Use five, simple steps to ensure no short-term assignees run into immigration or tax-related troubles down the road. Colleen Holbrook of Runzheimer International explains.

It is good practice to have a central repository for tracking employees who are "on the move," or at least a standardised approach or listing to give managers to capture the details.

If you already have a system in place to track your long-term assignments, it would be a good idea to employ the same systems and level of detail for your short-term assignees, especially if you find that the intent of assignments changes quite frequently or that the assignments typically last for 30 days or more.

Depending upon the size of the mobile work force, some companies may choose software packages with many bells and whistles while others may employ a simple spreadsheet approach. No matter which method you use, here are some basics of what you should be capturing on an on-going basis.

1. Track the basics of each payment including:

• Who: Who paid for the expense - home or host business unit?
• When: On what date was the expense incurred?
• What: What was the expense (housing, rental furnishing, transportation, COLA, etc.)
• How much: Document the amount of the expense and the currency in which it was paid.
• How was the bill paid: Directly by the company to the vendor or re-imbursed to the employee?

TIP: It is a good idea to check with your tax advisors to get advice on how the payments/reimbursements should be handled as it could provide some tax savings depending on the timing, how the payment is delivered (either directly to the employee or to the payee) and whose profit and loss statement bears the burden of the costs.

If you find that tracking individual expenses is not feasible, you can introduce a lump-sum approach. Establish a location-specific, fixed allowance for your employees and ask them to manage the funds themselves. You simply track the allowance.

One piece of advice: be sure that this approach does not create additional tax implications.

2. Track the time spent in each location:

• One of the most basic but important points to track is days in and out of the assignment country. This is valuable information if tax reporting requirements develop or employees need to be pulled out of the assignment location on a certain date to avoid local taxes.
• Days spent in-country can also affect the visa designation. Know if/when you will need to have immigration documentation extended or revised.
• Paper pocket calendars are perfect for the job and never run low on batteries. You may wish to supply a simple pocket calendar along with a copy of the policy or the letter of assignment. Require employees to turn in their calendars following their assignments and keep on file for easy reference.

  If assignments are close to crossing legal thresholds due to timing, require monthly reporting of days in/days out of country. You can tally the days and keep an ongoing log for those employees whose travel frequency to the same locations could create cost or immigration issues.

• If calendars are not well maintained, you can resort to requesting copies of passport stamps and track timing this way – tedious, but it is a way of capturing travel activities. This method is helpful if you have employees who travel quite a bit on their personal time. Legal authorities don’t differentiate between business and leisure travel when tallying days.

TIP: Ask your tax advisors upfront about the applicable time restrictions for each country of assignment with regard to becoming a taxable employee. Many common thresholds are 90 and 183 days. However, it can be tricky as timing can be stipulated in not only calendar years but also 12-month periods of times spanning several years.

Knowing these limitations and working within them can help manage assignment costs and entice your managers to make you aware of assignments in return for your wisdom. This is an area where you can really add value. Strategising to avoid taxes can result in cost savings.

3. Track the employee’s compensation (besides the assignment emoluments) including monetary value and delivery dates.

• Salary and bonuses.
• Special compensation opportunities such as stock grants/exercises, deferred compensation, accrued bonuses, etc should be evaluated for tax implication before the transactions take place.

TIP: If there is a remote possibility that employees will exceed timing or earnings’ thresholds, which make them taxable in their host location, special attention should be paid to any form of compensation that is scheduled to be awarded to employees during the assignment.

Taxability of compensation varies greatly from country to country. Writing from personal experience, my former employer sent an employee on short-term assignment and decided to grant stock options. Management decided to keep the employee a few weeks longer than originally planned, which changed their tax designation.

Unfortunately, in the host location, stock options were taxable at grant and in the home country they were taxable at the time of exercise. Double taxation occurred and the assignment became exponentially more expensive.

4. Track details of legal documents and ask for copies to keep on file in case of an emergency.

• Passport expiration dates.
• Visa expiration dates.
• Social security agreements/totalisation agreement expiration dates.

5. Make notations about an auto provided for employee use.

• Note make, model and year of auto.
• Note approximate value of auto.
• Note beginning and ending mileage.

TIP: There are some locations that allow reporting of an imputed value of an auto rather than the actual lease or purchase costs, which could add up to savings. This type of auto information is difficult to track down after the fact. Those handling assignments on an ad-hoc or infrequent basis would rarely think about this, but if it is built into your tracking tools, you will have the information at your fingertips when needed.

Conclusion

These are just a few of the basics of assignment tracking. Take the opportunity to network with professionals in your field and seek out their tips. Remember to regularly evaluate how well your current practices are working for your organisation and continue to build your knowledge base.

Short-term assignments may be short in duration, but they should not get the short end of the stick when it comes to the detail required to make them a success for all concerned.

September 2002

Colleen Hollbrook is a client service consultant with Runzheimer International.