location or status-specific, but can be leveraged over the long-term to facilitate the retention of employees – global or otherwise – as a means of ensuring a better ROI from global mobility and talent management programmes. For example, an employee who expatriates, relocates back to the home-country, and expatriates again as part of their overall career progression, need not change compensation status during each move if a global compensation approach that uses local-plus is administered. This alleviates not only a heavy transactional burden on the global mobility department in terms of pay and benefits for each subsequent change in host- or home-location, but also contributes to, and fosters, a type of ‘dynamic global career’ that is likely to become a normal part of global talent management over the next two decades.10

Policy “Best Practice” for Local-Plus Local-plus represents a more costeffective means by which companies can manage various types of expatriate staff, while simultaneously attempting to meet their organisational objectives. But in advocating for reduced compensation approaches, it is important that expatriates are not treated like local host-country or domestic employees: clearly, assignees incur more substantial expenses and greater disruption to their lives than employees who choose not to work abroad. As such, they should be

compensated accordingly and subjected to a different set of policies, but only insofar as the compensation approach remains appropriate to the job that expatriates actually do, rather than the status they hold because of their home-country ties.

When deploying local-plus or localisation, consider the following guidelines: • When introducing local-plus, enter into discussions early and put all agreed items in writing via an assignment letter, letter of understanding, policy document, or formal contract • Provide solutions to address assignee’s concerns about retirement plans and healthcare coverage, typically two of the biggest challenges when compensation is reduced. One way to handle social security, health and life insurance, and employer-provided pension plans is to enroll the employee in the local plan immediately • Be mindful to consider requests to continue the payment of international school fees for children. This is often a highly emotional issue for assignees as the local school system may not be a viable alternative due to language barriers or curriculum challenges.

In addition to formal policy elements, it is important to recognise that introducing local-plus requires careful management aside from only financial considerations, in terms of how assignees can adjust to their new status and are integrated among a local workforce permanently. Consider the following: • Local-plus frequently implies a one-way transfer with little or no opportunity for repatriation. In practical terms, it is important to facilitate realistic expectations among assignees as to the potential career paths likely to arise from their semi-permanent stay in the host-country • Mentoring specifically related to acculturation into the host culture seems essential, on the basis that localplus assignees are not “true locals” despite their status as “semi-localised assignees” • There is a need to recognise the vital role to be played by local employees in helping local-plus assignees to adjust.

A Final Word Clearly, money does matter to some extent: expatriates, like everyone else, need to pay their bills. Expatriation – and global mobility in general – is often an advantageous way to earn a high-wage Spring International HR Adviser

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LOCAL-PLUS living, making mobility attractive to many.

Employees close to retirement may be especially focused on money, particularly maintaining home-country retirement plans, yet this aspect of remuneration remains one of the most challenging issues particularly for career expatriates; only 12 percent of companies in a Mercer survey had established international pension plans to ensure long-term expatriates their continuity of benefits.11 But money is not everything. For more and more expatriates, compensation is simply a “means to an end” – it matters only to a point. Most organisations are therefore mistaken in their belief that financial gain is expatriates’ overriding motivation when they go abroad. In fact, a recent study found that financial gain becomes most important to expatriates only when a sudden change in remuneration causes them undue hardship or they are close to retirement.12 Furthermore, traditional balance-sheet approaches to assignee compensation cannot be used to the same extent as they have in the past to motivate expatriates to perform and to remain with an organisation.

The Santa Fe commissioned Global Mobility Survey 201513 highlights that 26.1% of respondents use ‘Long-term on local plus packages’ and other variations between 15% to c.20% such as ‘Expat lite’ Whilst there are advantages and disadvantages to policy segmentation – cost optimisation being a prime example - organisations need to have a well-defined framework to be able to manage the alignment between business need and talent development driven assignments. Clearly, from a financial perspective, local-plus works well when moving assignees from high taxation to low taxation countries. Equally, it can also work in parallel with a tax-equalised, guaranteed net compensation approach.

The biggest challenge is the governance of the right policy approach that has clarity on the reasons why the particular policy has been applied. The risk for some global mobility programmes is the temptation to have too many policies that are difficult to manage and to also be able to provide a rationale on why local plus rather than a tax equalised approach has been adopted, especially where the business or employee see opportunities to ‘cherry pick’ the more attractive elements of a particular package.

Increasingly, the traditional long-term, tax equalised assignments are becoming fewer and the need for more fluid and flexible International HR Adviser Spring

assignment types is the future.

In accepting this new reality about compensation, it is not then the type of compensation that matters most to expatriates, but the process by which compensating them takes place and how they are subsequently treated, because if

the financial ties that bind them to their organisations is lessened by local-plus, then using only money to retain them seems somewhat futile. This is particularly true when competitor organisations can match or exceed an assignee's existing remuneration package as a means of poaching them.

How The Package Is Changing Local-Plus Visa and work permit applications

Balance Sheet

✓

Relocation of household goods Temporary housing (average 15 to 30 days) Temporary living expenses Pre-assignment visit Housing/rent allowance

/X

Tax briefings and tax preparation assistance School fees (full or partial)

/X

Home leave flights and expenses

X

Club membership

X

Tax equalisation

X

Car allowance

X

Utilities reimbursement

X

Retirement benefits

(host-based)

(home-based)

Medical and dental coverage

(host-based)

(international)

Cost of living allowance

X

Mobility premium (bonus for relocating)

X

Mobility premium (bonus for relocating)

X

Storage of household goods in home country

X

Repatriation costs

X

Spouse allowance (reimbursement for loss of second income, education/course assistance)

X

References 1. Stanley, P. (2009). “Local-plus packages for expatriates in Asia: A viable alternative.” International HR Journal 3(Fall): 9-11.

2. Diez, F. & K. Vierra (2013). Why companies in Asia are changing their approach to pay. WorldatWork. Scottsdale, AZ: WorldatWork; ORC Worldwide (2008). Survey on local-plus packages in Hong Kong and Singapore. New York, NY: ORC. 3. Tait, E., De Cieri, H., & McNulty, Y. (2014). “The opportunity cost of saving money: An exploratory study of permanent transfers and localization of expatriates in Singapore.” International Studies of Management and Organization, 44(3) (in-press).

4. McNulty, Y., De Cieri, H. & Hutchings, K. (2013). “Expatriate return on investment in Asia Pacific: An empirical study of individual ROI versus corporate ROI.” Journal of World Business, 48(2): 209-221.

5. McNulty, Y. and K. Inkson (2013). Managing Expatriates: A Return on Investment Approach. New York, NY, Business Expert Press.

6. Rousseau, D. (2005). I-deals: Idiosyncratic deals employees bargain for themselves. Armonk, NY: ME Sharpe.

7. McNulty & Inkson (2013); Tait, De Cieri, & McNulty (2014).

8. Minbaeva, D. & Collings, D. (2013). “Seven myths of global talent management.” International Journal of Human Resource Management, 24(9): 1762-1776.

9. Salimaki, A. and R. Heneman. (2008). Pay for performance for global employees.

Global Compensation: Foundations and Perspectives. L. Gomez-Majia and S. Werner. Milton Park, UK, Routledge: 158-168.

10. McNulty, Y. & Vance, C. (2014). Dynamic global careers: An internal/external model for understanding international career self-management. EURAM Conference. Valencia, Spain, European Academy of Management.

11. Herod, R. (2012). Benefits challenges and trends for expatriates and internationally mobile employees. Geneva: Mercer.

12. McNulty & Inkson (2013).

13. Santa Fe Commissioned Global Mobility Survey 2015.

LOCAL-PLUS Yvonne McNulty, Ph.D. Singapore Institute of Management University Dr. Yvonne McNulty is a leading authority on expatriate return on investment and an academic expert in the field of expatriation. A frequent and outstanding contributor to international conferences and other media in the area of global management, Dr. McNulty is currently on the faculty at Singapore Institute of Management University. Her research has been featured in The New York Times, Economist Intelligence Unit, International Herald Tribune, BBC Radio, China Daily, The Financial Times, HR Monthly, Sydney Morning Herald and many other publications.

Dr. McNulty is a research consultant for the Global Mobility industry and serves on the editorial board of Journal of Global Mobility and Global Business & Organisational Excellence. She is co-author of the best-selling “Managing Expatriates: A Return on Investment Approach” (Business Expert Press, 2013).

John Rason Head of Consulting, Santa Fe Consulting Services As a Fellow of the CIPD, John is a recognised thought leader and speaker on strategic International HR, Talent Management and Global Mobility. John has 14 years consultancy experience and has previously held senior HR roles at Cable & Wireless, Canon, Convergys and GEAC Software. John is an International HR Professional who works with global mobility departments to help develop their mobility programmes. John has undertaken senior HR international assignments in Saudi Arabia and Latvia and holds a master’s degree in Managing Human Resources.

T: +44 (0)20 8961 4141 john.rason@santaferelo.com Karen McGrory Partner, BDO Partner - Expatriate Tax Services/Human Capital Services BDO LLP. Karen is a partner in the Human Capital services team, specialising in expatriate tax issues. Karen has over 20 years’ experience advising employers on the tax and social security issues that arise when sending employees on international assignment. Karen has extensive experience of running large global assignment programmes and working with overseas colleagues to ensure the seamless delivery of expatriate tax services. Karen understands what it is like to be an expatriate employee as she was seconded to South Africa to help a big 4 firm set up their expatriate tax practice in Johannesburg. Karen has a BSc (Joint Hons) in French and Linguistics and qualified as a Chartered Tax Adviser in the UK. T: + 44 (0)20 7893 2460 Karen.mcgrory@bdo.co.uk

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GLOBAL BENEFITS - PENSIONS

Currency Risk, A Long-Term Savings Challenge For Mobile Employees One of the major challenges faced by the career expatriate is currency risk, and especially its impact on long-term retirement savings.

Short-term overseas secondees are often retained in a home pension or savings plan, ensuring that their savings accumulate in the currency that they will return to, but for longer-term, globally mobile employees, the position is much more complex. Acquiring a series of local pensions in different countries and different currencies can severely deplete the eventual returns, damaging retirement expectations. Employers need to be aware of the implications of currency risk, especially if they are providing company-sponsored pensions or savings. While many employers recognise the need for an investment committee to oversee the investment options on a company-sponsored pension, currency risk is often overlooked – with potentially far-reaching results.

Currency risk can, of course, work both for and against a long-term saver. Rarely will someone be unhappy if additional returns are achieved through favourable currency movements, but the opposite can leave the employee feeling let down or, at worst, in a dire financial state upon return home, with plans of retirement in tatters.

Before we look at some of the options available to employers to minimise the risks, let’s look at an example to fully understand the problem.

Case Study David was a senior executive of a global pharmaceutical company. He left the UK in 2006 to work across South America establishing operations in Argentina, Chile and Venezuela. Throughout his time there, his employer established a local pension plan for him in each country and contributed a healthy 15% of his basic salary. Upon his return to the UK, David was somewhat disappointed to discover that the result was an accumulated fund in each country as shown in the table. Now this is a simplified example – it makes no allowance for investment growth, inflation or product charges on any of the funds – but the purpose here is only to show the effect of currency risk over the 10-year International HR Adviser Spring

Country and time

Contribution to pension

Value in local currency

GBP value @21/02/2016

2006 - Argentina

GBP15,000 equivalent

ARS 81,617

3,776

2007 - Argentina

GBP15,000 equivalent

ARS 91,544AP

4,235

2008 - Argentina

GBP15,000 equivalent

ARS 93,129AP

4,308

2009 - Chile

GBP15,000 equivalent

CLP 13,833,806

13,745

2010 - Chile

GBP15,000 equivalent

CLP 12,603,232

12,522

2011 - Chile

GBP15,000 equivalent

CLP 11,605,448

11,531

2012 - Venezuela

GBP15,000 equivalent

VEF 102,276

11,298

2013 - Venezuela

GBP15,000 equivalent

VEF 101,521

11,215

2014 - Venezuela

GBP15,000 equivalent

VEF 155,040

17,127

Total contributions

GBP135,000

period on David’s pension savings when he returns to the UK. You will see that currency risk can work both in favour of, and against, an overseas worker. GBP15,000 has turned into GBP17,127 in just over two years due to the strengthening of the Venezuelan bolivar over that particular period.

However, overall the effect has been quite devastating, reducing the amount contributed by a third from GBP135,000 to just GBP89,757.

To add to David’s concerns, he now has three pots of savings in three countries with which he no longer has any connection and needs to find a way to transfer these to the UK. You may think that I have chosen these locations deliberately due to their high inflation rates and weak currencies, but let’s take another example based entirely in Europe. Had David moved to Switzerland in 2006 and received a company pension contribution equivalent to GBP15,000, it would have increased in value to GBP24,012 by 2016 – a huge 60% return brought about by the strength of the Swiss franc following the financial crisis.

A very good result, yes, but had David been Swiss, living in the UK for those ten years and then returning to Switzerland,

GBP89,757 he would have seen his savings plummet from CHF34,238 to CHF21,387 – a fall in value of 38%.

So what can employers do to help to reduce or mitigate this risk for their employees? One option is to retain the employee in a home pension plan.

However, this is not always possible due to home country legislation or the basis of the employee’s employment contract, and cost is often a barrier too. Switzerland, for example, does not allow overseas workers to remain in its pension system.

Increasingly, companies are looking to localise expatriates in order to control costs that can make retention in a home country plan more complex than overseas secondment. Europeans localised in another European country but retained in the home country pension plan create a cross-border plan that can bring a host of problems with it.

For those companies with a policy of placing overseas workers in local pension plans, at the very least those plans should be able to offer a range of investments based in one of the world’s harder currencies, as this should provide some degree of currency hedging. Sadly, many local pension plans do not offer multicurrency investment funds. In fact, many

GLOBAL BENEFITS - PENSIONS have strict controls over where approved pension monies can be invested, often with requirements that these are restricted to local government bonds.

A more flexible solution, adopted by many multi-national companies, is to set up an international pension plan (IPP). These are long-term offshore saving plans set up by a company specifically for expatriate and mobile employees regardless of their country of residence. These plans can accept contributions in most currencies and the investments can be held in a hard currency, such as US dollars, or possibly in the employee’s home currency, thereby removing or reducing the effect of currency risk. Further advantages of these plans are that all of the savings accumulated are held in a single plan, in a stable jurisdiction, making them easier to access in the future, and they can offer a much broader range of investments as they do not need to comply with complex local pension regulations.

Local pensions vary greatly from country to country in terms of the tax position, some giving relief on contributions but taxing income, others with no relief but providing a tax-free income in retirement. Importantly, though, the tax advantages are often partly or wholly negated by factors such as currency risk as we have seen in the examples above, investment restrictions and economic and political instability.

It is important that companies can offer a robust pension solution to employees, wherever they may be working. People are living longer and it’s well documented that they are not saving enough for the future. While it was acceptable a few years ago to just give people a higher salary in lieu of a savings plan, now employers are trying to be more responsible with their employees.

Given a choice between a local plan offering tax relief of 15% in a volatile currency, or an IPP with no relief but a strong currency, the latter can easily be seen as the least risky option.

Stewart Allanson Zurich Corporate Life & Pensions is a leading provider of international pension plans.

For more information, please email: stewart.allanson@zurich.com or telephone on +44 (0) 1242 664443.

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Expatriate Adviser Summer

Autumn International HR Adviser

International HR Strategy

Making Your Global Mobility Data Work For You With improvements and movements in technology, many Global Mobility functions are starting to explore whether data could be made to work a little harder and whether some of the, previously accepted, time-consuming manual routines required to collate and use operational data, could be removed altogether.

Global Mobility uses a great deal of data to perform its day-to-day functions for the business. This encompasses basic assignee demographic data like dates of birth, addresses and assignment lengths, through salary and compensation details, to assignees’ details of involvement in equity plans and bonuses.

This data can be housed in various company systems, in different parts of the business and often across different countries. With improvements and movements in technology, many Global Mobility functions are starting to explore whether this data could be made to work a little harder, and whether some of the previously accepted routine, manual work, could be removed altogether.

In particular, the focus is on two main areas: • Firstly, efficiencies in recycling data for business-as-usual processes. That is, effectively, taking data from one system to another, or sending it internally, or to providers, without manual intervention and duplicating efforts; For example, companies are looking at assignment initiation processes. How can the necessary data be collected efficiently to initiate the assignment, and each of the vendors involved, in getting an assignment in place?

Other areas for efficiency are the monthly payroll notification process and the annual compensation data collection process for income tax return preparation. Automation can allow the business to focus on the exceptions rather than manually working through reconciliation • Secondly, using the available data to provide greater value, such as providing useful strategic insights and feedback to the business.

Collecting and aggregating assignee

data allows the company to apply data analytics techniques to produce very useful insights including total Global Mobility programme costs (with breakdowns by country, region, business area, etc.), dynamics in assignee patterns, and assignment policy types. It also allows for some very practical resource planning, such as the variance of new assignments with external factors such as economic cycles, product demand/prices (and by extrapolation the necessary size of the Global Mobility function to cope)! The right tooling allows Global Mobility to analyse the efficiencies of its policies and the impact of making changes.

So, how can all this value be recognised by the Global Mobility function? In simple terms, it takes the form of a “data hub” - a platform which receives feeds from the different systems which hold data relevant to international assignees, organises and reconciles that data, and then has the ability to send that data out to authorised recipients.

A few years ago this type of model might have seemed like something from the future, but the pace of modern technology means that the future is already here, and it is now possible to set up this type of platform relatively efficiently and cheaply.

In starting to investigate how this type of model might be approached within an organisation, a feasibility project might include the following steps: 1. Ask questions about the primary goals you would like to address. Which operational activities would benefit from automation and improvement?

Do you want to track how well your providers are meeting their service agreements? Is the most important thing understanding the total spend across all assignment programmes?

What data sets would help you address this?

2. Identify the types of data which are used for many purposes in your dayto-day Global Mobility operations and therefore would be the most useful to collect for operational purposes.

3. Identify the ‘sources of truth’ – which

of your systems hold the most accurate records of each item of data. For example, primary records of salary information may be held in the ERP system. The same data may also be held in the Assignment Management system, but this may be a secondary record keyed in manually. In some cases the ‘source of truth’ may be a provider system that captures more detailed data than is held in your ERP: share plan, immigration, relocation, and payroll.

4. Identify the best way to obtain the data from the system on a regular basis – is this by report generation (e.g. in an Excel or CSV format) or can you use something even more efficient like a web service. What is the best frequency to obtain this data? Automation will mean that more regular frequencies become feasible.

5. Once this data has been pulled from the appropriate systems, where will you store it? In a new database or provider system?

Pulling data from various systems (Step 4 above) has never been easier. For instance: • A standard approach would be to leverage integration technologies such as web services and secure file transfer to capture data efficiently and accurately.

A “data pump” pattern can be used to keep data fully up-to-date by triggering synchronisation when data is added or changed in the primary database • Robotics technology allows for multisystem repetitive processes to be automated easily. For example, where a team member opens one application (e.g. the ERP system), runs a report, saves down a file and then runs a macro producing another report which is uploaded to a new system (e.g. the data hub). Such a process can be automated and scheduled to run before work hours so it can be checked by a team member at the start of the working day. A robot can bridge the gap where a report does not exist to extract all information required and emulate a user extracting data from multiple screens. These kinds of activities may have been too resource intensive to consider • "Data wrangling" technology allows Spring International HR Adviser

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International HR Strategy

data which is only available in fixed formats such as PDFs, to be managed into more malleable forms such as Excel, for manipulation into alternative formats. Again, the aim would be to turn the data into a format which could be uploaded into the data hub.

Once the data is in the hub, it can be recycled and used to achieve a variety of different goals: • It can be used for any number of operational activities, with standard repetitive tasks automated by using one of the techniques used to transfer the data into the hub • It can be used to feed visualisation software producing dashboards which can show data in a three-dimensional interactive format. The limits of the dashboard reporting are only limited by the data sets available • It can be used to produce ad-hoc reports across the entire Global Mobility programme where this would previously have required commissioning a project to gather intelligence from multiple internal and provider systems • It can be used to drive continuous improvement with hard data. For example, evaluating the efficiency of using different providers for different International HR Adviser Spring

parts of the business • It can be used to update the Assignment Management system to ensure that contains the most up-to-date versions of ‘the truth’ from the various systems which contain primary records • It can be used to analyse data consistency and quality between systems. This process may identify efficiencies that could be applied by synchronising data from the ‘source of truth’ to other systems that house the same data.

Of course, these projects are not without their challenges and there are a number of issues for Global Mobility teams to overcome before embarking. Some of the most common are listed below: • Access to technology resources within the business or from specialist consultants or service providers • Access to the data and systems themselves – clearly, the data required is personally identifiable information and therefore is rightly guarded sensitively by the corporate security teams • The state of the original data is key – you have to be able to rely on and trust the state of the data held in the primary systems. For example, duplicated data or, worse, inconsistent data received from different systems could lead

to problems unless some form of reconciliation is performed.

While some of these challenges may appear daunting, this is an area of great opportunity, particularly for complex functions like Global Mobility. There are many resources available to help you on your technology journey. As mentioned above, processes and technologies exist that make these goals easier to reach than ever before.

Phil Crossman Partner Deloitte LLP Direct: +44 20 7007 0988 Fax: +44 20 730 34048 Mobile: +44 7765 897222 pcrossman@deloitte.co.uk www.deloitte.co.uk

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GLOBAL taxation

Global Taxation Update Argentina Winds of change Argentina has had a new government since 10 December 2015, and the country is likely to have a more pragmatic and business friendly President for the period 2016 to 2020.

Revisions to policies that have previously limited growth and investment should help Argentina transition to a new and healthier economy.

The main measures are as follows: • The Argentine peso was devaluated by 40% and its flotation depends on the market with no regulation from the Central Bank. This rate was in line with the previously existing “blue mkt” • It is not required to obtain any authorisation from the Federal Administration of Public Revenues (AFIP) to access the exchange market • No prior consent from the Central Bank is required for real estate investments abroad, loans to nonresidents, contributions from direct investments, portfolio investments abroad, or purchase of foreign bills in the country • The total amount operated cannot exceed the equivalent of US$2 (two) million per month • Argentina Central Bank no longer regulates foreign currency withdrawal or expenses abroad made with credit cards. Credit limits are set by the banks according to the financial status of each customer.

BDO’s comment The new rules on foreign exchange will help expatriates and imply free access to salaried individuals to purchase and transfer foreign currency.

The political and economic climate is changing in Argentina and the next few years should see a period of growth and investment in the country. This could result in new or expanding operations and an influx of labour to support this.

Belgium Salary Split Employment – Impact on Future Belgian Pension Entitlements A salary split employment is a way to comply with the withholding obligations in multiple countries for employees who are internationally mobile. In some International HR Adviser Spring

scenarios it can also result in a lower overall tax liability as the relevant double tax treaties will give each country the sole right to tax income relating to duties physically performed in that country (and therefore each country applies their progressive tax rates).

Whilst this approach generally works from the perspective of taxation, when considering EU countries and countries with which Belgium has concluded bilateral treaties with, this is not the case for social security purposes where the principle of exclusivity applies (i.e. an internationally mobile employee is generally subject to only one social security scheme). The applicable social security scheme will either be determined by the European regulation 883/04 or by the bilateral agreements on social security.

Due to this difference in treatment for tax and social security purposes, issues might arise with respect to future Belgian pension entitlement.

Example: An employee, Belgian resident, is employed by 2 separate entities belonging to the same international group. One employer is located in Belgium; the other is located in The Netherlands.

The employee divides his working time equally between the 2 employers. The remuneration of the employee will be taxed 50% in Belgium and 50% in the Netherlands. Based on the EU 883/04 regulation for social security purposes, the employee’s full employment income will be subject to the Belgian social security scheme. In our example, the social security contributions due on the entire remuneration (100%) are withheld and paid by the Belgian employer.

Possible issue for the future Belgian pension of the employee involved: In practice, only the Belgian employer is registered with the Belgian social security authorities. The Belgian employer will declare and pay the social security contributions also for and on behalf of the foreign (Dutch) employer and income.

As a result, Belgian social security contributions are withheld and paid on the entire (100%) remuneration, but often only the (number of ) labour days (or equivalent days) for the Belgian

employment (in the example 50%) will be declared to the Belgian social security authorities.

The reason for this is that, based on the administrative instructions of the Belgian social security authorities, only the Belgian labour time may be declared. In such cases the employee is not declared as a full-time employee for the employment years in the salary split situation. Consequently, depending on the method of reporting the Belgian and foreign working days, the future pension entitlement will be pro-rated in the same way as is done for part-time employments. The employee will receive a lower legal Belgian pension at his pensionable age regardless of the payment of the social security contributions on his full salary (100%).

BDO’s Comment The good news is that this issue can be reviewed to establish whether the reporting of the multiple employment payroll for internationally mobile employees (while remaining subject to Belgian social security) is compromising the employees’ pension build-up. The authorities can then be contacted to ensure the pension position is regularised.

Canada Non-Resident Employer Certification Programme On 12 January 2016, the Canada Revenue Agency (CRA) announced that it is launching the Non-Resident Employer Certification Programme, as originally announced in the 2015 Federal Budget.

Under current tax legislation, non-resident employers must obtain employee-specific waivers from the CRA in order to be relieved of their obligation to withhold income tax on wages paid to employees performing services in Canada. In addition, the employer has to comply with reporting requirements such as obtaining Canadian tax numbers and year end payroll reporting for all employees working in Canada, even if they are not ultimately subject to Canadian tax.

Now, non-resident employers who register and are certified under this programme will no longer be required

global taxation to obtain waivers for qualifying nonresident employees (see below). In addition to this, they would not need to fulfil the reporting requirements for such employees who earn less than $10,000 per year from their Canadian duties.

Programme requirements To qualify for the programme, a nonresident employer must meet the following conditions: • Be resident in a country with which Canada has a tax treaty (special rules apply for employers who are partnerships); and • Be certified by the Minister of National Revenue via the newly-available registration process.

The non-resident employer should submit the request for approval at least 30 days before a qualifying non-resident employee starts providing services in Canada. If approval is granted by the CRA, it would be valid for two calendar years.

In order for an employee to be regarded as a qualifying non-resident employee, the employee should: • Be resident in a country with which Canada has a tax treaty at the time of payment, and be exempt from income tax in Canada under the provisions of that treaty; and • Either work in Canada for less than 45 days in the calendar year concerned, or be present in Canada for less than 90 days in any 12-month period that includes the time of the payment.

Careful tracking of days spent and worked in Canada (both before and after the payment date) by the employee is therefore crucial in benefitting from the programme. If the qualifying nonresident employer becomes aware that an employee ceases to meet these criteria, they are required to make a written disclosure to the CRA immediately.

If a qualifying non-resident employee earns less than $10,000 in a calendar year in respect of their Canadian working, no further action is required. However, if their Canadian-related earnings exceed this amount, the employer would be required to report the earnings on a T4, and the employee would be required to obtain a taxpayer identification number, even though no income tax withholding would be needed.

It is also important to note that the availability of this programme only applies to income tax withholding, not social security deductions (Canada Pension Plan

Employee working in Canada less than 45 days in the year or present in Canada less than 90 days in 12-month period?

Canadian-related earnings for the year less than $10,000?

Income tax withholding required?

T4 reporting required?

Yes

Yes

No

No

Yes

No

No

Yes

No

Yes

Yes, unless waiver obtained

Yes

No

No

Yes, unless waiver obtained

Yes

and Employment Insurance). However, there are often other exceptions that would apply to remove the requirements to make these contributions under domestic legislation.

The table summarises the various thresholds and requirements under the programme (assuming that the employee is exempt from Canadian income tax under a tax treaty).

BDO’s Comment This is very welcome news for nonresident employers who send employees to Canada for short periods of time and these employees are exempt from Canadian tax under the provisions of a tax treaty. This new programme will greatly reduce the administrative burden associated with these short-term stays.

Please note that the Canada Revenue Agency has allowed for a retroactive filing for the 2016 calendar year as long as it is filed by 1 February 2016.

BDO has been advised this date may be changed to 1 March 2016.

However, it is important to ensure that a robust process is in place to track the number of days each individual spends in Canada to ensure that compliance with the requirements of the programme is maintained.

France Online Tax Returns Are Coming Following recent legislation, online tax returns will be progressively mandatory from 2016 to 2019. From 2016, online tax return filing will be obligatory for all taxpayers having taxable income over €40,000. This threshold will be gradually updated.

Luxembourg Stock Option Plans – Obligation of Notification On 28 December 2015, the tax authorities issued a circular regarding the tax regime of stock option plans. This circular provides an obligation for the employer to notify the tax authorities of the stock option plans implemented.

The following plans are concerned: • Stock option plans implemented before 1 January 2016 under which options are granted on or after 1 January 2016 • Stock option plans implemented as from 1 January 2016.

Plans implemented before 1 January 2016 in respect of which options have been granted exclusively before that date are not concerned even if the options have yet to be exercised.

With regard to the reporting format, it is necessary to distinguish between plans implemented before 1 January 2016 and plans implemented as from that date: • Plans implemented before 1 January 2016 under which new options are allocated as from 1 January 2016 The employer has to provide the tax authorities with a copy of the plan as well as a list of participants as soon as it is known • Plans implemented as from 1 January 2016 - The employer has to provide the tax authorities with a copy of the plan at least two months before it is actioned.

The employer also has to provide the list of participants to the tax authorities as soon as it is known.

BDO’s Comment Employers who use or intend to use stock option plans (classic plans or warrant Spring International HR Adviser

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GLOBAL taxation plans) must review their obligations based on these new provisions.

Malta Residence And Visa Programmeme Regulations Malta has recently introduced a new residency scheme granting a residency permit confirming the right to land and to remain permanently in Malta, to individuals who satisfy specific conditions. The certificate entitles the beneficiary and their dependants to reside, settle and stay indefinitely in Malta and constitutes an e-residence card entitling the holder to travel within the European Union, together with a valid travel document, without needing to request a visa.

Upon issue of the certificate, once the beneficiary and their dependants take up residence in Malta, they will be deemed to be resident in Malta if on an annual basis they spend more than 183 days in Malta. Unless they express the intention of staying in Malta indefinitely, they will not be deemed to have acquired a Maltese domicile. Therefore, as a resident non domiciled individual, they will be taxable in Malta at the resident tax rates only on foreign source income which is remitted to Malta, and on Malta source income (unless they are a beneficiary in terms of the Global Residence Programmeme which provides for a flat tax rate of 15% on foreign source income remitted to Malta and 35% on Malta source income).

Any foreign source capital gains are not charged to tax in Malta even if remitted to Malta. The taxation on remittance basis is applicable as long as the beneficiary does not become a longterm resident or applies for long-term residence status.

UK Payrolling of Benefits in Kind Traditionally, taxable benefits in kind (such as medical benefit and company cars) have not been included directly within payroll reporting. Where such benefits are provided, a value based on the prior year amount is included within an employee's tax code to ensure a best estimate of PAYE is deducted on these. This can lead to an under or over payment of tax when the individual prepares their tax return, or further adjustments to the tax code to collect any shortfall.

International HR Adviser Spring

The current process can lead to a constant cycle of trying to play catch up on tax due for earlier years, as well as consistent adjustments to tax coding notices to try and accurately reflect the value of the benefits being provided in the current tax year.

HMRC has mooted the real time inclusion of benefits in kind within the payroll cycle for some time; from April 2016, employers are now able to opt in to payrolling benefits in kind on an actual basis. The majority of benefits in kind can be payrolled with the only exceptions being vouchers, accommodation and beneficial loans.

If an employer wishes to payroll benefits for the 2016/17 tax year, they must notify HMRC by 5 April 2016 (and as soon as possible so tax codes can be adjusted to remove estimated values where real time benefit information is going to be submitted).

P11Ds do not need to be completed to report benefits that have been payrolled, however, a P11D(b) is still required to calculate the Class 1A National Insurance due.

adjusted for inflation.

There are exceptions for taxpayers who have entered into instalment agreements, have requested or have pending collection due process hearings, or have claimed innocent-spouse relief. The Secretary of State may also issue a passport in emergency circumstances or for humanitarian reasons.

BDO’s Comment This is a welcome announcement

by HMRC and should lead to more certainty for employees that they are paying the right tax at the right time.

It will also reduce the administrative burden on employers in terms of the removal of P11D reporting in the vast majority of cases.

Although it is optional for 2016/17, our view is that the payrolling of benefits could become mandatory within 3 to 5 years if it proves successful.

Prepared by BDO LLP. For further information please contact Andrew Bailey on 0207 893 2946 or at andrew.bailey@bdo.co.uk

USA Loss of US Passports for Delinquent US Citizens is now law The proposed US tax payment enforcement provision has been enacted, and this tax provision allows the State Department the ability to revoke or deny passports for US citizen taxpayers who are behind on their income tax payments.

The law is effective from 1 January 2016, and applies to current debts. Estimates from the Joint Committee on taxation project the move could raise $398 million over 10 years.

The measure affects taxpayers who are “seriously delinquent” on $50,000 or more of income taxes owed, this figure includes penalties and interest and will be

BDO’s Comment Delinquent US taxpayers must ensure they settle any outstanding liabilities or face the loss of their US passport.

International HR Adviser is delighted that Kim Smart, formerly Global Mobility Director of Brown Forman & Atkins, has joined our team as our Global HR Operations & Strategy Director.

Kim has been an avid reader and supporter of International HR Adviser since its launch 16 years ago, and has read every issue of the magazine!

If you would like to contact Kim, please email kim@internationalhradviser.com

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taxing issues

Tax Risks Within The Assignment Life Cycle As businesses expand globally so comes the challenge of moving people. In our last article we raised a number of issues to get right with any international assignment. In this article, we explore the tax risks arising at various points in the assignment life cycle.

Pre-assignment Who is going, where and what will it cost? Could you structure it differently?

In general, projects start with a potential business opportunity where it is necessary to move people to a different location.

Given that staffing is often the biggest expense, it is amazing how few businesses consider the tax cost of any assignment/ project. For example, many businesses express surprise, some 18 months after the assignment has ended, once the final tax bills come in, saying that if they had known that it would be that expensive then they never would have sent the individual/s on assignment. Some businesses resort solely to basic internet research that often throws up outdated figures and rules and omits practical, on the ground, local experience. A properly considered upfront analysis of the assignment, the applicable rules, and projected tax cost, can assist greatly with budgeting and managing cost expectations for all.

Planning can also help reduce the cost of an assignment. In many instances there are tax breaks for short-term assignees, e.g. UK, Netherlands, Sweden and Denmark all have such reliefs. These reliefs may have conditions attached for example, to the length of the assignment, the employer’s location or the level of salary and allowances. Such tax breaks can be considerable, for example, the Dutch ‘30% facility’. Additionally, paying certain benefits through the employer or having the employer provide them directly (e.g. accommodation in Hong Kong), can result in reduced tax and social security liabilities. By considering available tax breaks in conjunction with the aims of the project, assignments can be planned and structured in the most tax efficient manner, potentially significantly reducing the costs of an assignment.

International HR Adviser Spring

Work Permits/immigration Clearly you do need to obtain the right work permits and visas to ensure that an individual can legally work in the country.

The applicable rules may dictate whether an individual can/cannot be employed locally and has to be on an assignment.

Do check such rules as they may restrict the ability of the business regarding employment structuring and tax planning.

Tax Policies With few assignees arguably a tax policy is not needed, as this permits maximum flexibility to reduce tax costs. However, when the numbers accumulate, the advantage of a structured approach becomes more apparent. By setting out the approach of a business to international mobility, this provides a ready template as to how to deal with assignments, and sets out the tax and social security philosophy (e.g. tax equalisation, home social security, assisted tax returns etc.). A policy can help to reduce tax risks by addressing clearly the approach to be adopted for international assignments and localisations. The need for a tax policy has been the subject of many previous articles, and please do refer to these for additional guidance.

Do you know who your assignees are, and do you know where they are?

Surprisingly many businesses are unable to correctly identify all of their assignees and their locations. Apart from the obvious security and duty of care risks that arise, tax risks abound. The issue of short-term business visitors is becoming a major topic and revenue generator for tax authorities around the world, and leads to a potential high risk tax exposure for businesses. It is important that businesses can track where their assignees are, and can identify the potential tax trigger points and proactively manage these.

Don’t assume that tax treaty exemption will always apply, the conditions for such exemption all need to be met – not just the 183 day test – and remember that tax treaty exemption applies to the individual and does not necessarily remove the reporting and withholding obligation for the employer. Be aware that authorities are becoming increasingly sophisticated

when it comes to tracking and sharing data between different government departments. For example, the Australian tax and immigration authorities have recently agreed to share data.

Departure meetings in home country and arrival meeting in host country These meetings can be invaluable in assisting both the employee and employer understand what tax forms and procedures need to be completed and followed, and what records needs to be kept for the duration of the assignment.

Failure to hold such meetings can result in assignees missing out on opportunities through ignorance such as failing to keep relocation receipts, workday and travel records, or registering for expatriate concessions (e.g. the 30% facility in the Netherlands has a 4 month window to register to get it backdated to the start of the assignment).

During The Assignment Withholding taxes - Is the company paying withholding? Are they paying the right withholding?

Frequently the biggest tax risk that arises with assignees is the failure by the employer to deduct withholding taxes. Withholding taxes such as Pay As You Earn (UK), Pay As You Go (Australia) should often be deducted by the employer. Employees can be fickle, and with many moves resulting in early cessation of assignments and possible termination of employment on or shortly after completion, it can be difficult or impossible to recover taxes from former employees. Where there is a failure to deduct withholding, tax authorities will generally look to the employer to rectify the position and may insist on a grossing up of any resulting tax liabilities thus increasing the tax cost.

Always deduct withholding taxes and do this on a timely basis: after all you can usually get this refunded if excess withholding is paid. Where variations to withholding are appropriate (e.g. UK’s nil tax codes and reduced s690 overseas workday relief withholding directions or tax treaty exemption), do ensure you get the appropriate documentation from the tax authority evidencing their approval.

taxing issues Are you picking up split payments and pre-assignment payments?

Assuming withholding taxes are being deducted, do ensure it is being operated on the correct basis. For example, are split payroll amounts being taken into account?

It is very easy to overlook home country/ third country payments that remain in existence. Additionally, payments that relate to the assignment but are paid before the assignment commences could be liable to withholding in the host country. All may need to be reflected in the payroll calculation and even if there is no actual payroll or entity in the host location, withholding taxes may need to be operated on a shadow or ghost payroll basis. Payments will of course also need to be reported, as appropriate, in the individual’s tax returns.

Is the company picking up all the benefits – home and host paid or pre-assignment paid?

Another issue that is frequently overlooked for business or individual reporting is that of benefits. Again it is important that both home/third country benefit provision is considered when assessing host (and home) country tax liabilities. It is very easy to overlook their provision, for example continuing home country long-term storage or medical insurance costs. Additionally, where benefits such as relocation expenses are paid pre-assignment, these can often be forgotten when it comes to assessing host country liabilities. Host country rules will need to be examined to determine what needs to be reported and taxed.

Is social security being paid in the right location – on home and host payments?

Part of the initial assignment structuring should be to determine where social security will be paid. This may be in the home country, the host country, both or neither, or in a third country depending on the circumstances. Bear in mind that social security costs can sometimes outweigh the tax costs, with employer contributions in locations such as France and Italy being approximately 40% on an uncapped basis. Contributions in other countries such as Germany may appear high at face value, but capping limits the costs for high earners and employers. In other countries such as Hong Kong and Singapore, it may not be possible for foreigners to join the local social security system. Planning can help to reduce any

social security liability, but the impact on future benefits does need to be considered.

This is of course extremely difficult with ever changing rules.

Once the right location for payment has been determined and the individual is on assignment, it is important to ensure that social security liabilities are calculated on the correct amount. For example, are all cash payments being recorded?

Payments through split payrolls are often overlooked, as are benefits provided in home or host countries. Do gather all details on a timely basis so that liabilities for both the employee and employer can be correctly calculated and paid. As with withholding tax, failure to deduct by the employer can result in additional liabilities for them if the employee becomes an ex-employee. Always deduct where you need to and do ensure you have the right, up to date, certificates of coverage in place to demonstrate why liabilities are being or are not being deducted as appropriate.

Recharges and bearing the cost/transfer pricing From a business perspective, cost and benefit typically go together and should be located in the same place. However, this relatively simple business rule can have far reaching consequences. Recharges can jeopardise potential treaty exemption for the individual. The failure to consider people issues and the resulting costs can create problems with tax authorities when transfer pricing rules are overlooked.

The impending introduction of Base Erosion and Profit Shifting (BEPS) rules needs to be considered from an international mobility context. In certain circumstances recharges can also trigger a non-recoverable VAT liability.

Corporate residence and permanent establishments Although your company is located in and is a resident of a certain country, sending people to another country may create a local presence to such an extent that the company will also be subject to local corporate taxation. Whether or not this is the case will depend on their purpose of being there, as well as their authority to act on behalf of the company, does it or does it not create a ‘fixed place of business’ is usually the criterion to analyse. This whole area is currently under particular scrutiny by the OECD and tax authorities, so do look out for future changes.

Are tax returns being filed by the individual – on what basis?

Completion of personal tax returns whilst an individual is on assignment can often be overlooked or dismissed as an easy compliance task. This is particularly risky when one considers there will be added complexities, interactions between differing tax systems, and the unfamiliarity of foreign implications and foreign tax regimes to deal with. Failing to provide tax assistance can lead to missing and incorrect tax returns – whether innocent or otherwise. This could affect the corporate reputation of the business entity and possibly even its ability to continue to undertake business in a location. Providing professional assistance with this task can help both the employee and the employer to ensure correct and timely filings and leave both parties to focus on the success of the assignment.

Post-assignment

Have any tax reconciliations been undertaken?

Where there are tax equalisation commitments by the employer to meet certain or all elements of an assignee’s foreign tax liability, it is important to ensure that not only is the correct liability paid, but that relevant steps are taken to recover hypothetical tax underpayments or real home country tax refunds from the employee. Tax leakage may occur for the employer where this does not take place promptly or at all.

Trailing liabilities – stock and bonuses.

Are you taking these into account?

Naturally you have been correctly reporting stock awards and bonuses during the assignment itself, but do you continue to track and map those relating to the assignment once the individuals cease their assignment? How long do you track for? Tax authorities around the world are increasing aware of the potential for tax to be overlooked and not paid in such circumstances. They will pursue such liabilities so do ensure you withhold and

Tax equalisation reconciliations and loans On cessation of the assignment it will be necessary to unwind any tax loans and deal with final tax equalisation reconciliations.

Do remember to undertake these tasks especially, as so many individuals leave their employer after an assignment and memories of tax arrangements agreed at the outset of an assignment quickly fade.

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taxing issues file as appropriate, and remember to collect any contribution towards tax and social security liabilities from the employee.

Use of carry forward foreign tax credits In certain circumstances payment of taxes by the employer, whilst an individual is on assignment, may result in excess foreign tax credits which may be unusable during the course of the assignment but available thereafter. As the taxes giving rise to these credits were paid by the employer, arguably they belong to the employer not the employee. How long does your business track such foreign tax credits to ensure any tax refunds generated go to you?

Tax clearance certificates, tax payments and post-assignment individual tax returns Relevant departure forms should be submitted to record the individual’s tax departure from the host country and return to their home or next country.

Do remember that certain countries, for example Singapore, require tax matters to be settled and liabilities paid before a departure clearance certificate can be

International HR Adviser Spring

obtained. Don’t forget that final year tax returns may still need to be filed and the existence of post departure bonuses and stock may necessitate filings beyond the actual year of departure.

Forgotten bank accounts and host country investments In the rush to move to the next location or return from assignment, it can be relatively easy to forget to shut foreign bank accounts or report their or other host country investments ongoing existence in future tax returns. Don’t forget to do so, otherwise tax authority enquiries will probably ensue. The volume of information reported between tax authorities is seeing a massive surge and this can easily trap the forgetful. Do seek to get it right from the outset.

I have only briefly touched on the tax risks that can arise from international assignments during the assignment life cycle. Careful tax planning, a structured approach to tax and implementation of a tax process, can help both employers and employees alike to mitigate tax liabilities and minimise tax risks. All department

teams (HR, Tax, Finance, etc.) should work together with the assignee and the tax adviser to achieve this goal.

Andrew Bailey is National Head of Human Capital at BDO LLP. He has over 30 years’ experience in the field of expatriate taxation.

BDO has offices in 154 countries and is able to provide global assistance for all your international assignments. If you would like to discuss any of the issues raised in this article or any other expatriate matters, please visit our website at; www.bdo.co.uk/services/tax/humancapital/expatriate-tax-advice or contact Andrew Bailey on +44 (0) 20 7893 2946 email Andrew.bailey@bdo.co.uk

EXCHANGE RATE POLICY

Does Your Exchange Rate Policy Respond To Your Expatriates’ Needs?

Exchange rate is a persistent and recurring topic within Global Mobility.

It is commonly and equally causing headaches to many International HR managing expatriate personnel and their remunerations.

From a macroeconomic perspective the main factors influencing exchange rate fluctuations are far greater than expatriates’ concerns and their goods and services basket. These factors are commonly presented as inflation, government monetary policy, economic and political stability, current account deficit.

One of the most notable event of this past year was certainly the sudden soar of Swiss franc (CHF) against the Euro (EUR) after the Swiss National Bank stopped holding the CHF at a fixed exchange rate with the EUR. Overnight Swiss goods and services became 20% more expensive to buy while Swiss companies or individuals benefited from an unexpected increase of their purchasing power within the Euro zone. As an example, Swiss car retailers had to adjust after realising that customers were starting to purchase vehicles in neighbouring countries (primarily Germany). At a micro level of expatriate management this had a huge impact on exchange rate reconciliation calculations for both those assigned to, or from Switzerland.

This, however, only shows an example in so-called “stable” or “biggest” economies, but expatriates are sent all “over the place” where economies and politics are far more exposed, and thus exchange rates are traditionally more prone to go to extremes.

Expatriates cannot do anything at their level and employers must constantly (re) adapt and (re)adjust their practices to reduce the impact on expatriates remuneration.

The impact that the exchange rate actually has on expatriates' remuneration can be classified as 3 major types:• Purchasing power in the host country: If payroll currency depreciates, the cost of living in the host country will increase.

If on the contrary it appreciates, the cost of living will decrease • Savings and financial commitments in the home country: Many expatriates transfer money back to their home country to cover

ongoing financial obligations (i.e. mortgage, diverse types of savings plans) or other personal obligations (i.e. family support) • Retirement assets: Currency of their retirement plan may be different than the currency of the country they will retire to. Exchange rate fluctuation may therefore increase or decrease the counter value of their assets or pension at the time of retirement.

The above will have more or less of an impact following to each expatriate remuneration structure: from home to host approach, over to guaranteed net, to the transfer of purchasing power and many others. When adding this to the possible legal obligations for a local salary, it becomes even more challenging to apply a common approach to all home/ host country combinations.

Two main categories can however be distinguished: • Those for whom their package is fully or partially paid in host currency The impact may arise if the portion they receive does not cover or exceeds their needs. These expatriates usually have a reduced exposure as they are receiving home and host currencies • Those for whom their package is expressed in a currency other than the home or the host country These are usually impacted over all 3 previous major fields.

For both these profiles the cost of living allowance (COLA), if any, tends to mitigate the exchange rate effect.

Many of the discussions Mobility Managers have with their expatriates lay over the fact that expatriates are observing a current impact while the COLA they receive reflects a differential corresponding to a previous period. In other words, you are compensating over an oncoming period something that has already occurred. The “good news” is that the exchange rate differential calculation usually works the same way so the combination of both can help companies to better explain and relate one to another.

With this respect, a “true” split pay

approach is an interesting configuration where you define at the beginning of the assignment the home and host portion in their respective currency and then annually apply an inflation differential without recalculating a COLA. This option is very interesting as it disconnects the exchange rate factor throughout the assignment. Exchange rate variations are considered to not have an impact as each portion of the salary is paid in the right currency. The annual package review is made by applying an inflation differential. This system can have its limits for high inflation countries and thus a huge negative inflation differential on the spendable income without considering how people actually adjust their consumption habits.

There is no magic formula (at least not just one) to manage exchange rate impacts, but there are a couple of actions organisations can adopt to make this subject and their policies more pragmatic and adaptable without dramatic changes.

Monitoring: It can help prevent situations where expatriates are already affected by a fluctuation and decide to prepare their own summary file, with their own rates and already calculate the amount of the differential they should be paid. Keeping close communication on fluctuations and their impacts as well as how, why and when they will be processed is essential.

This usually is time consuming or requires an integrated and automated tool to record and calculate these variations.

Clear Communication And Practices: Upon signing their assignment contract expatriates do have a multitude of personal and professional matters going on. The reference rates are often commented and discussed, but the methodology and its potential financial impact are typically overviewed. Taking the time to run a couple of scenarios and numbers before any assignments helps expatriates better understand situations in the future.

Exchange rate differential methods are often part of expatriate policy(ies) which Spring International HR Adviser

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EXCHANGE RATE POLICY inevitably demands several validations and the implication of various mobility stakeholders upon modification or update. Consider having a general policy enforced with various practices that help adjust faster under certain circumstances and adapt it to remuneration structures and geographical locations.

Leave The Choice To Expatriates Themselves: Some expatriates may prefer not to have any type of exchange rate differential calculation applied on their whole or portion of their salary. Flexibility might be given with this regards, but what is almost certain is that in case of a situation similar to the CHF-EUR scenario, companies will need to have a back-up plan. The choice can be reconsidered at the beginning of each year.

Keep Record Of The Balance: Many companies do not withdraw positive (employee’s ‘gain’) exchange rate differential while on the contrary, they pay upfront any negative (employee’s ‘loss’) differential. Keeping records of the fluctuation allows Global Mobility teams to obtain an ongoing status of an overall balance and to settle it periodically. This would usually be over a standard 3-year assignment period, or any time there is a significant change in the expatriate’s situation.

Exclude Some Currencies: What companies and expatriates hate the most are drastic oscillations and endless discussions around the actual financial impact. Considering to exclude certain currencies “at risk” does not mean the absence of any action but simply removing them from the traditional scheme of a reference rate.

The expatriate community is greater than ever and will continue to rise. What is also sure is that the number of different expatriate status will continue to grow. Cross-borders, commuters, unaccompanied assignments, Local +, young talented graduates, career expats are only a few examples.

When it comes to the exchange rate topic, the “classic” cross-border population is of particular interest.

If you take the example of crossborders working in Switzerland, here is a group of roughly 300,000 people having their salary fluctuating every single month without any type of differential calculation.

Current situation is idyllic as the CHF International HR Adviser Spring

is being particularly strong against the EUR but time will come when it will turn the other way around and everyone will see their purchasing power diminish and the cost of their living expenses increase.

Last but not least, they all benefit from retirement plans in CHF. The idea behind this example is not to waive any type of calculation, but to drive towards a more flexible model

where a certain variation (ie + or – 5%) is supported respectively by either the expatriate or the company.

The exchange rate topic will certainly continue to bring more surprises over the next few years. But one thing is sure, it could be worse if, imagine for a second, we would still have to deal with French franc, German mark, Italian lira or Slovenian tolar.

Gordon Zovko, is the Chief Development Officer of ITX S.A. based in Geneva (Switzerland) and a member of its Executive Committee.

Prior to this, he held the position of Head of International Mobility Administration & Finance at ITX S.A. for several years, where he successively set up, promoted and administrated Global Employment Companies on behalf of ITX clients.

His "Human Resources Specialist" background and his strong experience of working with multinational companies from diverse industries makes him an expert measuring the strategic importance of Global Mobility and its key topics such as: Compensation & Benefits, policies, international working contracts, management of TCNs, rebilling, cost control vs package "attractiveness" and expatriation process efficiency.

Gordon also drove the implementation of ISO 9001:2008 Quality Management System standards and compliance and co-leads Legal & Consulting services of ITX S.A. Telephone: +4122 309 3210 Email: gzovko@itx-ge.com Visit: www.itx-ge.com

International HR Adviser has just launched a Monthly Email Newsletter for its readers, that will keep you up to date with issues and topics relevant to your role in Global Mobility Management.

If you haven’t received this newsletter, and would like to, or would like to register your colleagues for it, please email helen@internationalhradviser.com with the email addresses of those who would like to receive it.

Our March 2016 Newsletter is available to view on our website and subsequent Newsletters will also be published on www.internationalhradviser.com

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expatriate reward

Documenting Expatriate Reward The remuneration of internationally mobile employees is complex to document and increasingly the subject of dispute. Juliet Carp, employment law specialist at Dorsey & Whitney (Europe) LLP, offers some practical strategies for reducing risk.

Documenting reward for expatriates is, in some respects, just like documenting reward for any other employee. The contract is there to set the parties’ expectations and record the promises they are making to each other.

The contract can reduce the risk of misunderstandings leading to claims and help resolve claims when they do arise. More importantly, they can offer significant comfort to potential assignees who want to know where they stand before agreeing to go.

Who Else Will Use Them?

A host of third parties may also need to see the contract documents, including for example income tax, corporation tax, sales tax, social security, pensions and immigration authorities. Those third parties may be in a number of jurisdictions and the people who review the documents may not be familiar with applicable laws or typical expatriate arrangements. Clarity is critical.

Accompanying family members will usually have questions about where they will live, go to school etc., and the assignment will run more smoothly if the employee is able to explain accurately.

Disappointed family members can be a surprisingly significant commercial risk.

Buying Power Cash remuneration is complicated by a variety of factors that do not impinge on domestic contracts, most significantly lack of certainty about the “buying power” of pay. Expatriates are frequently offered additional promises designed to address that uncertainty, for example, tax equalisation, cost of living adjustments (“COLA”) and exchange rate comfort.

Tax Equalisation The expatriate may be subject to more than one variable tax regime and this may be further complicated by rules designed to avoid “double taxation”. Many employers offer comfort by making “tax International HR Adviser Spring

equalisation” promises designed to make sure that the employee is no better, or worse off, than he would have been under the home country tax regime.

In practice, tax equalisation arrangements are far more complicated to administer than a “no better or worse off ” principle suggests and most multinationals ask tax advisers to help with the maths, tax returns etc. Few multinationals manage to document the arrangements in a way that makes the deal clear. Which elements of remuneration are covered by the policy? Is social security covered or higher tax rates due to an employee’s personal income? What happens to long-term incentives, pension or severance pay? Or if the employee dies, inherits, sells his house, or marries a host country national?

The employee can often help the employer reduce the cost of providing tax comfort, for example, by keeping records, submitting tax returns on time, helping the employer recover from local tax authorities etc. The tax equalisation agreement is an ideal place to make sure any conditions or requirements are legally binding.

These promises should be properly documented, not only because they are frequently the subject of dispute but because in most jurisdictions remuneration is highly regulated.

Recovering a tax reimbursement made directly to an employee who has already received the benefit of tax equalisation can be difficult without either cooperation or careful contractual wording. If the contract wording is right cooperation usually follows.

COLA Cost of living, inflation and exchange rates can all have an impact on the value of pay. Data is available commercially that can help employers make appropriate adjustments to pay to reflect this. This is usually done by offering an additional cost of living allowance (or “COLA”) that can vary in size. There are often local restrictions on an employer’s ability to adjust pay unilaterally so negative COLAs are generally avoided.

Benefits Expatriates often also receive a range of complex benefits, for example, temporary

and permanent housing, home leave, relocation assistance, language training, and schooling for children. Again clarity is key to good relationships. Will the employee be offered a flat or a house?

Will pets come too? Thinking ahead can make a big difference to clarity when things change. What happens if another child is born or school fees rise?

Are flights covered when a child goes to university? What if the assignment ends in the middle of a lease, the school year etc.? What happens to the deposit?

In addition to practical decisions, the employer will need to decide whether benefits will be provided “in kind” or by way of cash allowance or expense claim.

This should be carefully documented along with any tax-related requirements such as a need to keep receipts.

Employment Status The identity of an expatriate’s employer can make a huge difference to costs. For example, this may impact on tax, social security, pension, intellectual property, eligibility to participate in benefit plans etc. Terms related to remuneration can either support the identity of the preferred employer or undermine it. Bear in mind that decisions regarding, and delivery of, pay are matters for the employer.

Equality Employers should always review rewardrelated arrangements for employee impact, particularly impact on employees with “protected status”. Expatriate arrangements are no different in principle but, in practice, remuneration is linked to things that would not normally be appropriate in a domestic context, such as national origin or family status. Disparate impact and any explanations should be reviewed and challenged appropriately.

Other Legal Constraints Employment law is not consistent across jurisdictions and in many cases consideration will need to be given to more than one set of rules. The key thing is to be aware of the areas where employment law is likely to have an impact, so that advice can be sought from appropriate specialists at an early stage.

These may include for example: • Mandatory collective agreements that

expatriate reward may set minimum terms whether or not the employer recognises a trade union, for example, providing for “13th month” salary payments • Restrictions on an employer’s flexibility to retain discretion to unilaterally vary remuneration • Restrictions on making deductions from pay or requiring repayments • Termination-related laws.

Beautiful documents cannot trump underlying facts. And, of course, it is much easier to get the facts right, and ensure the documents accurately record the facts and promises made, before an assignment begins.

• Potentially affect a large number of people over a considerable period of time (e.g. a pension clause that is repeatedly used without change or a tax equalisation policy document).

Happy employees do not usually make claims. Being open and upfront with staff and responding to queries quickly and fairly can be surprisingly effective tools to reduce legal risk. But make sure you have the paperwork to support you if goodwill is not enough.

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Prioritise With all this complexity it makes sense to focus time, and related cost, where risk is greater. Essentially, this means focusing on areas where remuneration and benefits: • Are high value (such as housing and tax equalisation) • Are more likely to be subject to dispute (e.g. termination related terms) • Are emotive (e.g. children’s schooling); and/or

All the articles featured in this issue of International HR Adviser, and previous issues of the magazine, are available to share, view and download on www.internationalhradviser.com

Juliet Carp is an employment law specialist at full service law firm Dorsey & Whitney (Europe) LLP. Email carp.juliet@dorsey.com The second edition of Juliet’s book “Drafting Employment Documents for Expatriates” will be published later this year.

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Expatriate Adviser Summer

Autumn International HR Adviser

ACCOMPANYING PARTNERS

Lean Out: Engage With The Unseen Spouse To Reduce International Assignment Refusals Struggling with International Assignment Refusals? Would a change to your partner support policies make a difference?

Happy Spouse, Happy House ‘If the trailing spouse isn’t happy, no-one is happy. Kids know instantly. If kids don’t settle, trailing spouse unhappy, then the whole thing is a nightmare.’

Assignee comment No doubt many of us have heard the phrase, ‘Happy wife, Happy life’. I prefer to think of it as ‘Happy spouse, happy house’. Both acknowledge that we have lives outside of work, which are vitally important to our wellbeing.

In Global Mobility management the importance of the ‘unseen partner’, is only going to grow.

69% - of MNCs agreed

that ‘- spouse/partner career issues will become more important for your company’s ability to attract employees for an international assignment’.

Most international assignees are in the tail end of Generation X, or the beginning of Generation Y. The Gen Xers are probably your managers, the talent you’ve been growing in-house, your leaders or future leaders. As a cohort they’re ‘- highly educated, active, balanced, happy, and family-oriented’, and likely, so are their spouses. And Generation Y demand ‘- more solutions for the whole family; quality jobs are sometimes mandatory for spouses to join the assignee’.

Lean Out Do we need to ‘lean out’, and look beyond just the employer/employee relationship to

also support the accompanying partner?

Most international assignees are men, although the number of women going on international assignment has grown steadily in the last twenty years, now making up 20 percent of assignments. This rate is slightly higher in the healthcare and pharmaceutical industries.

The best way to support them and their male counterparts may be to directly support their partner.

Direct Communication with the Accompanying Partner, so they don’t become the Unseen Spouse Relocation surveys consistently find that half the time an employee refuses an international assignment is because of family concerns and/or concerns about the accompanying partner’s career.

Some of the verbatim comments are interesting, ‘Partner unwilling to give up careers, so unwilling to move’. There’s an assumption here – that an international assignment has to mean the partner giving up their career. In many locations, this is true, but not all. Often the possible international assignment isn’t truly discussed with the person who makes half the decision – the spouse/partner.

In the Expat Expert survey, twothirds of accompanying partners say they did not have any direct contact with their partner’s employer before or after relocation. In your company, what strategies do you have to engage with your employee’s spouses? Are you confident they know what support is available to them and how they can access it?

‘The company claims to provide assistance with area orientation, setting up services, locating shopping facilities, language classes and driving orientation.

None of this actually happened’.

Spouse comment Above all else, the Expat Expert report asked for ‘- a desperate need

for clarity of the conditions of the assignments, financial or otherwise.

That can’t be accomplished without an organisation having a complete picture of the moving experience for the family, which must then be followed up with an effective system for communicating the complete terms and conditions of the move abroad’.

What are the policies that HR/ Global Mobility managers say make a difference?

1. Supporting spouses to find a job in the host country.

This seems obvious, but it doesn’t always happen. Financially it makes sense if you consider the larger picture, not just the short-term cost of paying for spousal career support. Let’s take a look at the numbers: 7% of assignments end early1 - that’s a conservative estimate, others2 put it as high as 50%.

66%

- of assignments that finish early, do so because of spousal concerns.’4

Any programme that reduces failures is likely to be good value for money. For example, each year, if you have 100 assignees away from home, it is likely 7 of them finish early and 4 of them return for family reasons. Each one of those returns costs you an additional $250,000 (though it may be much more) = $1m per year.

$250,000 $1.25m - Cost of

early termination of an assignment.3 How much do you currently spend on providing support services to an assignee’s family and spouse? Is it more than $1m per year? In your Spring International HR Adviser

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ACCOMPANYING PARTNERS company, do you know the percentage of assignments that fail for spouse or family reasons?

Above is an example of the cost of early returns, but how much do you lose when your talented staff refuse an assignment? If an inexperienced manager takes an international assignment because your first and second choice refuse – what does that cost you? Consider the costs in strategic, career and management objectives that occur when an assignee returns early – or simply doesn’t do what they’re meant to do.

2. Figure out your strategy and what you’re measuring, or get someone else to do it.

Although it seems unrelated to assignee refusal rates, if you don’t know which parts of your global mobility system are costing you money, then how can you cut costs? And let’s face it, we’re all conscious of our expenses. There’s no better time to look at family support policies that make good financial sense.

Make sure the measures you use to determine value on assignment reflect the values and strategic objectives of your organisation.

3. Keeping employees informed that the support is there for them.

Yvonne McNulty, author of Managing Expatriates: A Return on Investment Approach, considers that ‘- the psychological contract is the biggest differentiator for organisations wanting to obtain a satisfactory eROI. What is a ‘psychological contract?’ It is the ‘- indirect, unwritten and often unspoken agreement between an employer and employee’, the mutual understanding between the company and its staff, the way an employee feels they can, or can not, abide by the letter of the formal contract.

It’s the give and take, the flexibility, the understanding for the other person and their situation. ‘Nothing shakes an expatriate’s confidence and commitment like the feeling that his or her trust in the organisation has, in a breach of the psychological contract, been betrayed or ignored’.

What helps decrease refusal rates? People The irony is that it is not only money that makes the difference whether someone International HR Adviser Spring

accepts an international assignment or not. It is also about considering the social, cultural and career aspects of both the employee and the spouse. Two thirds of international assignees want assurances of a contact at the host country to help settle in. Some ideas for these are: • A buddy system • Welcoming events for all family members • A commitment to everyone who arrives in their host-country that their immediate line manager meets and greets them • A local concierge service when they arrive • Introductions to host-country nationals before leaving the home country • An on-going relationship with an expat coach who knows the host country.

The solution will vary with location and circumstances, but it is vital to provide human, caring support f o r e ve r yo n e o n a s s i g n m e n t .

Demonstrating the duty of care also helps to cement the psychological contract with the international assignee and those accompanying him or her on relocation.

Business Studies, 1988, Vol.19(2), p.277.

3 “An Integrative View of International Experience” ,Takeuchi, R ; Tesluk, Pe ; Yun, Sh. Academy of Management Journal., v.

48, (1), 2005, FEB, p. 85-100.

4 http://expatexpert.com/pdf/Report_on_Key_ Findings_of_Family_Matters_Survey.pdf

‘Our employees feel more comfortable as soon as they know that our company also supports the partner/spouse (and children)’.

Verbatim comment, Brookfields 2015 survey.

E n c o u r a g i n g l y, i n t e r n a t i o n a l couples want spouses involved in preliminary discussions about any relocation. Some organisations are making the effort to provide services in spousal/partner and family support, which assists the company to maintain a positive psychological contract with their employees.

When it comes to international assignments, the psychological contract extends to everyone who has to move, so the unseen spouse becomes a visible and considered part of the relocation.

Lean out to include the supporting partner and not only will you decrease your costs, you’ll increase retention and international assignment acceptance rates.

References 1 Brookfield GRS Global Mobility Trends Survey, 2015.

2 Work Role Transitions: A Study of American Expatriate Managers in Japan’.

J. Stewart Black. Journal of International

Veronica Lysaght is Director of Mobus, www.mobusconsulting. com that specialises in supporting people to move internationally, through expat coaching, crosscultural training and strategy for organisations with international assignees. She has lived and worked in four countries and has a background ranging through accountancy, marketing research, journalism, press secretary to a cabinet minister, career coach and business owner spanning 30 years. Qualifications include: Global Mobility Specialist - Talent Management, Certificate in Coaching, Masters in Counselling, Bachelor of Commerce. She is a member of the BACP Coaching division and of the ICF. To discuss the best strategy to increase international assignee acceptance in your company, please contact Veronica on veronica@mobusconsulting.com or call +44 (0)7757 939 940

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SERVICED APARTMENTS

Operators, Agents, Hybrids And Now Ag¦gre¦ga¦tors AGGREGATORS - NOUN: A website or programme that collects related items of content and displays them or links to them.

First there were operators and agents, then there were hybrids, and now there are aggregators: you might be excused for thinking - so what’s the difference? And does it matter anyway?

On a normal day, in a normal environment, and in a key location, probably not much difference at all. But, then again, that is the precise time you are lulled into a false sense of security – when everything is going well, and no-one really needs anything other than a great apartment in a fab location at a competitive rate.

Mark my words however, understanding exactly what kind of programme you have and knowing whether you are predominantly using an operator, an agent, a hybrid (or an aggregator…) will make a world of difference if that dreaded fateful day ever arrives, the day when something in the world (or the world of your traveller) goes wrong.

It might be that you need traveller tracking, or you need support in a secondary or tertiary location, or you need data for your ‘boss’s boss’ - whatever it is, you need someone to be accountable, responsible and react quickly with understanding. At that moment, knowing the deliverables within your serviced apartment programme you have in place becomes very, very important indeed.

In this article we will take a journey through understanding and reviewing what kind of serviced apartment programme you have already, whether it fits the needs of your company, your travellers and your vision, and whether you have the most safe, secure and reliable network of units that are available on the market.

Knowing that you have the best managed product (whichever one you have) is important. As we all know, challenges have a habit of becoming a priority at times when you least want or expect them to. For instance, the most dreaded challenge is the one that occurs when you are safely tucked up in bed on a Friday night, dreaming of the successful transition of your staff as they relocate across the globe, these are International HR Adviser Spring

the issues that when they arise in daylight hours, you take in your stride, but in the early hours, they seem 100% worse.

In a perfect world, (and definitely at 4am in the morning), we all know that you want to ‘rest easy’, knowing that you have dotted the i’s and crossed the t’s, and that you, your team, your agent and the operator will and have done everything in their power to ensure your people are always in ‘safe hands’.

Let’s go back a little, the history of the serviced apartment industry is interesting.

It previously boasted senior leaders from the hospitality industry and the property market who in turn created operated products and hybrids - at the same time agents joined the playing field providing access to inventory either through effective databases and systems or through high staffing levels and supply managers dependent on the style of agent.

The world of serviced apartments has continued to thrive, evolve and change.

Our industry is already recognised as one of the most fast-paced in the hospitality sector, but the current changes are now driving us to another level.

The challenge for any buyer now is to understand who they are buying from, who operates the apartments, and just how many layers of commissions are included in the final rate - the buying platform is increasing in complexity.

However, now the industry is being joined swiftly by aggregators who have seen the opportunity and the ‘gap’ of online content and links.

Change is a constant, and the serviced apartment industry is smack bang in the middle of another change. Just one year on, from when I discussed the concept of ‘Alliances’, we are now seeing the rise (and potential fall) of a great number of Serviced Apartment Booking Agents and now, with the demand for online inventory becoming stronger and stronger, aggregators have joined the mix.

Hybrids do not identify a difference between their own product and those they book into, for instance, their agency can carry the same name as their operated products. Their priority is generally to fill their own units, as this is where their real investment is. They work as an agent in

locations that they do not have their own inventory, and they earn a commission or ‘mark-up’ for making the booking.

This can be anything from $5 a day, to a commission or % mark up.

Agents act as a third party, generally working in multiple markets and with understanding of global currency and tax challenges. Believe me, understanding TOMs and the impact of this on a programme is paramount to you being able to explain VAT to your client. Agents generally will ask the operator they book into for a 10% commission. And most boast access to thousands of apartments.

The new agents that have been in the business for a relatively short period of time, very quickly claim to be able to immediately offer global programmes – and unfortunately, with pretty limited global experience. My recommendation is, do take time to review an agent's credentials, how long they’ve been in business, and do look at their systems and take the time to meet their supply chain managers – these are very important people if the booking or guest experience goes wrong.

The news of 2016, is that Apartments are being aggregated, and they have been for a while - just like taxi’s, just like insurance, and just like mortgages.

So what impact is this change having on the industry?

Well, quite a significant one actually.

The serviced apartment industry is currently experiencing a surge of firstly, operators developing their own global agencies (Hybrids), and secondly, new ‘agency’ start-ups that claim to sell ‘global’. Both are competing for space on the global sales platform.

The outcome of this change in our industry is potentially huge for buyers.

Whether the buyer is from relocation, from business travel or from global mobility, they will need to become super savvy to understand the potential ‘risk’ of employing an underdeveloped, immature or inexperienced hybrid, agent or aggregator.

So let’s review the differences and take a deeper dive into the aggregators. As we know, everyone is doing it. From Uber to Airbnb, from price comparison sites to eBay, from Laterooms to Booking.com.

SERVICED APARTMENTS Aggregating has fast become part of modern life. However, what are the questions and fears that follow this method of purchasing a product or a service? Is it safe? Is it insured?

Who am I contracting with? How many layers of commissions are making up this final price? Who is the aggregator? So, the question is, how do you know if you have purchased through an aggregator? And just how competent are these aggregators?

From a procurement perspective – how do you ensure that you, your teams and your consultants can be safe in the knowledge of exactly what you are buying?

Your priority should be to understand who is regulating or checking the standards and the safety of ‘aggregated’ units?

1) It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change 2) In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.

Charles Darwin There are of course measures, checks and balances that can help you. The Association of Serviced Apartments (ASAP) are quality assessing products across the globe, CHPA

has also taken up the mantel, and there are agent accreditations being rolled out as we write this article.

For any buyer, understanding how a supply chain is managed, knowing whether there is an ‘owner’ who is responsible 24/7 and who remains connected and accountable for the supply chain and traveler is vital. Understanding if someone is just ‘loading’ or aggregating unchecked and potentially unsafe products onto sites where they can be booked easily by your travellers is where the danger lies, so a word to the wise, aggregators are here to stay, but do make sure you do your homework.

Jo Layton, MD Group Commercial Sales, The Apartment Service. Jo Layton has joined The Apartment Service as Managing Director – Group Commercial Sales.

She has successfully established The Apartment Service’s new Alliance brand as part of her overall remit to develop the company’s successful agency, network and Roomspace brands. Layton joined from BridgeStreet where she was responsible for sales and marketing throughout EMEA and APAC and was instrumental in the expansion of the UK office. www.apartmentservice.com

ORDER YOUR COPY OF THE GLOBAL SERVICED APARTMENTS INDUSTRY REPORT The 6th Edition of this annual report will be published in July.

To pre-register for your copy email GSAIR@apartmentservice.com

New Website To Support Expatriate’s Moving To, Or Living In The UK Www.Expatsguidetotheuk.Com This brand new website, where you can also view The 2016 Expatriate’s Guide to Living in the UK online, supports expatriates who have moved to the UK from anywhere in the world, by providing key information about living in the UK. Living and working in the UK can provide a fantastic opportunity to any individual expatriate and their family. The UK offers a diverse range of cultures and if you have relocated for business, family or lifestyle reasons, this website will prove to be an invaluable resource.

The 2016 Ex Guide to L patriate's iving in th e UK

Price £5.0

0

The site currently contains over ten Useful Advice pages covering: Banking & Wealth • Expatriate Clubs • Embassies & High Commissions Driving & Transport • Education - Schools & Universities Healthcare & Hospitals • Immigration & Residency • Legal Issues Moving & Relocation • Residential Lettings Serviced Apartments • Taxation These pages contain detailed information on these subjects, with valuable advice, information and links to our partners.

PLEASE SHARE THIS WEBSITE WITH ANY FRIENDS, FAMILY OR COLLEAGUES WHO ARE RELOCATING TO THE UK!

VISIT WWW.EXPATSGUIDETOTHEUK.COM TODAY!

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Expatriate Adviser Summer

Autumn International HR Adviser

LEADERSHIP

Britain's Most Admired Leader Hard evidence of how corporate reputation correlates with profitability has been consistently proven by over 25 years of the largest peer review of its kind: Britain’s Most Admired Companies.

For the first time, Britain’s Most Admired Leader is a woman: Dame Carolyn McCall, CEO of easyJet. She attributes her success to her team as well as a winning business model.

Angela Podmore MCIPR, founder of Kinetic which sponsored the award, examines the airline leader’s recipe for consistently building a reputation so many admire as well as citing Southwest Airlines and Delta as fellow exemplars as well as Unilever.

One of the challenges facing any organisation with a sizeable mobile workforce spread across the world, is how to keep your team happy in every regard – from the bureaucratic to everyday issues – while getting the job done in a way which generates meaningful profits.

Why Reputation Counts Reputation correlates with profitability.

The more people who admire you, the more money you make.

American operator, Southwest Airlines is among the companies proving the reputation/profit correlation point. It’s long been recognised as fostering a culture of employee engagement, transparency and communications as well as performing to key financial metrics such as sound revenue per available seat miles.

The airline puts employees first.

Customers come second.

Those in the frontline are given the knowledge and skills they need to do what it takes to delight and amaze their customers as well as resolve issues quickly, safe in the knowledge their boss supports them. That makes them more loyal, committed and raving advocates of the brand.

In February (2015), they confirmed they’d made record profits and were intending to match that result with a record profit share of $620 million by the end of April. That would work out as eight weeks of pay.

Meanwhile, American Airlines is in contract talks with ground workers with the unions accusing management of stalling tactics. Southwest had its own issues – most recently with flight instructors which

Dame Carolyn McCall. Image © Sam Peach

has been tentatively resolved within a month – but never had to suffer a strike.

The global leader in loyalty currency management – Points – recently renewed its multi-year agreement to power Southwest Airlines’ business incentive programme: Rapid Rewards. Its helped the airline build one of the industry’s most loyal customer bases as they collect, share and redeem points.

Now into its millions, the reward scheme is all part of Southwest’s vision to provide a unique and outstanding customer experience.

Another airline enjoying a strong reputation from every perspective – customer, investors, regulators and team alike – is easyJet. “easyJet is a safety business and trust in easyJet is paramount. Reputation is everything,” says Dame Carolyn McCall as the airline celebrates its 20th anniversary.

For 25 years, Prof Mike Brown of Leeds Business School at Leeds Beckett has proved this through his research with corporates as part of Britain’s Most Admired Awards.

constant presence near the top of the table, is testimony to the value of a good reputation, nurtured carefully over many years.

“Like individuals, companies have personalities and reputations,” says Prof Brown. “A company’s reputation is based on how people think and feel about a company.

“What better way to access ‘Britain’s Most Admired Company’ than to ask a peer group of senior executives and analysts about their thoughts and feelings of a company. The survey attempts to capture the tacit knowledge of these two key constituent groups whose jobs rely on their knowing about other companies within the industry sector.

“It is the company senior executives and the city investment analysts who should know about these companies and the research attempts to gather their perceptions across a series of characteristics that, when added together, provides a measure of the reputation of the company. Following the revelations from VW, reputation can take a very long time to build but a very short time to lose,” said Prof Brown.

Britain’s Most Admired Company: Unilever

Britain’s Most Admired Leader: Dame Carolyn McCall, CEO, easyJet

Of the Most Admired Company - Unilever - Professor Michael Brown of Leeds Business School at Leeds Beckett, says, “Unilever's achievement, not only in winning the overall award twice but also in being a

After five years in post, McCall has watched easyJet’s share price quadruple.

Pre-tax full-year profits are up 18% to a record £686m on revenues of £4.69bn.

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LEADERSHIP The 'premium low-cost' airline carried 68.6m passengers in 2015. Load factors are well over 90%.

McCall’s also shown cool handing in stormy business weather which has included ash clouds grinding the network to a halt as well as fuel and currency crises – and those were in her first few months.

Her leadership sets easyJet’s moral compass and is turning it into a worldbeating brand.

She’s the architect of why people trust easyJet and vote for it in their droves with their cash and she’s understated about it all - crediting her team at every turn.

"I am genuinely honoured by this award but this is about the great people at easyJet and the huge team effort they have made over the last five years. It’s a real vote of confidence in easyJet,” says McCall.

The Happiest Team In The Skies easyJet’s flat hierarchy means every member of the team can decide how best to deliver on the company’s customer experience. That’s key as modern consumer expectations continue to climb to stratospheric levels. The team enjoys their work according to IPSOS MORI which tracks employee engagement.

Against all the other airlines in the world, easyJet leads by 19 points in terms of employee engagement.

Flat hierarchies also keep costs low. easyJet has no grand offices. They’re all open plan. Quiet conversations take place in local coffee shops.

Commitment to keeping customer service standards high can be seen in the £2.75m Gatwick crew training centre.

Which Variables Drive Reputation?

The winners are chosen by the people who make it their business to critique the company or leader – their competitors.

They rate you as a leader and a company against a range of nine variables.

Some variables are created more equal than others. Consistently the heavyweight variables are: quality of management, quality of products and services and financial soundness – variables which have improved across the airline sector as a whole: Social and environmental variables consistently lack acclaim in the reputation metrics.

Over the years, the airline industry’s reputation metrics have increased steadily.

Whereas the consumer goods industry International HR Adviser Spring

has been fairly balanced in their ranking since the credit crisis.

The overall average, for all nine variables, has always been rated a seven or higher.

However, both Next and JLP achieved significantly higher ratings than Unilever.

Dame Carolyn’s Recipe For Reputational Success The most powerful business lesson Dame Carolyn’s learned, “You have to have a clear vision and then make decisions quickly, particularly about people because you need to have the right people in the right roles.”

Team Power “My guiding principles are to treat people as you’d like to be treated. You deliver profits to shareholders while having great power to do some good such as providing a service like no other in an enjoyable work environment,” says Dame Carolyn.

Dame Carolyn’s approach to building trust among her team: “You tell them the truth even if it’s unpalatable. You’re always open and accessible – people know they can always talk to you even about the stuff that’s not easy to hear.”

That culture is articulated in easyJet’s values: safety, pioneering, one team, passion, integrity and simplicity.

It’s a culture attuned to modern teams’ hearts and minds which bring plenty of discretionary effort and talent to any business. One where the leaders encourage colleagues to challenge the status quo.

Anyone who has flown easyJet knows they have a reputation for keeping their promises – they’ve made air travel easy and affordable without compromising service. It’s the team’s discretionary effort and talent which makes the difference between easyJet delighting its customers or the gap growing between what they promise and deliver.

easyJet vs the world’s biggest – Delta By market capitalisation, Delta is the world’s largest airline ($40bn in Oct 2015 with $10bn profit). It’s done it by focusing on its culture.

Its philosophy is treat your team with respect and they’ll look after your customers. They started with the employee conference Velvet series in 2006 which has since become a symbol of the Delta mindset.

Values guiding that culture include:

striving to be humble, remembering where you came from, having a sense of humility, as well as maintaining a collaborative approach to 'climbing even higher'.

That culture has guided investments as diverse as an oil-refinery subsidiary, with international partners (Virgin Atlantic, Aeromexico and China Eastern) and reshaped its loyalty programme. It’s now looking to develop its services in Brazil and China.

As with all dynamic cultures, Delta’s is both ‘bottom-up’ as it is ‘top-down’.

Its US mainline operation recently went 200 days without experiencing a single cancellation – a first for any US airline.

Excellence Is Not GenderSpecific A powerful role model for women climbing the corporate ladder, Dame Carolyn was surprised that in its 25-year history, this is the first time the Most Admired Leader has been awarded to a woman.

“Winning this award is an a honour whether you are a man or a woman but I hope this will inspire more women and that they will want to be in business and to do it their way - be leaders of companies in their way,” says Dame Carolyn McCall.

Angela Podmore MCIPR started at Saatchi & Saatchi and founded Kinetic 20 years later. Reputation engineers, Kinetic has pioneered ways to guarantee results in building trustworthy reputations. In its 12-year history, Kinetic’s always delivered on its guarantee. Its ISO 9001-certified services include content creation and dissemination across traditional print and emerging digital media. Its values are: challenging, rigorous, sincere, pioneering, delight.

Visit www.kineticpr.co.uk

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DIARY DATES APRIL Worldwide ERC® Global Mobility Specialist (GMS)® training – Module 3 9 April 2016, 09:00 - 17:00 (Registration begins at 08:30) InterContinental Geneva Hotel, Geneva, Switzerland Participate in an in-person training session of one of the three modules (The Intercultural Challenge: Supporting Successful International Assignments) that comprise the Worldwide ERC® global designation.

Modules 1 and 2 can be taken online. There is no prerequisite, and the modules can be taken in any order.

Visit www.worldwideerc.org/Events/Pages/Geneva_Module3.aspx

Chief Strategy Officer Summit London 26-27 April 2016 etc.venues St Paul's, London, United Kingdom The Chief Strategy Officer Summit is an ideal environment for crosspollination of ideas, satisfying your intellectual curiosity and finding proven solutions to real-life challenges. Join over 150 senior-level strategy executives and get the secrets to success from the leaders and key decision makers of BBC, Shazam, Sky, UNICEF, EE, Pret A Manger and many more. Come share your insights and discover how you can evolve your strategy to become more agile and adaptive while simultaneously providing a long-term path to business success.

Take part in discussions covering all the hot topics in strategy such as growth strategy, strategic innovation and communicating strategy, using engaging fireside chats, keynote presentations, panels and more. Get a saving of £200 off two day passes here with code IHR200. To learn more or to secure your place visit: www.theinnovationenterprise.com/ summits/chief-strategy-officer-summit-london-2016

MAY FEM Summit & EMMAs - Americas 4-5 May 2016 Hilton Hotel, Philadelphia, USA The 7th edition of the FEM Americas Summit & EMMAs will once again bring together the wider global mobility sector, including consultants, industry experts and HR specialist s over 2 days for the summit with our annual Expatriate Management and Mobility Awards following. Find out more information at www.americas.forum-expat-management.com

Worldwide ERC® Americas Mobility Conference 18-20 May 2016 Hilton Americas Hotel, Houston, Texas, USA Take part in the inaugural Worldwide ERC® Americas Mobility Conference, and gain solutions resources and connections for solving the biggest talent mobility challenges across North, Central and South American markets. Additional GMS® and Strategic Talent MobilitySM course training sessions will also be available.

Visit www.worldwideerc.org/amc16/Pages/conference-home.aspx

JUNE The Economist Events’ Future Works Summit June 21st 2016 The Montcalm Hotel, London, UK The rapid pace of technological innovation, demographic change and globalisation are redefining work practices. Is your organisation fully prepared and strategically organised to deal with skills shortages and maximising productivity going forward? Taking place in London on Tuesday 21st June, the Future Works Summit will address and challenge current thinking on the future of work in Europe. How can you create an interactive and autonomous environment to enhance productivity, enable innovation and encourage entrepreneurship in your organisation? Register at www.economist.com/events-conferences/ emea/Future-Works-2016 and benefit from the early booking discount and plan your networking opportunities for the summit in June.

International HR Adviser Spring

JULY FEM Global Mobility Conference - Melbourne 20 July 2016 Crown Entertainment Complex, Southbank, Melbourne, Australia Don’t miss the opportunity to attend the FEM Global Mobility Conference in Melbourne and hear from leading global mobility professionals from across Australia. Join us to share best practice and network with your peers while coming away with valuable insights and ideas for your own programme. Find out more information at www.melbourne.forum-expat-management.com

SEPTEMBER FEM Summit & EMMAs - APAC 7-8 September 2016 Orchard Hotel, Singapore The FEM APAC Summit & EMMAs returns once again to Singapore and it’s a must-attend 2 day event for forward-thinking global mobility and HR professionals working within the APAC region. Join your industry colleagues to discuss success from the last year and debate the future of mobility in Asia. Find out more information at www.forum-expat-management.com/events/conferences-summits

European Employment Law, HR and Business Culture 11-14 September 2016 Oxford, UK Immerse yourself in European Employment Law at JSB’s residential course 10% discount for readers of International HR Adviser Great opportunity to access reliable, ‘easy-to-digest’ employment law knowledge | Covers EU, French, Spanish, Belgian, Dutch, German and UK employment law | 3-day intensive residential course in one of Oxford University’s Colleges | Ideal for Global HR professionals from all sectors, in the UK, Europe and beyond |Superb location for learning, networking and mixing with legal experts | Full social programme, accommodation and meals organised by our friendly team | Delivered by JSB’s International Employment Law Faculty, the leading provider of international legal expertise to the HR profession in the UK for over 20 years. Full details at jsbonline.com/euro, quote ref IHRA-10

NOVEMBER FEM Summit & EMMAs - EMEA 10-11 November 2016 Intercontinental O2, London, UK You will not want to miss your annual opportunity to learn, share and network at the FEM EMEA Summit in London this year! Combined with the EMMAs, these two unique events bring together over the course of two days leading global mobility professional across Europe, the Middle East and Africa to share best practice and network in the evolving landscape of global mobility. Find out more information at www.forum-expat-management.com/events/conferences-summits.

Annual EMEA HR Summit 16-18 November 2016 Bentley Hotel, London, UK Aimed at global HR leaders, the Europe, Middle-East and Africa HR Summit will cover hot topics; Talent & Capability Development, Performance & Rewards, Talent Mobility in EMEA, HR Transformation & Change Management and much more. The three-day conference will focus on new trends in various markets, explore some of the unconventional ways of managing a diverse workforce and recent developments in the continually evolving role of a global HR. Delegates are invited to take part in the practical and highly interactive masterclass on Talent 2025, by Gyan Nagpal. Engage in a diverse range of sessions with HR professionals from leading, global brands. Find out more and register at www.boc-uk.com/conferences/emerging-markets-hr-summit

If you would like to advertise a conference or exhibition on our Diary Dates and on www.internationalhradviser.com please email damian@internationalhradviser.com

DIRECTORY BANKING SERVICES LLOYDS BANK INTERNATIONAL LIMITED Telephone: From the UK, call: 0808 169 6411 Outside the UK, call: 033 3014 5287 Mon-Fri 8am-6pm and Sat. 9.30am-1.30pm UK time. Calls may be monitored/recorded Email: londonbdm@lloydsbanking.com Website: international.lloydsbank.com Registered Office and principal place of business: PO Box 160, 25 New Street, St. Helier, Jersey JE4 8RG. Registered in Jersey, number 4029.

Regulated by the Jersey Financial Services Commission.

We abide by the Jersey Code of Practice for Consumer Lending.

The Isle of Man branch of Lloyds Bank International Limited is licensed by the Isle of Man Financial Supervision Commission and registered with the Insurance and Pensions Authority in respect of General Business. Business Address: PO Box 111, Peveril Buildings, Peveril Square, Douglas, Isle of Man IM99 1JJ. NATWEST GLOBAL EMPLOYEE BANKING Address: Eastwood House, Glebe Road, Chelmsford, Essex, CM1 1RS, UK Contact: Craig Boe, Manager, NatWest Global Employee Banking Telephone: +44 (0)1245 355628 Email: craig.boe@natwestglobal.com Website: www.natwestglobal.com NatWest Global Employee Banking is a specialised department within NatWest who work with Company HR functions/ Relocation agencies to offer a streamlined account opening service for relocating employees. One of the main benefits of the service is that employees can apply for their account before they arrive in the UK so their account is ready when they arrive. This may also help if they want to transfer funds to their new account in preparation for relocation.

INSURANCE AND FINANCIAL SERVICES

ZURICH CORPORATE LIFE & PENSIONS Tricentre One, New Bridge Square, Swindon SN1 1HN Contact: Adele Cox Telephone: +44 (0) 118 952 4253 Fax: + 44 (0) 118 952 4300 E-mail: adele.cox@zurich.com Website: www.zurichinternational.com Zurich International Life is a global provider of life insurance, investment and protection products. Our corporate range offers flexible, portable solutions, designed to suit multinational organisations with an internationally mobile workforce. The International pension plan offers a cost effective, bundled retirement benefits solution comprising of trust services, investment funds and online administration.

International group protection is designed

to protect an employers’ most important asset – their employees – and offers a range of life and disability protection.

With a local presence in key global business hubs and over 20 years experience of implementing and administering plans world wide, we’ve developed our knowledge and understanding of key markets to meet the needs of our customers and business partners.

INTERNATIONAL HR CONSULTANTS DELOITTE LLP Stonecutter Court, 1 Stonecutter Street, London, EC4A 4TR Contact: Robert Hodkinson, Partner Telephone: +44 (0) 20 7007 1832 Fax: +44 (0) 20 7007 1060 E-mail: rhodkinson@deloitte.co.uk Website: www.deloitte.co.uk Whether you are creating your first international mobility programme for employees or addressing fundamental changes to an existing programme, our International Human Resources team can help. Deloitte provides consulting support that has an appreciation for each company’s size, background and unique cultural environment, aligning your international programme goals with corporate business strategies. Our consultants have developed deep expertise in many fields based on first hand experience with many of the world’s leading organisations: international assignment policy and process design, benchmarking, service delivery modelling, improving vendor management and helping our clients become more compliant and their administration more cost-effective.

INTERNATIONAL MOVING DT MOVING LTD 49 Wates Way, Mitcham, Greater London, CR4 4HR Contact: Tim Daniells Telephone: +44 (0) 20 7622 4393 Fax: +44 (0) 20 7720 3897 Email: london@dtmoving.com Website: www.dtmoving.com DT Moving is a world leading international moving company. Founded in 1870, we serve corporate customers all over the globe with an award-winning* move management and destination service programme. Through our London and Paris headquarters and worldwide network of global partners, we help clients achieve their workforce mobility goals.

Every employee we relocate receives a dedicated DT Moving team member as a central point of coordination, support and advice to ensure every part of their relocation runs smoothly.

Our goal is your complete satisfaction, and with a 96% customer rating for 2014, we offer unrivalled quality at competitive rates. *Awarded nine global relocation awards since 2010.

RELOCATION HCR RELOCATION UK Head office - Belvedere House, Basing View, Basingstoke, RG21 4HG UK Contact: Louise Hardy - Business Development Executive Telephone: +44(0)1256 313887 email: louise.hardy@hcr.co.uk website: www.hcr.co.uk Twitter: @relochatter LinkedIn: www.linkedin.com/company/hcrgroup-limited We look after people, your people. we have a dedicated, high performing and professional team to deliver our award winning relocation service. our knowledge, experience and empathy ensures that each of your relocating employees and their families are carefully managed and that their specific needs are considered. HCR has a true ‘one point of contact’ philosophy; one dedicated, cross trained account Manager and lead Relocation Consultant who will manage, co-ordinate, deliver and provide comprehensive support for every relocation case.

SANTA FE RELOCATION SERVICES Central Way, Park Royal, London, NW10 7XW Contact: Mark Rising Telephone: +44 (0) 208 961 4141 Fax: +44 (0)208 965 4484 email: Mark.Rising@SantaFeRelo.com website: www.santaferelo.com Thinking Relocation? Think Santa Fe Relocation Services.

Santa Fe Relocation Services provides the full range of relocation services to support businesses with international interests from diverse industry sectors. Santa Fe is conveniently located across six continents and offers holistic relocation solutions to support businesses and relocating employees. Last year, we handled 120,000 relocations globally. Our core services are Immigration, Moving, Relocation, Real Estate and Records Management.

We make it easy.

RELOCATION ASSOCIATIONS

ASSOCIATION OF RELOCATION PROFESSIONALS (ARP) 9&10 Diss Business Centre, Dark Lane, Diss, Norfolk, IP21 4ND Contact: Tad Zurlinden Telephone: +44 (0)1379 651 671 Fax: +44 (0)1379 641 940 Email: enquiries@arp-relocation.com Website: www.arp-relocation.com The ARP is the professional association for the relocation industry in the UK. The ARP’s activities include seminars throughout the year, an annual conference, the publication of an annual Directory of Members and a website, which is updated regularly.

THE EUROPEAN RELOCATION ASSOCIATION (EuRA) 9&10 Diss Business Centre, Dark Lane, Diss, Norfolk, IP21 4ND Telephone +44 (0)1379 651 671 Spring International HR Adviser

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DIRECTORY Fax: +44(0)1379 641 940 E-mail: enquiries@eura-relocation.com Website: www.eura-relocation.com EuRA is an industry body for Relocation Professionals in both Europe and Worldwide.

EuRa have launched The EuRA Quality Seal, the world’s first accreditation programme for relocation providers. This pioneering initiative provides a straight forward, cost effective audit to reflect your company’s excellence in providing relocation services.

SCHOOLS International Community School 21 Star Street, London, W2 1QB Tel: +44 (0) 20 7402 0416 Web: www.icschool.co.uk Email: admissions@ics.uk.net An international day school located in 3 sites in the centre of London. We offer all three International Baccalaurate Programmes (PYP, MYP, and Diploma) to children aged 3-18yrs.

ICS has a diverse community with 45 different nationalities, and boasts a strong tradition of working with students in a highly personalised tuition framework thus enabling every student to reach their maximum potential in a rigorous but supportive environment. For students needing English Language Support we offer our unique Preparation Programme that allows students to study mainstream academic subjects alongside the language tuition. We also welcome & provide outstanding support to children with Special Educational Needs. Students at ICS benefit from a wide ranging sports & activity programme during term time and also during school holidays. We have outdoor education centres at Chorleywood and Bawdsey, Suffolk and offer educational trips abroad as part of our Travel & Learn Programme.

ISL Group of Schools ISL Surrey Old Woking Road, Woking, Surrey GU22 8HY Contact: Claudine Hakim Telephone: +44 (0)1483 750 409 ISL London 139 Gunnersbury Avenue, London W3 8LG Contact: Yoel Gordon Telephone: +44 (0)20 8992 5823 ISL Qatar PO Box 18511, North Duhail, Qatar Contact: Nivin El Aawar Telephone: +974 4433 8600 Website: www.islschools.org Email: hmulkey@islschools.org The International School of London (ISL) Group has schools in London, Surrey, and Qatar. The internationally recognised primary and secondary curricula have embedded language programmes (mother tongue, English as an Additional Language, and second language) which continue throughout the student’s stay in the school. A team of experienced and qualified teachers and administrators provides every student with the opportunity to grow and learn in an environment that respects diversity and promotes identity, understanding, and a passion for learning.

International HR Adviser Spring

MARYMOUNT INTERNATIONAL SCHOOL LONDON Address: George Road, Kingston upon Thames, KT2 7PE Contact: Mrs Cheryl Eysele Telephone: +44 (0)20 8949 0571 Email: admissions@marymountlondon.com Website: www.marymountlondon.com With an outstanding record teaching the respected International Baccalaureate for over 30 years, Marymount offers day and boarding to girls aged 11-18 who gain places at the world’s best universities.

Consistently ranked within the top 5% globally, Marymount also offers the pre-IB Middle Years Programme; this stretches students without the need for incessant testing. The nurturing, supportive Catholic Community welcomes all faiths and achieves a shared purpose for girls of more than 40 nationalities.

TASIS THE AMERICAN SCHOOL IN ENGLAND Coldharbour Lane, Thorpe, Surrey, TW20 8TE Contact: Karen House Telephone: +44 (0)1932 582316 Email: ukadmissions@tasisengland.org Website: www.tasisengland.org TASIS England offers the International Baccalaureate Diploma, an American college preparatory curriculum, and AP courses to its diverse community of coed day (3-18) and boarding (14-18) students from 50 nations. The excellent academic programme, including ESL, is taught in small classes, allowing the individualised attention needed to encourage every student to reach their potential. Outstanding opportunities in art, drama, music, and athletics provide a balanced education. Extensive summer opportunities are also offered. Located close to London on a beautiful and historic 46-acre estate.

SERVICED APARTMENTS

THE ASSOCIATION OF SERVICED APARTMENT PROVIDERS (ASAP) Suite 3, The Business Centre, Innsworth Tech Park, Innsworth Lane, Gloucestershire GL3 1DL Contact: ASAP Office Telephone: +44 (0)1452 730452 Email: admin@theasap.org.uk Website: www.theasap.org.uk Twitter: @ASAPThe LinkedIn: The Association of Serviced Apartment Providers ASAP is in the industry association representing, promoting and improving the serviced apartment sector. Our 124 members including serviced apartment operators and agents represent in excess of 25,000 serviced apartments in the UK, Europe, USA and Canada.

When booking your serviced apartment, look for our Quality Accreditation kitemark which confirms the operator is fully compliant with all the core legal, health and safety practices and means you can book with confidence.

BBF Avenue de Roodebeek 78 box 9, Brussels Contact: Bernard Kerkhof

Telephone: +32 (0)2 705 05 21 Email: info@bbf.be Website: www.bbf.be Twitter: @BBFBelgium LinkedIn: www.linkedin.com/company/bbfserviced-apartments BBF is specialised in the rental of serviced apartments since 1992.

Today we are leader in the market of temporary housing with a portfolio of over 1500 apartments in Brussels. We also offer corporate housing in other cities such as Budapest.

Our flexible rental packages include excellent solutions for short and long term accommodation for personal and business travellers. For long term accommodation, minimum one year, we can offer unfurnished apartments where one has the choice to install their own furniture.

TAXATION BDO LLP 55 Baker Street, London, W1U 7EU Contact: Andrew Bailey Telephone: 020 7893 2946 Fax: 020 7893 2418 E-mail: andrew.bailey@bdo.co.uk Website: www.bdo.co.uk BDO LLP is the award-winning, UK Member Firm of BDO International, the world's fifth largest accountancy network with more than 600 offices in 100 countries.

We have a partner-led approach, which delivers the highest quality of service by using short, functional chains of communication to aid decision-making. Clients benefit from our fresh thinking, constructive challenge and practical understanding of the issues they face. Developing strong, personal relationships with our clients is at the forefront of our service approach.

Tax advice is just one of our award-winning services and our expatriate team give practical and direct advice, delivering solutions which suit your needs.

GLOBAL TAX NETWORK LTD Norwich House, 14-15 North Street, Guildford GU1 4AF Contact: Richard Watts-Joyce CTA Telephone: +44(0)20 7100 2126 Email: help@globaltaxnetwork.co.uk Website: www.GTN.uk Twitter: @GTN_Tax LinkedIn: www.linkedin.com/company/ global-tax-network Global Tax Network Ltd is the UK member of Global Tax Network (GTN), an international affiliation of professional firms in over 100 countries specialising in global mobility tax consulting. We provide assistance to employers with the tax administration of international assignment programs and private client services to high net worth individuals, non-domiciles, professional sportspersons and entertainers. Our consultants include members of the Association of Taxation Technicians, Chartered Institute of Taxation, and US Enrolled Agents.

To advertise your services in this Directory the cost is £800 per annum (4 issues). Please email damian@internationalhradviser.com