International Assignments: Cost, Benefits, Issues Explained
Have you ever thought about moving your family to Europe, Asia, South America, or Australia? The more you think about the possibilities, the more questions come to mind. The discussion with a spouse won’t be quite the same as one about a move across country. Where will my pay come from? What schools will my children attend? Can I afford to live there? What language do they speak? What about my employee benefits? Do I need a work permit and can my spouse work? Who is going to help me with all of these questions? International assignments come in different shapes and sizes with each having different objectives.

The differences between a short term assignment and a long-term expatriation of one to five years are enormous. Tangible costs for international assignments – short term versus long-term – can range from that of a long business trip to more than four times annual base salary. Planning and preparation are critical to the success of any international assignment, long or short. The potential return-on-investment (ROI) of a successful international assignment can be significant both for a global organization with a presence in many countries and for a domestic U.S. company expanding its business abroad for the first time.

The cost of a failed assignment can first be measured by the costs to transfer a family and then relocate them home again. In addition, there are intangible costs of a failed assignment that are much more difficult to measure: lost productivity, delay in starting up or reorganizing a management team, lost sales and production, etc.

The decision to accept a foreign assignment is very complicated, to say the least. An employer and their service provider’s consultant will discuss all of the issues that will impact an assignee and his/her family in order to maximize the company’s ROI and minimize the risk of an assignment failure. From cost of living, housing allowances, and dependent tuition, to language instruction, work and resident permits, foreign income tax and cross cultural training, an international assignment presents many new concerns and challenges.

Short-Term Assignments
The use of short-term assignments (STAs), often treated as “extended business trips,” has grown substantially because of their cost effectiveness compared to full long-term expatriate assignments. Most companies consider temporary assignments as extended business trips lasting from three months to one year. Trips of only a couple weeks to 90 days are usually treated as normal business travel. Short-term assignments are often characterized by their duration, and the employee is the only family member transferred.

There are exceptions within any organization, but generally, the family remains at home while the assignee works at a foreign location returning home on a pre-approved and often frequent schedule. U.S. employees working abroad typically remain on their home country payroll, and they maintain all of their home country benefits.

Many companies will provide additional “international” health and welfare benefits since many managed care programs common in the U.S. will not extend coverage abroad. Otherwise, an employee can expect to receive their compensation and benefits as they always have. Families of assignees on short-term assignments usually maintain their homes, thereby reducing typical relocation costs of selling or managing a home country property.

On assignment, the company typically provides corporate housing, such as a furnished apartment. Furnished housing eliminates the need to ship household goods abroad and back again for such a short period of time. Most companies, however, will allow an assignee to take some personal items of convenience. These features of a short-term assignment reduce costs significantly compared to a long-term expatriation.

Business trips are often characterized by the traveler submitting weekly expense reports for meals, lodging and incidentals. This can become burdensome and expensive for “extended trips” for assignments lasting six to twelve months. Therefore, many companies provide company paid housing and a daily per-diem for meals and incidentals. There are firms that specialize in the calculation of short-term assignment allowances, and the US Government publishes per-diem guidelines for locations around the world as well.

A company’s policy will designate what source of information will be used on a consistent basis. International assignees planning to stay and work in a foreign country for more than 90 days must seek assistance from their local business human resource department to secure the appropriate work authorization permit or visa.

Travelers to and from countries recognizing the visa waiver program may allow a visitor to enter temporarily for a period not to exceed 90 days. Other countries may require a visa to enter in every situation. Unauthorized stays in a foreign country can have serious consequences from an immigration perspective. Work authorization for a foreign country is typically handled or coordinated by the “Host” country sponsor. Preparation and application for work visas should be started well in advance of a scheduled arrival because it may take a couple months to get approved. Companies should seek legal counsel before every assignment because immigration laws are constantly changing.

One of most often overlooked aspects of short-term assignments is the possibility of foreign income tax liabilities. Even though these are considered temporary assignments or extended business trips by nature, it doesn’t mean there aren’t any foreign or US tax costs associated with the assignment.

Timing of an assignment start date and the number of days in the destination country in the previous twelve months prior to the start date, are all important considerations. Every country is different but, for many, in country residence of 183 days in any 12 month period could trigger a foreign tax liability.

Many – if not most – U.S. based companies, will offer tax protection or they will tax equalize their international assignees to their home country. This means the company will reimburse any additional tax liabilities that are a direct result of the assignment. It is highly recommended that companies seek professional tax advice and counsel when planning any foreign assignment.

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