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Complying with Country-Specific Compensation Requirements

Complying with Country-Specific Compensation Requirements

Published: Jul 20, 2020

Global Compensation compliance with complex, country-specific regulations is vital to protect each NEI client and their globally relocating employees. This is especially so for clients with assignees of varying citizenships and from countries with unique pay scales, multiple assignment policy / benefits tiers, a wide-ranging breadth of assignment locations and a variety of projected assignment duration times.

Accurately sending and receiving assignee salary requirements needs careful review prior to an assignment. It is most commonly an issue during assignments when a client’s employee is remaining on his or her home country payroll, but NEI takes two key steps to help ensure compliance:

  1. Home Country: Ensuring that the employee’s home country compensation meets the salary requirements for immigration:
  • Depending on the type of visa each employee needs for the assignment, an employee’s home compensation may not meet the salary requirements in the host location for the requested visa. This often can occur for specific lower-salary departure countries, such as India, and moving to higher-salary receiving countries, such as Switzerland, where there is a large gap in compensation when comparing home compensation to host compensation in host currency.
  • Companies should assess their assignment packages to make sure that the total compensation and, if allowable into the compensation, assignment allowances will meet the salary requirements for the position in order to move the immigration process forward.
  • Depending on the “to” and “from” country combination, companies need to be cognizant of this as they look at what is required for immigration needs and the relocation package that is being offered. There can be challenges in meeting the requirements which may lead to delays, having to put the assignment on hold or determining if the assignment will move ahead due to cost considerations.
  1. Host Country: Ensuring the appropriate action is taken for specific host countries that need income reported in both home and host country locations:
  • There are some host countries, such as Germany, which require reporting for payroll depending on the length of assignment and where a shadow payroll may be needed to ensure income is being captured in accordance with local requirements.
  • Other examples include host payment requirements in Brazil, where it is required that a country-specific salary be paid locally and in Russia, where assignees are required to receive a portion of his or her salary to be paid in country.
  • Some challenges for a client may include building a process for appropriate reporting between payroll and the tax firm and knowing when this applies.  NEI can provide this support.
  • It can often be a challenge for the host country to have payroll contacts experienced with shadow payroll concepts.

Clients who may not have clear visibility into these needs include those who may be: A) new to sending employees on global relocations; B) have smaller annual move volumes; and / or C)  expanding into new markets of the world where they have not yet assigned employees.

A growing number of clients have outsourced global compensation services to NEI for managing the process. Though larger companies may have in-house resources who understand such complex compliance requirements, ensuring correct and comprehensive reporting is not only time intensive, but could prevent valuable in-house resources from focusing on other functions that could better serve the company.

Working with NEI on this compliance piece offers our clients a one-stop, cost-effective way to access experts and retain both a centralized global compensation resource and process. Some clients who currently work with their tax firm to provide some payroll support, work with NEI to coordinate the capture of all global relocation expenses between parties.

NEI can advise the client or their tax firm in coordinating their payrolls to make such payments and accurately track them, while also making the process more cost-effective and streamlined for clients.

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