SIRVA Global Compensation & Payroll Administration Case Study
In the era of increased scrutiny over compliance with local regulations, the success of a company’s global mobility program may ultimately depend on its ability to effectively manage compensation for international assignees.
Unfortunately, managing assignee compensation globally can be difficult. Coordinating the payment of assignment-related allowances and recording taxability properly in home and host countries can be challenging, especially when currency exchange rates and tax requirements differ. For example, some countries do not require tax withholding, while others might tax as high as 50 percent. Certain compensation elements are taxable in one country and not another.
If companies do not accurately manage their global compensation and payroll, they could be vulnerable to compliance risk and lose the right to conduct business in a country. If not performed correctly, calculation of assignment-related payments and deductions may result in overpayments—a windfall to the assignee but one that will cause their program to go over budget. If assignees are underpaid and lose faith in their company’s global mobility program, they might reconsider their decision to commit to a global assignment, impacting corporate goals.
Gaining Peace of Mind
One of the world’s leading global bio/pharmaceutical services organizations, operating in 50 countries, was concerned about whether its administrative processes were compliant with local tax regulations in its assignee host countries. The company wanted peace of mind, and turned to SIRVA to get it. The company approached SIRVA for the following:
- Assess its current global compensation and payroll administration process for international assignments
- Implement a new process that would ensure assignees were compensated correctly and appropriate tax and taxability were recorded
- Coordinate training and communications with local process stakeholders
Out with the Old, In with the New
Over a one-month period, SIRVA met with the company’s local payroll teams to review the current process for effectiveness and determine where the company might improve and standardize. When reviewing the current procedures, SIRVA focused on both sides of the process—how the local payroll teams determined what to pay and how they reported those results back to the company and the tax partner.
SIRVA scrutinized each assignment balance sheet and year-to-date pay record to ensure payments aligned with company policies. Working with the local payroll teams, SIRVA created pay instructions for each team incorporating local payroll systems’ earnings and deduction codes to ensure clear communication moving forward. After each payroll cycle completed, the local payroll teams returned their payroll results to SIRVA. SIRVA audited the process and ensured payroll was delivered correctly.
Through SIRVA’s reconciliation of local payrolls, it was discovered that payments were being made to assignees that the company was unaware of. SIRVA identified a region that was paying “miscellaneous” allowances on a regular basis to compensate assignees for what was viewed locally as low compensation. The company eliminated the miscellaneous amounts and replaced them with appropriately calculated assignment allowances.
Assignee Location Tracking:
SIRVA discovered some assignees had moved or stayed in the host country longer than expected. SIRVA alerted the company to these discrepancies, which was critical, because assignments could have different reporting requirements and tax liabilities based on location and length.
Accurate Spend Recording:
While auditing compensation from local payrolls, SIRVA found that the value of certain allowances was being deducted from a local benefit and “lost” in reporting—it appeared these were never paid. SIRVA established a better process for recording these items so that the tax reporting accurately reflected these allowances.
SIRVA’s process enabled the company to create shadow payrolls, ensuring home and host payrolls record and pay appropriate local taxes. Processing shadow payrolls on a monthly basis ensures the company is compliant with local laws requiring current reporting of compensation earned, taxes due, and remitted. The company can also use shadow payrolls to maintain participation in pension and social insurance plans or to satisfy loans owed in the non-paying country.
Through SIRVA’s partnership, standardized processes and communications were developed for all countries. Standardized data file formats and the configuration of the SIRVA system allowed SIRVA to map all local payroll codes to a more meaningful corporate level chart of accounts for global reporting.
Accurate Cost Projections:
The company gained the ability to generate accurate cost projections using SIRVA’s internal data and calculations as well as data from reliable partner providers. This helped the company make informed decisions when considering assignments. These cost estimates contain a multi-year picture of relocation costs, base/bonus compensation, assignment allowances, taxes and destination services.
SIRVA delivers financial reports to the company, ensuring financial tracking and reporting compliance. These reports include total compensation/cost collection, active and new assignment listings, budget to actual reports, and expense management/ policy exceptions.
Most importantly for the company, SIRVA established controls to ensure the company was compliant with all home and host country tax and payroll requirements.
Managing compensation and payroll administration for global assignees presents a wide variety of challenges. Working with a relocation provider like SIRVA can make this process simple.
Contact Concierge@SIRVA.com for more information.