May 2016 | Short-term assignments (STAs) make up a significant portion of global mobility. In fact, more and more organizations are using short-term assignees to handle business emergencies overseas, conduct or undergo training, manage discrete projects, etc. But, as Alison Shipitofsky and Glen Collins – both with the Mobility Consulting Services group in KPMG’s GMS practice – argue, there’s a frequent misconception about STAs: that they are easier to administer and manage, are often less expensive, and pose fewer risks, just because they are “short-term.” We invite you to watch this video to understand the possible advantages that can accrue to a short-term assignment in particular, and to an international assignment program overall, from implementing efficient processes at each phase of the assignment lifecycle and keeping channels of communication open with all of the key stakeholders involved.
Alison Shipitofsky: Thanks for joining us today as we talk about short-term assignments, or STAs. I'm Alison Shipitofsky, and with me today is Glen Collins.
Short-term assignments make up a significant portion of global mobility. KPMG's Global Assignment Policies and Practices Survey indicates that short-term assignments represent 81 percent of total assignments for organizations, as illustrated on your screen.
Glen Collins: Yeah, that's right, Alison. More and more organizations are using short-term assignees, although we find there's a frequent misconception about STAs in that they're easier to administer and manage, are often less expensive just because they are short-term, when it fact we know this is often not the case.
Alison Shipitofsky: To your point, Glen, it's almost counterintuitive. All too often we hear anecdotes where an employee is not familiar with global mobility risks, and they begin to start planning the assignment and simply submit travel receipts like it's a business trip. There's a misconception that because they're not moving a household—like you would on a long-term assignment, that it's merely a business trip.
Glen Collins: That's so true, and depending on the length of the short-term assignment, the employee could easily have different living needs, possibly unknowingly trigger a tax liability, and certainly require an entry visa or work permit.
Alison Shipitofsky: Global mobility programs usually have multiple policies based on business needs, assignment purposes, and length. Organizations should work to formalize their policy approach to short-term assignments just like they do any other policy. Short-term assignments are defined as a temporary transfer of an employee across national borders. They're usually over three months, but less than a year.
Glen Collins: And let's point out that this time frame is not necessarily arbitrary. Historically, this mirrors country tax law for many countries, and generally the 12-month mark reflects a shift in tax home for many countries. I know we're not discussing taxes today, but I think it's important for our audience to put context around the STA length itself.
Alison Shipitofsky: Right, and along the lines of context, why don't we start our discussion, then, in terms of the life cycle—and that is the assignment life cycle. For today's discussion, we'll highlight some valuable tools and steps for the short-term assignment's pre-assignment phase.
Glen Collins: When employees are asked to go on a short-term assignment, they naturally start thinking about things like, "Where will I live? Do I need a visa? What should I pack?" However, program managers should also keep in mind that the same level of logistical and compliance-related support provided for long-term assignments should also be provided for short-term assignments.
And one key aspect of the pre-assignment phase is in the planning and getting ready for the assignment logistics. This includes such things as securing proper immigration documents, understanding the home/host country tax requirements and the possible impacts, for example. A key takeaway here is that more and more countries are paying even more attention to those who are coming in and out of their country, not only for security purposes, but also for immigration and tax compliance.
Alison Shipitofsky: You know, stating the obvious, employees should not depart on an assignment without proper immigration documents in place. You know, it's funny, Glen. We still hear employees saying things like, "How will I know when I can leave? Who's going to help me with this process?"
Glen Collins: You're right, Alison. Sometimes it's hard to know who in fact is involved, and what each contributor is responsible for; and this could be confusing for assignees. Internal groups responsible for global mobility often vary between organizations, and that program ownership may not necessarily be part of the human resources department only.
For any international assignment, many key stakeholder groups often carry an important role in supporting a successful assignment. For example, pre-assignment risk reviews often include members from corporate tax, legal, and finance; and as programs grow and assignment volumes increase, more often than not external administrative tax advisory and legal support may in fact come from third-party service providers.
Alison Shipitofsky: It's certainly interesting to see how different organizations go about managing their international assignment programs.
So coming back to our pre-departure fees discussion, one of the most valuable tools to consider implementing in the process is an assignment initiation form. It should be easily found, filled out as early as possible. It is the who, what, where, and when data of an assignment. It provides all of the stakeholders the demographics they need to do their job. It starts the process. The assignment initiation form should be that proverbial whistle that starts a relay race, and then the proper handoffs can begin.
Glen Collins: And once the pre-assignment relay race begins, it's often time to determine the right package of benefits and services under a policy, then to project the assignment costs themselves, and often to engage external service providers.
Alison Shipitofsky: That's right, Glen. I'd like to mention one more key reason for its purpose, and that is the cost of an assignment. When planning for a new assignment, even if it's a short-term assignment, running a cost projection that includes all of the agreed-upon and approved policy elements for the assignee is so important.
On your screen, you'll see what a basic cost projection might look like. It has various elements. The form also includes the demographic information needed for the costing. Preparing a formal cost projection can provide the business with an estimate of the budget-to-actual. This detail includes individual and corporate tax impacts for both the home and host country, if applicable.
Glen Collins: I know we're not going into a deep dive today about tax risk for STAs, but we'd be remiss not to highlight what you just said, and that is that sometimes STAs are in fact taxable. So don't go on autopilot.
Alison Shipitofsky: I think the key takeaway here is to be as informed as possible. That's why we keep going back to the value of completing an assignment initiation form from the start of the assignment process, regardless of who owns your international assignment program. The more you know about the employee, the home and host country combination, the compensation package from the very beginning, it pays off in the long run.
Glen Collins: I think that's a really great point, and a good place for us to wrap up our discussion today. We hope you have learned something about how to recognize and define a short-term assignment, who in the organization typically owns short-term assignments, the concept of the assignment life cycle and, for our focus today, on the pre-departure phase and ways to keep stakeholders coordinated and well-informed.
Contrary to what many business managers may think, short-term assignments are not always the easiest to administer, or even a less costly alternative. However, planning opportunities may be available to manage prospective assignment costs and streamline STA administration. As know, in a heightened global regulatory environment like today, there is even more focus on global mobility programs.
Alison Shipitofsky: And yes, you don't want a short-term assignment unnecessarily resulting in costs that you did not account for initially. So implementing efficient processes at each phase of an assignment life cycle and keeping channels of communication open with all the key stakeholders involved will help manage costs, eliminate surprises, and support the success of a short-term assignment.
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