COVID-19: What steps to take if you have globally mobile employees

We live in uncertain times. From political unrest to natural, or even man-made disasters to unexpected outbreaks impacting our health and well-being. Most would agree … nothing is more important than the health and wellbeing of our families, colleagues and employees.

Security and health scares are scenarios many mobility professionals have to plan for. The Coronavirus is merely a recent example of a health-related event with wide spread impact on the movement of people. How do we quickly identify which employees are in a particular location/ country? How do we quickly shift personnel out of a country? What will the impact on the local teams and business be if key talent needs to stop travelling, or return home, at short notice. These are key people related business issues that have to be addressed. Human Resource and Mobility Teams will be at the forefront of answering these key questions.

What are the tax implications?

The unplanned repatriation of employees as a response to security or health concerns can also impact taxation, social security and payroll. The basic issue here is that payroll and taxes would have been set up in home and host countries based on certain planned assumptions.

Assumptions like the length of the assignment, the number of days to be spent in the home and host country and the qualitative links and connections the employee has in the home and host country. Examples of qualitative links include where the family is, where the home is and where centres of vital interest are. When an assignment is cut short, interrupted or even cancelled due to an emergency evacuation, or preventive measures, this will impact the set of assumptions upon which the original compliance was set up.

Tax residency of the employee drives both the level of taxes (income taxes and social security) due by the employee and the employer payroll reporting and payroll taxes. With tax equalisation, the employee tax liabilities due in the home and host shift to the employer so the changes in tax liabilities actually become an employer issue too.

Interruptions to the assignment may change the tax residency of the employee. Thus, the payroll taxes may also need to be altered and the individual may need to understand how their tax position and filing obligations have been impacted. When this aspect is left un-reviewed - underpayments (non-compliance) and overpayments (cash flow issues) can arise.

Similar issues can arise in the reverse too. A number of NGOs, medical aid agencies and charities often respond to humanitarian events by deploying expertise and resources to the impacted zones. For these employers, urgent impact issues apply as well. The key question to ask - are we deploying resources to a location that is triggering compliance obligations in that country?

What’s the key? Understanding the length of the assignment disruption period and where the employee is during this time is paramount.

What should HR/ Mobility professionals consider?

The very nature of the cause of assignment interruptions means the situation is very fluid in nature. The exact period of assignment disruption is often unknown. So what should global mobility and HR professionals be doing in this area?

1. Determine enterprise wide ownership. A number of functions may be looking at this issue but it is possible that no one person or group has ownership. Tax, Finance, HR/Mobility, Country Manager and HRBPs are the right community with whom to agree who owns this issue.
   
   
2. Communicate the need to know where assignments are being interrupted. All assignment interruptions or delays will not be visible to HR and mobility teams. Local management may well make their own decisions and employees also may act independently. Convey a message that the business and employees should share where assignments are being interrupted, delayed or even cancelled.
   
   
3. Compile the data. An understanding of the planned assignment together with the current status is essential to analyse the implications for the employees and the organisation. Key data points are: where is the employee now? What is expected period of that stay?
   
   
4. Consider the tax implications. Your in-house tax team or mobility tax advisors will be able to review the data and assess the changes that may arise in respect of the taxes due and changes to employer compliance obligations such as payroll. The immediate and careful analysis of this information may help you understand if there are thresholds of presence in the home country which trigger taxation. You can then monitor going forward. The analysis helps you understand changes in costs and compliance to the business where tax residency does change.
   It is worth understanding if a different host location to the home country can be used for the assignment interruption. This could actually be more cost effective (tax residency isn’t as easily triggered as the home country) and better from a teaming perspective (time zones etc.).
   
   
5. Communicate with key stakeholders and pro-actively monitor the situation. Keep your communications regular and your data set, up to date to enable the analysis to be effective and insightful. Get in touch with Corporate and local HQ and understand the business continuity and communications plan that is in place. If not in place, this needs to be addressed quickly and put together by senior management.
   
   Establish contact with your insurers and understand their directions and establish ownership of business travellers. Connect with the people managers of the assignees: are the assignees and their families ok? Is there any support they require? Consider their emotional and mental well-being. The extraction from the host territory may have been a stressful experience, consider whether this compassionate or unpaid leave appropriate?

Crowe Global expert’s commentary on Global HR considerations

Australia: Jacqueline Carmont - Crowe Australia (Findex) 

• Insurance and risk management: When an event occurs, what advice is your corporate and/or personal insurance provider giving? If they are advising you that your staff won’t be covered then the decision to withdraw employees may need to be a quick one. Do you have a provider such as SOS international? What plans and/or actions need to be taken?
  
  
• Business Continuity Plan (BCP): Most organisations will have some kind of plan. I have seen in moments of extreme events businesses forget to access the plans they have put in place to guide them through these events. Most importantly these plans usually specify who are the decision makers and the flow of communications. For example, do global HQ decisions to evacuate override local decisions? I recall the mix of information provided after the Japanese Tsunami and decisions were made at home territory levels to evacuate staff overriding the host territory and global advice. A learning from this was to have clarity over decision making and communication process.
  
  
• Who is responsible for business travellers? Given the compliance requirements of long and short term assignments most businesses have policy and procedures to manage this population and have centralised data to identify assignee location and movements. The risk I have observed lies with the lack of centralised data globally to identify and coordinate business travellers. Home territories can use local travel agents so there is not one single source of the truth globally. This is complicated if businesses have ‘simplified’ travel planning and allow staff to directly book travel – how do they know what flights staff are on so they can track exact location and movements?

United Kingdom: Kenny Law – Crowe UK

Employees leaving the UK to work abroad will typically break UK tax residence under the ‘Full Time Work Abroad’ test. This test requires that the employee, whilst working abroad, has a) no more than 30 UK workdays in a tax year and b) no more than 90 UK midnights in a tax year. Unexpected return visits to the UK may result in the employee exceeding these thresholds triggering UK tax residence. This, in turn, can trigger unexpected tax costs and reporting obligations (both at employer and employee level). Whilst reliefs should be available to mitigate this exposure (e.g. temporary workplace relief, foreign tax credits etc.) there is now significant added complexity to manage.

Canada: Nupur Rishi – Crowe Canada

There are certain specific provisions linked to the duration of stay in Canada to note. A stay of more than 183 days in Canada could trigger tax residency and reporting and tax obligations. Non-resident employer certification is an area to look at too. This allows certain employers to be waived from payroll withholding if their employees’ stay in Canada meets certain conditions. If employees are unexpectedly in Canada because they are quarantined, it may put the certification in jeopardy. Employers may also need to consider unanticipated taxable benefits (temporary housing, moving costs etc.)

India: Venkataraman Raghavendran – Crowe India

Monitoring movements is key. There are no exceptions defined for any kind of emergencies in the tax rules. The Budget on 3 February 2020 did however propose changes in the residency rule. 120 days of stay in India to trigger residency maybe the key test going forward instead of 182 days. 

Belgium: Marc Verbeek – Crowe Belgium

South Africa: Michael McKinnon – Crowe South Africa

South African tax residency rules are complex. Many South African expats (working overseas will remain tax resident in South Africa). However, where a person has left SA permanently and become not tax resident a ‘Physical Presence Test’ applies. In these cases careful monitoring is needed to ensure that the allowable days present in SA is not exceeded. If these are exceeded then the person automatically becomes tax resident again.

Conclusion

There is a lot of going on when assignments get interrupted. The human aspects of employee welfare, communications are absolutely critical and will be front of all minds. That said, employees being in a location for an unplanned period of time can change compliance obligations too and this aspect also requires attention.