Compliance in Global Mobility: Part 2 of 2

Lloyds Building
In the second of her two part blog, Tracy Figliola of HSBC discusses how Global Mobility professionals can work to assess and manage risk in organisations. 

Local regulatory environments are becoming key for Global Mobility teams.

Regulations are forever changing and becoming more complex. It is important for Global Mobility professionals to understand the changes occurring within each country and assess the implications for assignees and for the businesses operating within the organisation. Some questions to consider are:

  • Are the changes going to impact the policy, processes and structure of the organisation?
  • What are the dependencies, the risks and the costs?
  • Is the local regulatory change in one country going to block the global policy, process and structure?
  • Who needs to be communicated to?
  • Who is going to be impacted?
  • Who are your stakeholders?
  • Which outsourced third parties need to be advised?
  • How do you keep up to date with changing reporting and withholding rules in a large number of jurisdictions?
     

Cross-Border implications are becoming more complex and diverse.

Host and home reporting requirements, and the necessity of shadow payroll need to be realised. Some questions to consider are:

  • How robust are your checks on whether the correct application of pension arrangements are being made?
  • How robust are your checks on whether the correct application of home and/or host social security applications and payments are being made?
  • How good is your knowledge on countries operating worldwide income tax regimes?
  • How good are your systems to effectively collate all the required information to report and deliver cross border compliance?

Risk awareness is fundamental. The impact of improperly managed risks can take many forms; from direct penalties for compliance breaches, poor returns from an assignee/ talent population, restrictions on the ability of a business to operate and reputational risk to the organisation.

Data quality

Effective management and quality control of data is essential to ensure robust compliance across a global infrastructure. Compliance relies on effective and timely reporting, therefore the management of data needs to become a key focal point for Global Mobility. Questions to consider are:

  • How is your data managed to ensure quality and accuracy?
  • Where is it stored and is it secure?
  • What processes impact your data and therefore how are you governing and auditing the data input, parameters and its use?

To have good global compliance, data need to have its own workflows and be managed as closely and with the same intensity as we do for our assignee population.

The management of compensation data is critical for compliance. Consider the variables- fixed or variable pay, deferred compensation, home entitlements, pension contributions, share awards, cash benefits and benefits in kind- all of which need to be assessed from both an employer and employee perspective. All categories of compensation need to be identified and coded correctly for tax and social security treatment in both home and host locations, and the assignee needs to have the correct tax and social security liabilities applied to them. Global Mobility teams must be effective at collating and recording this data to meet the regulatory requirements in host and home locations. There are so many multiple compensation delivery points which need to be mapped and governed. 

Technology platforms must be viable from a compliance perspective and especially in terms of how it’s used, for what purpose, and the appropriate links and dependencies with the data flows. Questions for consideration are:

  • Is the data linked to the workflows?
  • Is the terminology correct and clearly understood by all users?
  • Is the reporting functionality sufficient to meet your compliance reporting needs?
  • what audit controls exist?

There is a balancing act to be performed between automation and precision or finding the optimum hybrid approach.

Communication

Interactions with third party suppliers are critical. Assess what information is passed through to the supply chain and how to keep the data source whole and accurate. The method by which information is returned back to the organisation is crucial. The ultimate responsibility of compliance will always be an employers’ responsibility, therefore even when Global Mobility outsource there is still a need for audit and governance around data. Having a clear oversight on how data is governed by your third party supplier is essential.

Global Mobility's interface with your payroll department is another key consideration. Payroll structures vary from one organisation to the next and can be either in-house or outsourced models. The many considerations and challenges in managing payroll for international employees make it difficult to streamline and automate the full process. Many countries require reporting for expatriates who may not be paid in the current country in which they are working but are still employed there (e.g. USA). Shadow payrolls may have to be administered in the employee’s home location even when the benefits are paid 100% in the current host location, but either need to protect benefits in the home country or have a reporting requirement in the home country. Payrolls are the end recipient for most data and therefore the key challenge is collecting the required data and inputs from many sources. How does Global Mobility facilitate this feed into payroll and how do you manage local payroll knowledge gaps in cross border compensation and benefits?

Process

Complex Global Mobility processes add to the challenge of ensuring compliance. An example of the complexities can be found in the reporting of bonus and equity awards for cross border employees. As a complicated process it can entail withholding on compensations earned over multiple years and sourced to multiple jurisdictions (trailing liabilities). Typically these payments are apportioned between locations and the application of the rules varies between locations. Likewise different locations operate different rules relating to retrospective reporting across tax years. Understanding which processes have a compliance requirement and assessing each stage to ensure robust audit controls, clear governance and accountability over the delivery is key.

As a lasting thought, compliance in the world of Global Mobility will continue to be a driving force for some time to come. It really is a growing challenge and one that must be addressed.

About this article: This is the first of a two part blog from Tracy Figliola. The concluding piece will be available on Thursday 11th September.

About the author: Tracy Figliola, HSBC
Tracy Figliola is Global Head of Global Mobility at HSBC Group, responsible for the strategy and operational delivery of the Global Mobility global platform, executing the Group's Global Mobility Programme across all business entities in the Bank and a Centre of Excellence for the delivery of Global Mobility within the Group. The HSBC Group has in excess of 1,700 international assignees, across 71 countries managed through three regional hubs covering APAC, EMEA, AMERICAS and a central operations team based in India. 

Sources:
IMAGE RIGHTS: Gideon Benari, Solvency Ii Wire (2011). Lloyd's Building Available at: www.solvencyiiwire.com . License here.