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Businesses fail to monitor cost of globally mobile employees

Posted by Pat Sweet on 19-Feb-2015 13:47:00

Businesses are investing millions of pounds each year sending employees on global assignments without being able to quantify the cost or measure the value from their investment while they are failing to monitor tax liabilities, according to research from PwC which says many organisations lack a clear global mobility strategy.

The firm’s survey of nearly 200 global executives found only 8% of global organisations are able to accurately put a cost on their mobility programmes and just 9% measure their return on investment. Nearly 60% admit their global mobility programmes currently do not deliver value for money, and 30% of organisations are not even sure how many of their employees work overseas each year.

Despite the lack of clear financial assessments of the impacts, PwC’s Modern Mobility report predicts that the number of people going on global assignments will increase by 50% by 2020, with 90% of organisations saying they are looking to increase the amount of globally mobile people over the next two years.

Clare Hughes, director in PwC’s global mobility team, said: ‘Many businesses risk wasting considerable money sending the wrong people to the wrong places, overpaying for expats when local talent is available in-country or offering large financial packages when people are more motivated by the development opportunity.

'Many businesses are also losing valuable talent at the end of their assignment, as they have no plan for their returning role.’

The research identified tax and immigration compliance as the main challenges to moving employees, followed by security considerations and employees being reluctant to leave home country pension plans.

As the government plans to introduce new powers to clamp down on global tax avoidance and evasion with a new offshore criminal offence, Lee Hamilton, director of international mobility services at Crowe Clark Whitehill warns: 'HMRC could seek to prosecute the employee for failing to ‘correctly declare income’ (ie, the income should have been reported on the individual’s UK tax return, even if PAYE was not operated).

'It is also possible to envisage scenarios where the employee (whether deliberate or not) provides incorrect information to the employer, leading the employer to be complicit on the non-payment of tax on income arising overseas.'

The changes to the legal basis for individual taxation are being considered with responses to a recent consultation being reviewed by Treasury officials. It is likely that a firm announcement on the measures will be announced in the Autumn Statement in December.

The number of business travellers is also expected to increase raising various risks as it is the most challenging type of mobility to manage. Just 17% of organisations said they have robust policies, processes and controls in place to manage the tax, immigration and regulatory compliance around business travellers.

The nature of overseas assignments is also changing with double the number of short-term assignments of up to one year’s duration. The firm says this reflects efforts by businesses to get the right people on the ground quickly to deliver set projects and is seen as a way to develop high-potential employees.

Hughes said: ‘But the shift into much more fluid mobility from longer-term formal assignments is causing employers a headache. It makes it much more difficult for employers to know where their people are and what they’re doing to make sure they are compliant with tax and immigration laws.’

PwC’s report found on average, 12.2% of an organisation’s total workforce is internationally mobile each year, with 1.6% on a formal international assignment.

Respondents viewed Africa as the most challenging region to move people to, followed by Asia Pacific and South America.

This article was originally published on Accountancy Live.

Topics: SME | All posts

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