By Peter Holland, Managing Director, EMS – an Integrated Member of GS3
When sending monies around the world, aside from accurate and timely delivery of payments, organizations must be compliant, cost effective and have control of their funds. Whereas payroll is the substantial part of company costs, within the Global Mobility Environment the assignment package, benefit in kind (BIK) taxes, allowances and expenses are at least of equal proportion. What is paid, how and when are of greatest interest to the assignee and the business traveller.
There are a number of parts to the payment involving different areas of expertise from Tax, systems and policy constraints, and payment methodology. Within the Marketplace, companies are challenged by multiple coordinators and suppliers of this task using separate companies for tax, a different payment organisation or the company finance team for multitude of payments; and little by way of tailored systems to support the company or employees.
Expenses are often carried out by a separate part of the organisation or outsourced and seldom fully integrated with Payroll. ‘Behind the Curtain’, providers are pulling levers involving tax organizations, expense policy, manual reporting processes not linked to payment systems that are run by money transfer organisations. The complexity of the data required, breadth and diversity of the country rules, and requirement for a fast turnaround can cause high error rates and increased cost of cash let alone compliance risk. I have seen ‘Behind the Curtain’ and it is not pretty; organizations have outsourced payroll, retained expense management and have not connected the two, leading to compliance issues. Others, have added this to payroll, grossing up and paying tax that they needn’t have done in countries where they are unlikely to get the tax back.
It is easy to find fault especially in this complex and multi layered world, I therefore offer the following considerations to all companies that have or move people around the world, be they assignees, local employees or business travellers:
- Define a global process which includes compliance in the different countries of the world; taxation; systems and data (protection) in line with the company’s and individual’s status.
- Ensure that process is simple for all, transparent, auditable (non repudiation) and tailored to your company strategy.
- Integrate the BIK data with payroll; the payments can be made separately but monthly payroll should include the calculation of all taxes.
- Confirm the most cost effective tax treatment of the expenses and method of payment. For example, if payments are made directly rather than through payroll, they may not incur tax in some countries. Remember, money transfer companies make their money through FX.
- Record and track all your international employees and payments into a singular consolidated system (of record).
- Capture Taxable Benefit Information into a policy so assignees are aware of any taxation and ‘there are no surprises’.
- Produce a feedback loop to provide information to both Finance and HR and update their respective systems.
- Create a simple manual and ideally display within the Company Intranet or Web Portal, so all the contributing parties are aware of their responsibilities, the approach and importance of this process.
If you would like further information or advice on Expense Management and Payment Systems ‘Behind the Curtain’, please contact GS3.