As organizations examine the global workforce and the benefits of recruiting talent across borders, human resource (HR) professionals are actively seeking the knowledge and credentials to address their companies’ global workforce needs. In response to its constituents’ desires, the long tradition of educational excellence of Worldwide ERC®, combined with innovative and creative training techniques, has brought to us the Global Mobility Specialist (GMS™) designation.
Delivered in three modules with online exams, more than 1,500 professionals have attended some or all the GMS™ training sessions. Eight hundred and sixty-two individuals from 28 different countries have successfully completed all three modules and passed their online exams to earn their GMS™ designation.
As a benefit to its students, Worldwide ERC® has recruited some of the best faculty in the world to teach the training modules. Each module features multiple instructors who are proven experts in their respective fields and who have demonstrated successes as effective presenters and trainers. The faculty varies from location to location, allowing a more diverse set of experiences and examples.
In Warsaw, Poland, this past June, Worldwide ERC® provided a special panel of three legal, tax, and immigration experts at the first GMS™ module.
The Experts
During the program, delegates and panelists engaged in a thought-provoking, interactive question and answer session. The first panelist was Achim Heuser with Rechtsanwalte Heuser & Collegen in Oberhausen, Germany. Heuser’s firm specializes in international labor, employment, and social security law; individual tax strategies; and immigration and work permits. One of his main areas of expertise is the counseling of expatriates and their employers. The law firm is trilingual and has co-operations in several metropolises and cities all over the world.
The second expert, Pauline Mathewson, is with Fragomen Global, London, United Kingdom, and was appointed by the firm as managing director for Europe, Middle East, and Africa (EMEA). She is charged with establishing practices and managing immigration services for the firm globally with direct responsibility for the EMEA region.
The third panelist was Nino Nelissen with Executive Mobility Group. Currently based in Amsterdam, The Netherlands, Nelissen has worked as an expat in Washington, DC, and Tokyo, Japan. His main focus areas are helping clients to contain the cost of a global mobile workforce and ensuring legal compliance in all countries where clients are active. Nelissen is the author of various articles, books, and training manuals on the tax and social security consequences of having a mobile workforce, and a member of the MOBILITY Global Editorial Advisory Committee.
Question and Answer
The knowledge imparted by these experts led to some interesting questions. Following are some of the delegates questions and their respective responses from the panelists.
Q. What do you do with a non-returning, lifetime expat? Where do you keep them tax-wise and what are the factors that would most affect a corporation’s and its employee’s pocket?
A. “[Let us] narrow the question down, first of all with respect to which individuals we are talking about. The wording ‘non-returning, lifetime expat’ may refer to both localized expatriates, as well as individuals who are assigned from location to location one after another. In my response, I am focusing on the latter group, sometimes also referred to as ‘gypsies.’
“In addition, these individuals are often covered under (some sort of) a tax equalization scheme. Companies may have flexibilities as to which country to use as home country for determining the hypothetical tax owed by an individual. The actual tax liability, and the country where this liability is due, is (besides from certain planning possibilities), often more or less a given. In my response, I will, therefore, focus on the determination of the country used as basis for determining the hypothetical tax.
“As with all things in life, one secondment must have been the first for these individuals. With this secondment, one location was picked as a home location, and the amount of hypothetical tax that an individual owed to his employer is determined using the tax law of this home country as a starting point. If this one secondment is followed by other secondments, the ties with the home location tend to become less and less, and it may no longer be as logical as it looked in the first place to use this location as a starting point when determining the compensation package. Employers have, in general, three options in this respect.
“The first option is to continue using the initial home location as home location. A second option is to switch to host location rules (in other words, abandon the thought of tax equalization, for example by granting a certain gross salary that should provide for an appropriate net spendable income in the host location.). A third option is to remain using a tax equalization approach, but change the home location. I will elaborate a bit further on these three approaches.
“Although the first approach, to continue using the initial home location as home location throughout the individual’s career, may seem like the most logical thing to do, there can be some significant disadvantages.
“The most obvious objection against this approach is the problem in explaining, when comparing two long term gypsies in a company, why the individual who started his international career having Germany as a base should pay significantly more hypothetical tax than, say, the individual who started his career in the UK. Both individuals will have lost ties with their home location, and may during their lifetime have spent more time abroad than in their home location. Also, from the assignee perspective, this approach may not be desirable. If an executive has been living a long time abroad, he may be less familiar with the tax rules in his ‘home’ location as time goes by. Especially tax reforms, as they occur from time to time, may cause the individual to no longer understand his hypothetical tax position.
“The second option mentioned above, giving up tax equalization for gypsies, has a big advantage to an employer. Providing a local package is often the easiest thing to do, and all practical complications can be avoided. However, during each assignment, it becomes the assignee’s responsibility to start to understand a foreign tax system. This will, therefore, not turn out to be the most successful option in practice.
“In my view, the best approach to deal with these individuals is to equalize all ‘gypsies’ to the same (hypothetical) home country, for example the country where the company’s headquarters is located. In my view, it combines the benefits of all the above systems without incurring significant disadvantages. This system is easy to use for an employer: all gypsies can be dealt with at a headquarters level, which provides administrative ease. In addition, when comparing one gypsy to another, their income is comparable. Third, by having one tax system as a home tax system, it is relatively easy to provide information on this system to the individuals involved. It is no longer the responsibility of an employer to make sure that all gypsies continue to understand tax developments in their home location; it will be sufficient to educate them on tax developments in one country.”
Q. Do you see a trend toward adopting the European Union (EU) Employment Laws? What are some of the most critical elements of employment law that HR professionals need to know and why?
A.“The EU Employment Law consists of three sources: regulations, directives, and court decisions, which have immediate effect on the national law of an EU member state. As of May 1, 2004, the EU East enlargement led to a new legal development in Europe. The legal standards of Western Europe now apply as well to the Eastern states like Estonia, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, the Czech Republic, Hungary, and Cyprus. Bulgaria, Romania, and Turkey likely are to be the next members of the EU.
“After more than one year of experiences with the new member states, the first conclusions can be drawn. Obviously, most of the new members were not prepared to apply the EU Employment Law in their national jurisdictions. Neither the administration, nor the enterprises, nor the individuals took appropriate measures to adopt the new rules. However, this does concern all new member states alike. From an outside EU view, the EU world appears as a homogeneous entity. As a matter of fact, there are still various differences that affect the day-to-day life of global acting companies and individuals.
“Administrations did not train their public officers. Enterprises did not realize the impact of the EU Employment Law on their businesses. Individuals thought that they would move freely from one member state to another. Free movement still is not guaranteed within the EU between all member states. For a number of the new member states, transition periods were established in order to protect the national labor markets, since the value of labor is very different from member state to member state.
“As of January 1, 2005, a major amendment to the German immigration law came into effect. Especially impatriates from the United States and other foreigners in Germany including, but not limited to third-country (non-EU) citizens are supposed to benefit from the changes. Regardless of the discussion whether this new immigration law is a progress or not from a German perspective, it simply proves that national immigration laws still have their meaning. However, this fact does make it easier for a non-EU citizen to understand the EU world.
“From a purely legal point of view, I recommend using a condition precedent clause in employment contracts for employees of non-EU countries, if they want to start working in the EU territory. The condition precedent clause shall rule that the employment is legally not valid before the respective visa and/or work permit is issued. Neither the employer nor the employee wants to be liable for charges or fines.” Within the EU, the discussion of a so-called Anti-Discrimination Act is hot. Most member states expect an unnecessary complication of their systems, more liability issues, and less flexibility. U.S. employers may be familiar with the one or the other rule, since the U.S. original idea served as a model.
“Non-EUs should be aware that the EU still is not a territory that applies one EU Employment Law. The EU member states try hard to establish homogeneous rules and already have done a great job on this. However, there are still national laws which must be taken into account.”
The GMS™ is a just-in-time program that brings outstanding faculty with practical and timely experience to address the global issues facing HR global mobility professionals worldwide. For more information, visit www.erc.org/gms.shtml.
Sheri Sinaga, Ph.D., CRP, GMS, is director, global business development, for Primacy Relocation, LLC, Memphis, TN. She can be reached at +1 972 963 5115 or e-mail sheri.sinaga@primacy.com.