For higher education institutions that want to be at the forefront of innovation and thought leadership, a globally mobile workforce is essential. Benefits include everything from increasing diversity of thinking and access to research funding to supporting employee well-being, recruitment, and retention.
The increasing globalization of workforces has invoked more government scrutiny of cross-border employment than ever before. Mistakes in classification and tax payments can be costly for colleges and universities from both financial and reputational perspectives. But with the proper planning and execution, institutions can set themselves up for global mobility success.
What defines “global mobility?”
The myriad situations where global mobility arrangements come into play for faculty, staff, and students have benefits ranging from better international collaboration to increased employee well-being. They include:
- Joint programs, collaborations, or partnerships with overseas universities
- Commuters to and from the U.S.
- Overseas commercial ventures and campuses
- Overseas student recruitment
- Flying faculty to other institutions
- Fellowships with an international rotation
- Academics with fractional contracts, often also with overseas universities
- Research projects overseas
- Formal assignments (both long and short-term)
- Fellowships and secondments
- Remote working (working from home where “home” is not their home country)
- Sabbaticals spent overseas
With big benefits come big risks
While international working presents many opportunities for institutions and their talent, there are serious risks to consider. These include determining whether the employee has the right to work in a particular country, any personal or corporate tax obligations that may be triggered by an employee’s presence, payroll requirements, social security, and reporting requirements such as the Posted Worker Directive, according to Ashley Perry, Global Mobility Director at Vialto Partners.
Other potential pitfalls are often missed by institutions until a major issue surfaces. Duty of care and cyber security are two areas of increasing concern, according to Vialto’s Mobility Agility Survey.
“Does your company’s insurance cover employees if they are outside the U.S.? Also, we have to think about labor laws—if something were to happen resulting in a separation from the university, you could be bound by the labor laws of wherever that employee is working at the time,” Perry said.
Why getting it right matters
Failure to comply with a country’s tax and labor laws can trigger consequences as severe as travel bans and prison time. The most common penalty, however, is financial.
“If an issue isn’t discovered until two or three years down the line, you may be paying double tax and social security just to settle the assessment,” Perry said.
Reputational damage is an important risk to consider as it can impact student and employee recruitment and relations, as well as potential overseas partnerships. Access to overseas research projects can also be adversely affected. Those agreements often require that the university be compliant with overseas employment obligations—and if it’s not, it could potentially lose or delay critical funding.
Fellowships and secondments
“We see a lot of questions about fellowships and secondments—and they became even more prevalent as our clients were addressing the tax exposure and compliance concerns they had for individuals who were overseas during Covid,” Andrea Henderson, Global Mobility Tax Services Director at Vialto Partners, said. “Many of our clients were not even aware that they had certain individuals working overseas.”
Fellowships and secondments can generally be split into three categories: fellows conducting research overseas, overseas assignments at an international academic institution, or grant-related research overseas. To stay compliant, institutions must carefully consider the nature of the fellowship, starting with these essential questions:
- What type of visa or work authorization will the individual have?
- What entity will provide funding?
- What are the home and host locations?
- How long is the fellowship or secondment?
There may be exemptions based on the type of visa or work authorization, but these vary greatly by location. In many cases, institutions must still comply with local laws and potentially file taxes with the host territory.
“In some instances, there may even be a requirement to implement a shadow payroll, which is not an actual payroll to pay the individual, but rather a payroll to report that individual’s compensation and potentially withhold the host country tax requirements,” Henderson said.
Remote work
The pandemic transformed remote work from an added benefit to an employee expectation, yet many companies are still catching up with the strategy, policies, and infrastructure to optimize it. Remote workers generally fall into one of three categories: those permanently working remotely from another state or country, global nomads, or global commuters who periodically travel to the location where they are formally employed.
Creating a long-term plan for an institution and its employees is the first step in Vialto’s end-to-end approach to managing the risks of remote work. From there, Vialto helps institutions develop a complete policy that includes:
- Specific guardrails for work arrangements and location assessments
- A governance process for approvals and exceptions
- Service delivery models, whether it’s setting up an entity in another country or utilizing an employer of record, such as Velocity Global
- A plan for rolling out the changes and involving key stakeholders
“Universities shouldn’t be reactive; ideally, universities should have the technology and services in place and think through any potential issues before you have to clean up a mess,” Perry emphasized.
Contingent workers
The increasing reliance on contingent workers in higher education shows no signs of slowing down. In the U.S., more than two-thirds of faculty hold contingent appointments. However, the gains in flexibility and access to talent come with significant compliance, management, and integration challenges. Correctly classifying an employee vs. a contractor is critical to avoid penalties. It grows even more complex as you move abroad and take various countries’ laws into account. Education institutions will want to ensure they periodically assess each contingent worker’s classification and stay on top of any changes to international labor laws. To address this, Vialto recently launched an automated solution for contingent work monitoring.
Manage risks with an employer of record
Employer of record (EOR) is becoming a more established solution in the higher education space, and institutions are seeing its potential to hire and retain overseas employees without needing to go through the costly and time-consuming process of establishing an entity, according to Mark Fielding, Director of Consulting and Sales Engineering at Velocity Global.
Institutions can mitigate risks posed by both contractors and employees by having an EOR provider run payroll, administer benefits, withhold taxes, and even sponsor visas.
A reputable EOR provider like Velocity Global offers institutions:
- A quick way to test a new location before deciding to fully commit
- HR and legal knowledge with local experts in each country
- Management of permanent establishment risk
- Continual monitoring of regulatory changes to ensure compliance
- Cost savings over running an entity (for smaller headcounts, where the risk of permanent establishment is low)
“EOR is also a really handy way to convert contractors if needed—such as a case where an employee is flagged by Vialto’s technology as a potential compliance risk,” Fielding said.
For complex situations, Velocity Global works with Vialto to optimize EOR and determine if it is the best solution for an overseas hiring challenge. EOR is not always viable in countries that limit the term of an EOR contract or only allow EOR for certain types of positions and titles. And institutions that rely on a specific number of academics on the university payroll to receive grants and funding will not want to pursue EOR because that headcount would then sit with the EOR provider, not the university.
It is, however, a great model to use for professional services.
“EOR saves a huge amount in terms of having to develop an understanding of all the labor, tax, and social security legislation of a country. I don’t need to know all the ins and outs because I’ve employed somebody who does. You’re assured that you’re operating legally in the other country, and yet you retain control of the staff and what you’re doing there,” Sinclair said.
“EOR may not be part of your institution’s existing HR policies, but finding ways to include EOR as an option in your global mobility plan will prepare you to manage complex situations nimbly when they arise,” Fielding said.
Set yourself up for global success
HR plays a role in global mobility programs at most higher education institutions. But no matter where the global mobility responsibility sits within a university, collaboration with the tax, finance, and legal departments—in addition to support from senior management—is essential to developing a successful plan.
“Leadership buy-in is absolutely critical. Roll out the plan from the top down. Don’t try and do it from the bottom up because you’ll never get there—people don’t change their habits that quickly,” Sinclair said.
Whether your university is ready to uplevel your global mobility strategy or just investigate the possibilities, Vialto and Velocity Global can guide you toward long-term success.
