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International business travel is on the rise. Nearly two-thirds of international organizations have seen an increase in the number of business trips taken in the last two years, and the same proportion expect the number to increase again in the next two. The main reason for the increase is that companies are sending staff to more locations than previously, reflecting broader trends in globalization and slow economic growth in many parts of the world and forcing companies to explore new markets where returns may be higher.
As the number of business trips and the locations involved increase, successfully managing these trips becomes more challenging. In ECA International’s “2017 International Business Trips Survey,” the greatest concern to participants, particularly those working in larger companies, was keeping track of business travelers. Tracking is crucial for ensuring compliance with tax and immigration requirements, as we shall see later. The second-biggest concern was monitoring and controlling the costs of business trips.
A documented business travel policy is essential to make it clear exactly what expenses will be covered in what circumstances to prevent the cost of international business trips from spiraling out of control. This will typically specify the class of flight and accommodation that is permitted—which may vary by seniority and, in the case of flights, duration—and the other subsistence costs that will be paid for, such as meals and transport. Read the full article for a more in-depth exploration and survey data on air travel, hotels and per diems.
As the diversity of business trip destinations increases and government scrutiny intensifies, it is becoming increasingly important for companies to accurately track the movements of their business travelers and assess any possible compliance risks. Yet keeping track of travelers was cited as the most challenging area of business trip management by participants in the survey.
While 71 percent of companies keep track of some or all of their business travelers, the remaining 29 percent are leaving themselves open to the risk of noncompliance with tax or immigration regulations. This in turn could lead to unforeseen costs in the form of fines and damage to the company’s reputation.
There are three types of business traveler that companies are more likely to track. These are employees who are
Broadly speaking, these are all situations in which a tax or immigration compliance obligation is more likely to arise. This suggests that many of those companies that track only some of their business travelers make the decision on whether to do so based on a risk assessment—a more mundane reason is the challenge of ensuring all employees follow the required processes to track business travel.
Just over a third of participants in the survey carry out a risk assessment before every business trip, and a further 44 percent do so some of the time. Companies are more likely to carry out risk assessments before trips to countries where employees have not previously been sent or before longer trips—typically over a month.
The area most commonly assessed is immigration. The personal health and security of the traveler is also of great concern, with three-quarters of companies assessing the safety of the destination and two-thirds checking the adequacy of the employee’s medical insurance.
It is interesting that the risk of incurring a personal income tax liability or creating a permanent establishment is assessed less frequently. This is perhaps because it is assumed these scenarios are unlikely to become a risk until the trip exceeds a certain length of time—most companies define business trips as lasting no more than either one or three months. Preselecting certain trips for risk assessment and not others based on assumed knowledge, however, is not good practice. Legislation changes frequently, and the personal security situation in some countries can be extremely volatile. It is the risk assessment itself that should determine the level of risk in a destination, so ideally all business trips should be assessed, even those that will ultimately offer low risk to the employees and organization.
Looking forward, we expect to see the number of international business trips continue to rise. As a result, many more companies will be focusing on the challenge of tracking their business travelers in order to avoid the financial and reputational cost of noncompliance with tax and immigration obligations. At the same time, policymakers and administrators are likely to remain under pressure to contain the costs of business travel, meaning that we can expect to see further downgrades in the class of air travel permitted for more senior employees and an increase in the use of per diems to set limits on expenses.
The above information is excerpted from a September 2018 Mobility magazine article and shares survey data, © Employment Conditions Abroad 2017.
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