Integrated Compensation Data ManagementGetting a clearer view of mobile employee information |
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Employees who move across international borders, whether on a permanent basis, for long-or short-term assignments or just for frequent business travel, pose a particular set of compensation considerations and challenges for their employers. In fact, between the extremely complex and varied rules governing these “mobile employees” and significant increases in scrutiny from tax authorities around the world, compliance and reporting obligations surrounding compensation are some of the most difficult areas for organizations to “get right.” Failing to do so, however, can be costly.
Integrated Compensation Data Management
Collecting comprehensive compensation data from various global sources and determining it is treated properly from a reporting and remittance perspective can be extremely challenging. For one thing, it requires the ability to capture all elements of compensation related to expatriates or international assignees. In addition to home or host payroll, compensation may include a variety of “off-payroll” payments; for example, payments on behalf of an assignee such as those made to vendors associated with the international move, tax payments, and/or various compensatory expense reimbursements. At the same time, compensation paid to or on behalf of globally mobile employees typically involves multijurisdictional reporting requirements and is subject to varying taxation rules. What may be taxable in one country may not need to be reported in another, or it may need to be reported in a specific way depending on the situation. Accordingly, companies need to understand all of the home and host requirements associated with each cross-border assignee. This requires strong multi-functional cooperation within the organization.
Risk Overview
What happens if you do not get it right? Companies with mobile employees face:
- Financial control risks. Although many companies carve out expatriate payroll for the reasons described above, it is important to avoid treating it as an exception to an integrated, automated financial reporting solution.
- Increased risk of identification of noncompliance and audit due to increased scrutiny.
- Potential tax regulatory penalties in both home and host locations, and possible prohibition periods for both assignees and management with responsibility for underreported withholding.
- Assignee dissatisfaction with the program due to errors on W2s or tax regulatory notices.
- Reputational risk and/or adverse publicity resulting from underreporting compensation or from potential Personal Identifiable Information (PII) disclosure.
- Excessive costs for researching questions and for rework associated with incomplete data.
Read the Report
In a new report, Deloitte reviews complexities surrounding integrated compensation data management, including the importance of understanding the risks attributable to changes in tax authority compliance efforts and penalties regarding non-compliance. The report also includes responses to polling questions posed to executives during a Dbriefs webcast on global compensation and payroll reporting.
Integrated Compensation Data Management
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