The old model for handling global employees worked like this: A company opened an office in a foreign country and sent an employee there to hold a permanent, long-term job. The employee would move the whole family and become permanent residents of the new country. However, times have changed and with that, so have the ways companies handle global employees. Many companies are moving away from the classic model and instead, building their global team with mobile employees. Global mobile employees work relatively short-term assignments, move from country to country, and allow businesses to change the way they hire in foreign markets.
Why Utilize Global Mobile Employees?
The expatriate model of the past presented many obstacles for businesses. Brett Evans reports that between 10% and 40% of expatriate assignments fail because their families have issues with the employment arrangement (33% of respondents), or dissatisfaction with compensation (7% of respondents). What this means is that there is a high rate of failure associated with the costs needed to arrange this employment situation. To move an employee for a long-term assignment, a company takes on a variety costs, including moving expenses, family relocation, and other benefits.
In a recent study published by the Research Handbook of Expatriates, Liisa Makela, Kati Saarenpää, and Yvonne McNulty describe a trend toward globally mobile employees who work short-term assignments. In the report, they divide global mobile employees into the following categories:
- Flexpatriates: Persons who work abroad for durations of one to three months
- International Business Travelers: Persons who work abroad for a few weeks
- International Commuters: Persons who work abroad for a few years, but maintain a residence in their home country with frequent return trips
These new work arrangements help companies mitigate the risks of a long-term assignment by allowing for a more efficient, cost-effective way to send employees to global markets. For example, in the three categories above, companies do not have to take on expense for moving a family across the globe, meaning the worker’s family does not have to disrupt their lives. Additionally, the process for business visas is less complex for those applying to live in a country for a shorter term. Mobile workers tend to have less of a culture shock because they are able to make frequent trips home. Utilizing global mobile employees gives companies a myriad of advantages, as long as the companies are able to remain compliant in foreign markets.
Managing Compliance with Global Mobile Employees
With new employment practices comes a new set of challenges in terms of compliance. When a worker travels for short-term assignments or works in several countries in a short time frame, compliance can become difficult to manage. In Australia, an official took action against two foreign companies, Valuair Limited, a Singaporean company, and Tour East Ltd (TET), a Thai company. Both companies employed cabin crew members to work on routes between Thailand and Singapore into Australia. While based in their home countries, the crew members’ duties included working within Australian jurisdiction. In this instance, whose labor laws applied? If Australian courts made a judgment against Valuair and TET, the companies would have had to pay much more in labor costs. In this case though, the court decided that Singapore’s and Thailand’s labor laws applied to their employees.
This example illustrates how complex labor compliance can be for global mobile employees. Poor compliance management can open a company to lawsuits and hefty fines and court costs. Here are a few things companies can do to make sure their global mobile employment practices comply with the appropriate labor laws:
- Hire an in-country partner. With more companies practicing global mobility, global employment solution services have been created to help companies maintain legal practices. These experts specialize in global compliance and have experience working with multiple legal structures and labor codes.
- Review tax exposure. It is important for companies to help employees understand their tax obligations. When employees travel to multiple foreign countries for work, they may have to file taxes in more than one country. It can help to have an expert on hand to help the company and its employees understand their tax obligations.
- Review social security or pension funds. Every country has their own set of social security or pension laws. Depending on how an employment contract is structured, an employee may have gaps in coverage at home or the company may owe social security in other countries. A review of the requirements in each country will help the employee and the company stay on track.
- Carefully write employment contracts. The employment contract for a worker who travels frequently overseas should explicitly state the relationship of the employee to the countries visited as well as the home country. WHY?
- Acquire the right work permits and visas. Each country has different requirements for visas and work permits. Before an employee can begin working in foreign markets, it is important to see which permits and visas they will need to apply for and what the company needs to do to ensure the employee can work compliantly in global markets.
Global mobility can help companies mitigate risks and bring specialized talent to multiple projects and countries, but it also makes staying compliant more difficult. Careful planning and policy review can help a company stay compliant and remain focused on its business growth.
Discover how global mobile employees can help your company build its global footprint. Reach out to the experts at Velocity Global today to see how our innovative solutions make it easier to take part in this trending employment arrangement.