Last month KPMG provided an interesting insight into the challenges that companies encounter with STA’s.
“You’ve got a problem in your Cairo office. So you need to send one of your top people out there for three to six months to take care of it.
Booking the flight and hotel is easy. But a host of other issues — immigration, taxes and payroll — are often overlooked in the haste to get your trouble-shooter on the plane.
Short-term assignments, or STAs as they are called, are more than just extended business trips. Yet many company leaders rush people overseas without involving human resources, corporate tax, finance and payroll to ensure there’s proper planning and support.
Short-term assignments provide a vital function. They fill skill gaps, offer international work experience and/or training, help transfer knowledge and support ongoing projects. Because they are for a shorter duration, their complexities are often underestimated.
Here’s a look at some of the key issues to consider before initiating a short-term assignment.
– What are the individual and corporate tax implications? A cost projection should be run.
– Should a long-term assignment policy approach be considered at the outset for longer STAs that may exceed one year?
– If extended, will a new visa/work permit be required?
– Will a new assignment letter or amendment need to be issued?
– Is the assignment a sequential STA, or is it going to be a long-term assignment, resulting in a change in the assignment type and delivery of policy provisions (e.g., from per diem to a Cost of Living Adjustment (COLA) or “permanent housing” arrangement).
– Is a sequential STA even an option?
The response to these issues is to set up a system that proactively identifies potential risks and manages costs and helps company leaders to make informed decisions at the inception of STAs.
STAs should be considered the same as longer-term assignments in terms of policy and administration. This seems counter-intuitive to business managers because they often don’t think that the same level of support is needed, but STAs are in fact complex arrangements that can trigger a host of issues for the employee and the company if not planned and managed properly.
It is critical that assignment lengths and policy types be well-defined and, more important, these categories and associated policy treatment should be communicated throughout the organization.
A business trip that continues to be extended may need to be reclassified as an STA, which could trigger additional compliance requirements and assignment costs.
Until recently, business trips typically fell outside the realm of a global mobility program. However, as regulators take a closer look at business travelers, more companies are re-considering their business traveler programs.
Of course, any program is only good if it is followed. Leadership support, education and proper communication are critical to making it work.
SOURCE KPMG/Forbes Magazine