On the move – The HR challenges as Irish businesses go global

Mark Carter
First published in the PwC HR Business Services Newsletter
April 2010

Almost three quarters of the participants in a recent Irish survey(1) admitted that the key business driver for their international employee mobility strategy is the need to expand into new markets. As Irish organisations continue to set their sights on overseas markets to make up for lack of domestic demand, they will need to grow their international workforce to fully exploit such opportunities.

Managing an international workforce presents many challenges. Such workers are expensive, often costing 2-3 times that of a local resource. It is therefore no surprise that half the survey participants cited cost control as one of the key challenges in managing their employee mobility programme, with 46% saying that tax costs were a particular issue.

Managing the Cost Challenge
The challenge for many organisations is how to keep costs under close control while supporting international business growth. Given the potential difficulties in assimilating an assignee to become a productive employee, and the additional costs involved, the starting point for many employers is to consider whether the job must be undertaken by an expatriate, or can a local fulfil the job requirements? Sometimes a local hire is not an option, particularly when a company is setting up in a new location it will need to send in those with knowledge of the business to ensure it is properly established. In recent years we’ve seen a growth in non traditional assignments with more businesses using short term assignments and frequent business traveller arrangements, which can help to control costs as well as overcome individual barriers to mobility. Indeed many employees favour such arrangements, albeit for a defined period. As predicted in Talent Mobility 2020(2) improved technology, transport and means of communication should result in an escalation in this trend so employers will have to get to grips with managing non traditional assignment patterns.

There are many approaches adopted by global organisations to managing mobility which Irish businesses can learn from. As a starting point, implementing a properly developed international mobility (IM) policy framework, which can be used to support a range of assignment types should help to not only control costs but also to:

  • support the organisation’s international business strategy
  • attract and motivate the right people
  • support employer and employee compliance
  • promote a consistent approach helping to ensure equity and reduce the needs for exceptions.

However, our survey suggests almost one third of Irish businesses operating outside this country have no international employee mobility policy in place to support their international business development.

Once a policy framework is established, work can begin on addressing a whole variety of cost control and efficiency mechanisms, including for example:

  • assignment cost projections
  • assignment approvals and exception management
  • frequency of cost of living and exchange rate reviews
  • expense procedures
  • cross charge arrangements
  • localisation arrangements
  • tax policies and tax related balances tracking (tax refunds, equalisation settlements)

Other Challenges
Almost two thirds (64%) of Irish organisations admit that managing risk and compliance is the biggest challenge faced in relation to moving employees across international borders. Almost half say that tracking employee movements is a challenge. Other challenges faced include:

  • managing international employee benefits;
  • dealing with a complex regulatory environment;
  • inefficient process administration;
  • managing international payrolls.

For example, from 1 May 2010 employers will have to ensure that they are up to speed with the complexities of the new EU Social Security rules.

The Frequent Business Traveller Challenge
Irish employers attending the recent PwC Global Employee Mobility Workshop in Dublin cited the tracking of repeat business travellers as a particular problem. While employees who undertake frequent business travel to another country are not considered assignees in the conventional sense, failure to account for them may lead to penalties, adverse publicity and reputational damage. Most countries have tightened immigration, income and tax reporting regulations in recent years. Businesses need to know when the immigration or withholding tax requirements kick in (clearance to avoid PAYE for inbound employees in Ireland can be required within 21 days) and identify who is responsible for applying for the necessary documents for the countries they are operating in.

Whatever the length or nature of the assignment, successful mobility programmes have an infrastructure in place to track and arrange all necessary clearances and appropriate declarations and withholdings.

Getting Started
As the pressure on Irish organisations to do business abroad increases, the need to use mobile workers will escalate. Employers coping with mobile employees for the first time face a challenge in that without experience they often feel the need to provide more financial incentives than may be necessary. Once done however, it is difficult to pull back and make changes. Far more preferable if programme objectives and policy framework are assessed at the outset, with processes and a procedures set in place as soon as possible.

Developing the required strategy and implementation models requires an orchestrated approach from several functions within the business. Those who expect their international workforce to grow over the coming years would do well to begin planning their optimum service delivery model to support this growth.