Global mobility is vital for businesses – but how do you manage the costs?
As there is much current uncertainty surrounding the strength and pace of economic growth for 2022 and the shortage of talent, attracting and retaining the right people is a top priority for businesses today. In this period of transition and reinvention, many companies are reorganising their employee mobility functions to address changes to their business or talent strategies. Companies are resetting priorities to manage risks for workforce and build business resilience.
Companies are also looking at how international mobility can be utilised to solve the talent shortage and reduce attrition. This could be by shaping career development plans or allowing international remote working to attract and retain the right employees in a competitive market.
Do you have global mobility policies in place?
The cost of internationally mobile employees can be significantly higher than recruiting local staff even before the additional compliance admin is factored in. With inflation surging around the world in developed and emerging economies alike, being able to quantify and control the cost, streamline the processes, and manage the risk of internationally mobile employees is becoming more important than ever.
A well-designed global mobility programme should incentivise talent to be mobile while minimising unnecessary spend. Understanding the total cost of an employee’s remuneration package as well as administrative obligations is key to ensuring your programme is competitive yet cost-effective while keeping an eye on the tax and social security implications for both the employee and the company.
Companies with large populations of globally mobile employees clearly need a well-designed set of policies. It is equally important to implement and develop policies and consider budgets whether you’re planning your company’s first international move or when you receive your first request for international remote working.
The importance of cost analysis
Oversight of financial outlay is one of the most important parts of running a business. When a company has spent time on its budget, the business can plan, make smarter financial decisions, prioritise it’s spend, and focus on commercial and strategic goals. Planning in advance of an employee move can allow the company to ensure they are sending the right person, providing the right remuneration package and accessing tax reliefs available to both the company and employee. It can also ensure that the business has the means to prepare for unforeseen events, set goals and engage business leaders in the development of company policies.
When a company is aware of the costs, the business can better understand and monitor the costs involved and track performance.
Using global mobility technology
As the future of employee mobility evolves within organisations, using a Cost Projection tool as a standalone product, or alongside other mobility tools and guidance from your advisors, can ensure you have the data and insights to assist you in building and adapting mobility programs to ensure they are future-proofed and agile in these changing times.
Employers can leverage technology to enhance efficiency, user experience, and reporting. With the use of data analytics provided by a suite of global mobility tools, not only can you streamline your processes to cut down internal costs, manage compliance risk and control external spend, the tools enable your mobility team to provide your business leaders with quality data output to help your business make informed decisions including:
- Guiding the talent strategy to promote career plans and achieve talent objectives on a global scale
- Providing information to help direct business decisions focused on long term value creation
- Tailoring your approach to employees needs to attract and retain talent
- Building and ongoing review of all your policies to ensure they provide the best package to the employee, while remaining competitive in your market and cost efficient to the business.
While technology is an integral part of BDO’s service offering, the data provided by the mobility tools is only as good as the information input to the tools. Frequently, we have seen cost estimates only including the employee’s remuneration package. Often, the output data provided to business leaders has not factored in many of the additional costs such as tax and social security paid directly by the company that will arise during the assignment. This can result in discontented business leaders querying actual costs incurred during the assignment as they are so much higher than the initial estimates.
Although it is good practice to highlight to the business that cost projections are only estimates and you can’t plan for all eventualities that may arise during an assignment, it demonstrates the importance of building a full picture of costs and processes involved to take full advantage of the technology tools available. We recommend that cost estimates should include (as well as core remuneration) the following as a minimum:
- Tax & Social security
- Work permits/Visa costs
- Housing and other assignment costs
- Relocation at the beginning and end of move.
Cost estimate support for all employee mobility issues
The use of cost estimate calculations is a smart and quick approach to adopt in managing your global mobility population. Cost estimate tools can be used to address all employee mobility issues that international business face, including:
- International expansion: the calculations can provide a clear understanding of the costs of sending an employee to a new location
- Brexit implications: provide detail of the implications of moving between the UK and EU, both on business trips or for extended assignments
- Domestic agile workers: the tool can help give a picture of employee costs if they’re moving between states, cantons, or provinces
- International agile workers: compare costs for employees wishing to work overseas, something that is becoming more and more popular in today’s agile-working world
- Virtual assignments: highlight the often hidden and unintended tax and social security costs of virtual assignments & Commuters: determine and help budget for costs relating to cross-border commuters
- International assignments: calculate tax costs under various international assignment scenarios and help your business pin down any changes required to your existing mobility policy.
Should you need any assistance with cost estimates or cost projections please consult your BDO advisor.