8/12/2013. Then. Now. Managing risk and compliance. August 14, 2013

Transcription

1 GLOBAL/INTERNATIONAL PAYROLL THE GROUND WORK August 14, 2013 Then Identifying & tracking the assignees Drafting a policy document Implementing a mobility process Deploying an assignment management system Reporting Now Linking with talent management & business strategy Collecting all costs in order to manage costs and accruals Implementing process efficiencies/workflow management Integrating systems Data analytics Deploying portals & apps Managing risk and compliance Mobility Management: Then & Now Challenges Pent-up Globalization initiatives as economies emerge from a few years of waiting out recessionary conditions Broader spectrum of market activity from emerging to mature Rebound of Merger, Acquisition, and Divestiture activity Continued disconnect between skills businesses required and people seeking employment Organizations are sourcing available talent through more and more channels Business Talent Responses Global Mobility model that inserts itself into global strategic initiatives Global Mobility is aligned to business objectives Global Mobility is a credible and relevant resource to the business Global Mobility promotes organizational capability worldwide Global Mobility as a key ingredient or factor in corporate talent initiatives (leadership development, management of high-potentials, etc.) Renewed emphasis on transparency More accountability within organizations Regulatory environments tightening at a faster pace across the globe Global Mobility promotes a governance and framework Compliance Global Mobility can support due diligence and & Risk mitigate risk Demand for operational excellence Lack of skilled global mobility professionals Increased push for cost reduction Operations Move toward an advisor role within the business Execute in a high performance culture with flexible, repeatable and sustainable global mobility operations Challenges facing mobility 3 1

2 Budgeting & Forecasting Establishing Accruals Cost management, exception tracking Individual and corporate tax planning Assignee career management Proactive repatriation planning Deployment Data administration Shadow payroll administration Local payroll and tax compliance Compensation collection Ongoing accruals funding reports Assignee tax compliance VALUE HIGH Global mobility policy design Individual pension and social security planning Tax policy design Decision Analysis Global HR Metrics attrition, retention Total cost reporting Benchmarking Return on investment evaluation Vendor cost management HIGH SATISFACTION Program Administration Lifecycle Globally mobile employees create individual and employer tax obligations Incentive awards - cash and equity contribute to exposure Risk Exposure (tax audits, PE, brand reputation) Corporate tax and finance focus on global cost and tax rate Complexities of tax, administration and internal coordination Increasing regulatory oversight Business Issues Skills & Experience Communication Technology Processes, Global & Local Challenges managing a mobility program 2

3 Numerous compensation items and sources Negative compensation entries Claim of right Benefits-in-kind Payments to third parties Method of delivery Shadow versus paying payroll Nonresident reporting and withholding obligations Home and host payroll reporting and withholding obligations Tax equalization policy implementation Multiple employers Limitations of existing payroll systems Tax gross-ups Accounting for tax reimbursements Exchange rates Why is international payroll so difficult? 7 Verify assignee information: Citizenship Visa Family size / status Personal income Residence home & host Ties to home country Define the assignment: Anticipated Length Purpose (e.g., Skills Development, Leadership Development, Practice Development, etc) Policy / Compensation Package Cost Sharing Impact on Tax Residences Due Diligence Determine the employer: Facts and circumstances Right to hire and fire Right to direct Integration into organizational structure Consequences Obligation to withhold and report Coverage under social security system Participation in benefit plans Home Long term or short term assignment Receives Home Salary plus additional assignment allowances as defined by the policy May be tax equalized, pays hypothetical taxes May participate in home country benefit plans Depending on host location, may be eligible for a Certificate of Coverage Host Typically on a long term assignment and is not tax equalized Receives host salary (denominated in host currency) plus additional assignment allowances as defined by the policy Assignee pays actual taxes Company typically y tax protects select assignment allowances May be able to remain on select home country benefit plans Depending on host location, assignee may be eligible for a Certificate of Coverage Split Types of split payroll arrangements Home and host company payroll Home payroll and portion of pay delivered via A/P, vendor Host payroll and portion of pay delivered by A/P, vendor A portion of pay is delivered in both locations Amount delivered in other location is deducted as post tax deduction from payroll Approaches to Delivery 3

4 Advantages Home Host Split Disadvantages Facilitates continued participation in home country programs (company-related, Need for host country currency will pension, social, etc.) require supplemental assistance Not well-suited if home country has few Less challenging to go on to a new outbound assignees, challenging to set up assignment location (payroll, systems, processes, etc.) May mitigate reluctance to accept an May make compliance in host country tax international assignment regimes more challenging May require processes to support crosscharging Facilitates easier repatriation Impedes continued participation in home Pay and allowances may be country programs (company-related, delivered easily pension, social, etc.) May promote more Need for home country currency will consistent administration require supplemental assistance Could promote perceived equity amongst May be challenging for assignees on assignees at the host location multiple assignments Compliance and managing data can be easiest Makes repatriation more difficult Aligns best to balance sheet Most administratively challenging and the most expensive compensation approaches Home/host country currency needs mitigated Compliance issues could arise Facilitates both repatriation and mobility Issue resolution is more challenging since more than one organization is on to another assignment impacting pay Assignment related compensation is more Compensation accumulation processes are visible and not diluted in overall pay challenging To facilitate withholding requirements and to report wages and remit applicable taxes on wages earned by an assignee but paid by another payroll or vendor to the assignee or to a third party on behalf of the assignee. Requirements vary locally Countries in EMEA and Americas typically have monthly requirements China has a monthly filing requirement Irrespective of payroll delivery methodology, a shadow payroll process may be required in home, host or both locations. Shadow Administration Update assignment information Calculate allowances to be delivered via payroll Collect Compensation Results Obtain pay results from payroll, A/P, equity admin, third party vendors, etc. on monthly basis Compare results received with instructions to ensure accuracy of remittances and review non-payroll remittances for reasonableness and conformance to assignment policy Compute Worksheet, Transmit Instructions to Local s Reconcile Leading Practices in Expatriate Administration 4

5 Identify taxable compensation to be reported either back to home or host location and calculate and remit local tax payments Comply with Local Requirements for Shadow Reconcile (again) Compare results received for shadow payroll instructions with instructions to ensure accuracy of remittances Leading Practices in Expatriate Administration How does equity fit in? Focus by media Scrutiny by global tax authorities - Reporting and Withholding Corporate- Chargeback's / Deductions Wider use of equity awards Less use of Stock Options More RS and RSU s tied to Performance Globally mobile workforces Long Term, Short Term, Business Trips Domestic and International Ability of control process Complex Global Tax Regulations Increase in Volume of Award Grants Corporate Risk- monetary and brand Long Term Awards Mobile Employee s Regulatory Activity/ Tax Compliance The Current Environment 5

6 Typical Incentive Plans Treatment of equity compensation Lack of corporate sponsorship No central repository of information and system limitations Complexity of implementation Multi-everything (country, currency, regulations, etc.) Administration complex No tracking of mobility of employees No single owner of process or owner typically not IHR Many departments involved in process Company Challenges with Cross Border Equity Tax Matters 18 6

7 Tax Issues When is the incentive taxable? How much is taxable? What are the payroll reporting and withholding requirements? What is the interplay between payroll obligations, personal tax filings and tax equalization policies? Issues Should we report? Should we withhold? How much to report? How much to withhold? When to report? Timeliness of tax remittance to authorities Who is legally liable? Common Issues A grant to vest example Example of withholding by Vesting Tranche* 7

8 Increased focus on compliance Increased level of complexity of international moves Must understand global taxation to properly handle payroll reporting Don t forget equity and other long term incentives We have a lot of data let s use it! In conclusion AUGUST 14, 2013 University of Michigan Dearborn, MI Hosts: Sponsors : INTERNATIONAL ASSIGNMENT COSTS (PROJECTING, TRACKING & RECONCILING ECONCILING) August 14,

9 Cross Border and Local The Ground Work Structure and Administration Basics Copyright Expaticore Services LLC 2013 All rights reserved 1 Elements of International Data Management Secure data acquisition and compilation Updates to payroll processors Delivery of gross to net data to data repository for reporting Data retention for future reporting Processing Calculation of gross to net Gross earnings Less: deductions Less: taxes Net pay Compliance Funding The accurate and timely distribution of funds to beneficiaries as: Net pay Tax payments Third party payments (e.g. benefits) Management, accounting and other reporting Copyright Expaticore Services LLC 2013 All rights reserved 2 Standard Global Program Management Model Governance Global Program Management Local Processing Local Processing Local Processing Copyright Expaticore Services LLC 2013 All rights reserved 3 1

10 Governance Approve administration model design Global budget authorization Set data security standards Define tax positions Approve global policies Execute BPO contracts Vendor performance and SLAs Establish global performance standards Technology signoff Copyright Expaticore Services LLC 2013 All rights reserved 4 Global Program Management Copyright Expaticore Services LLC 2013 All rights reserved 5 Local Processing Effective resources Local compliance administration Tax payments Third party payments Net pay delivery Employee customer service Integration of global programs Local vendor management Local and non local data reporting Copyright Expaticore Services LLC 2013 All rights reserved 6 2

11 Fully Centralized Shared Services Model Governance Shared Service Center (ERP Plus Workflow) Instructions out Country A Country B Regional Outsourced Processor Country C Country G Country F Country E Country D Data Returned Copyright Expaticore Services LLC 2013 All rights reserved 7 Hybrid Shared Services Model Governance Shared Service Center (ERP Plus Workflow) Instructions out Country A Country B Regional Outsourced Processor Country C Country G Country F Country E Country D Data Returned Copyright Expaticore Services LLC 2013 All rights reserved 8 Managed Services Governance Program Management Company (either Employer or BPO) Joiners, Leavers, Updates Third Party or Aggregator Global Workflow Most of the company payroll reporting Reporting Feeds to accounting and HRIS Data Returned to Aggregator Country C Processor Country B Processor Country A Processor Copyright Expaticore Services LLC 2013 All rights reserved 9 3

12 BPO Model Governance Third Party BPO Shared Service Center (ERP Plus Workflow) Instructions out Country A Country B Regional Outsourced Processor Country C Country G Country E Country D Country F Data Returned Copyright Expaticore Services LLC 2013 All rights reserved 10 Business Process Outsourcing Time and Attendance Help desk Human Resources Capture and process payroll updates (employees & contractors) Payslips Funds management including net pay, statutorily Core required Services payments and third party pay Compliance Accounting Management reporting Employee and Management Self Service Business Intelligence in Multiple Currencies/ Languages Copyright Expaticore Services LLC 2013 All rights reserved 11 In-Country Processing Flow Data Sources Local HR Admin and Time & Attendance Accounts Payable Updates Collated and Distributed to Local Processor Collation/Distribution of Joiners/Leavers/Updates Processors Apply Rules and Run Gross-to-Net Gross-to-Net Processing Local Compliance Management and Accounting Reports Statutory Reports Other Local Sources Employee Payslips Copyright Expaticore Services LLC 2013 All rights reserved 4

13 Multi-Country Processing Flow Data Sources Local Feeds Updates Collated and Distributed to Local Processor Processors Apply Rules and Run Gross-to-Net COUNTRY 1 Gross-to-Net Processing Local Compliance Management and Accounting Reports Collation/Distribution of Joiners/Leavers/Updates COUNTRY 2 Gross-to-Net Processing Statutory Reports Global or Regional Feeds COUNTRY 3 Gross-to-Net Processing Employee Payslips Feed Back to Global Data Repository Copyright Expaticore Services LLC 2013 All rights reserved 13 Expatriates Data Sources HRIS/ Comp AP Updates Collated and Distributed to Each Local Processor According to Calendar Processors Apply Rules and Run Gross-to-Net Country 1 Local Compliance Management and Accounting Reports Relocati on Collation/Distribution of Joiners/Leavers/Updates Country 2 Other Reports Stock Country 3 Employee Payslips Home/ Host Iterative Updates Home Updates to Home/Host Copyright Expaticore Services LLC 2013 All rights reserved 14 Complexities of Expatriates Unique policies that require special paycoding Concurrent payrolls (shadow payrolling) Tax equalization Imputed income items Split pay Foreign exchange Grossups Tax law Accounting Copyright Expaticore Services LLC 2013 All rights reserved 15 5

14 Data Management Technology data sources In-country payroll processing HRIS 1 Bonus Stock Collation of changes data In country payroll updates 2 3 Load Gross to Net reports Report Other 4 Data Management Software Copyright Expaticore Services LLC 2013 All rights reserved 16 Technology Employee Self Service Employees should have the ability to access their payroll information Copyright Expaticore Services LLC 2013 All rights reserved 17 6