September 8, 2009 by MSI
Over the past twelve months third party relocation management companies have seen an increase in the use of frequent traveler assignments, also referred to as “rotator programs,” by clients with global business needs. Reasons for the recent increase include the need to manage shorter-term knowledge transfers, the difficulty in convincing employees to move more permanently to certain locations, and in some situations, general cost containment. Technology companies that need to set up complex systems or train customers often adopt this type of assignment as do major international consulting firms and companies in the energy field who require experienced personnel to travel and stay for limited periods in hardship locations. This segment of the employee population is very unique in their willingness to travel constantly for work, and many companies continue to experience ongoing challenges in hiring the appropriate candidates for these specific assignments. In fact, a Deloitte Tax LLP survey claimed the most significant challenge in managing a rotator program was attracting qualified candidates, with the second biggest challenge being “legal, tax, and regulatory compliance issues in home and host location.”
We caution clients that complying with tax and immigration standards and requirements around the world is critical to maintaining a viable program, one that remains invulnerable to hidden costs due to unpaid tax bills or employees stopped at borders because their visa and/or work permit paperwork is incomplete. We recommend designing a relocation policy tier to specifically address this type of assignment, inclusive of details on how the corporation will provide extra support towards compensation (such as housing, auto, per diem allowances; foreign service premiums and hardship pay), health and welfare benefits, tax obligations, immigration prerequisites, and travel policy while on assignment. Outsourcing some components, such as paying per diems or processing expense vouchers, acquiring short-stay accommodations, and the tracking of the time and expense of these assignments, is quickly becoming a ‘best practice’ in the industry as clients streamline internal human resource functions.
Regardless of how the program is structured, we always remind clients that a critical protocol is to ensure that frequent travelers are tracking days in-country, days traveling, and days at “home,” enabling tax partners to properly gauge tax liabilities, and to forewarn of any impending entry or exit issues. We suggest that tracking travel is actually a good practice for any employee who travels abroad because whether they are on a rotator, commuter, short-term or long-term assignment, they will need to recreate a travel history for the year when preparing tax returns. We also recommend that the traveler ask authorities to stamp their passports with entry/exit dates, even if not deemed necessary, to facilitate this process at the end of the year.
Have you witnessed an increase in rotational assignments within your global talent pool, of that of your clients? What has your experience been in tracking these assignments?
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