Extended Business Travel: Risks and Rewards
As companies work to align their relocation policies with mobility goals and company objectives, flexibility and cost management are typically front of mind, along with a desire to provide a strong employee experience to a broader population. In the search for alternatives to traditional long-term mobility assignments – while managing investment and considering organizational and employee preferences – extended business travel (EBT) has emerged as a front-runner. In response to SIRVA’s 2018 annual mobility survey, 44 percent of respondents stated that they expected an increase in the use of EBT arrangements over the next one to three years. Surprisingly, less than a year after publishing our 2018 annual Mobility Report, a 2019 SIRVA pulse surveyrevealed that the number had risen to 53 percent. This jump suggests the importance of examining EBT and its impact on mobility programs and administration more closely.
Extended business travelers are typically defined as employees who don’t relocate but, instead, travel to domestic and/or international locations frequently (or for extended periods of time) to conduct business. Extended business travelers don’t incur the expenses of home disposition or the settling-in services associated with other move types, which may make EBT appealing to companies looking to manage program costs. However, there are a variety of potential risks associated with these mobility arrangements that organizations should be aware of. Developing a strategy for managing each will be crucial to their success.
Depending on origin and destination locations, and the scenario of the traveler involved, a number of personal and company tax compliance requirements should be considered when utilizing EBT. Employees may be subject to additional income and social taxes. Companies may be subject to corporate tax requirements as a result of an employee working in a particular location. Significant penalties and interest may be incurred if compliance requirements aren’t met, driving the need for the meticulous tracking of activity. Put simply, a lack of proper tracking puts companies at risk of counteracting the very savings stakeholders had hoped to obtain by utilizing EBT in the first place. It’s recommended to utilize the expertise of a tax subject matter expert to preemptively raise awareness of these risks and ensure compliance.
Additional considerations must also be made for the varying country guidelines that exist around EBT and the complexities involved with its monitoring. For instance, some countries may consider a company to have generated permanent establishment in their locale if it has one or more extended business travelers who conduct business there, even if that company has no physical office in the area. In such cases, just one business traveler could trigger corporate income tax filing requirements and tax liabilities.
Tracking each traveler’s number of visits to a particular country, the length of each visit, the time frame the visits occurred within, compensation paid, and the scope of work performed by the employee is necessary to gauge where each business traveler falls within a country’s compliance laws.
Today’s geopolitical landscape is changing rapidly. As a result, it’s become more important than ever to stay on top of immigration requirements that are just as mercurial, including the entry and work permits and visas that may be required for extended business travelers to do business in other countries. Companies should seek the guidance of an immigration subject matter expert to minimize or eliminate potential non-compliance fines and penalties. They should also be aware that communication systems between jurisdictions have become more heightened and immediate, due to technological advances. Mobility managers should therefore have a firm grasp, in real time, on which employees are traveling, where they are located, for what duration, the reasons for their business travel, and the nature of the work being performed if they hope to properly manage immigration compliance permissions and risks.
Taking Control of Your EBT Program
To take control of your extended business travel program, SIRVA suggests the following:
- Determine who, internally, will take ownership of managing and tracking your EBT program. While several departments should be involved in the design of an EBT policy and process (HR, tax, mobility, finance, business leadership), items to be tracked must be clearly defined and traced to a clearly designated source for accountability.
- Define the parameters of your EBT policy, including an acceptable duration of each visit, compliance support elements, and the nature/level of additional support (as required) that will be provided to extended business travelers.
- Be aware of the changing immigration requirements impacting extended business travelers in all applicable destination countries. Whenever possible, enlist the help of tax and immigration experts to minimize compliance risks.
- Consider offering cultural and language training to your extended business travelers to foster the success of the arrangement.
- Implement a reliable and consistent tracking system to ensure that every extended business trip is monitored. Be sure to track the length of each trip, company spend, employee spend, compensation, reason for the trip, and the scope of work performed. Global travel booking systems and expense management reports can be helpful ways to both identify extended business travelers and monitor aspects of their trips.
As extended business travel gains popularity as an alternative to traditional move types, company stakeholders should be fully aware of the benefits, risks, and requirements associated with this population. When properly managed under the right circumstances, EBT can represent a flexible and affordable alternative to long-term relocation assignments. However, it must be properly implemented to ensure success. While this may initially represent an investment of time and resources for a company, preparedness, compliance and efficiency will provide long-term benefits that will bolster its overall mobility program in the long run.