By Globalization PartnersFebruary 2021
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You and your company might already be familiar with employee relocation at a local level. While it presents some challenges, it’s not overly complex. Global mobility, on the other hand, is not as straightforward. Relocating employees internationally can be a complicated process beyond just the logistics of physically relocating employees to another country.
Today, international employee relocation has taken on a whole new meaning, as the worldwide pandemic and remote work have made it possible for employees to choose where they want to be, rather than where they must be. Is your company prepared to pay employees who decide to relocate to another country?
A report by the Organization for Economic Co-operation and Development (OECD) states that in 2020, two out of every five employees worked from home in all 37 OECD countries. With so many remote workers worldwide, the stage seems set for a large migration. According to remote work expert Pieter Levels, there will be 1 billion “digital nomads” by 2035.
As employees take advantage of their new freedom, companies are left to figure out how to hire, pay, and ensure overall compliance.
What is employee relocation and global mobility?
Employee relocation, or global mobility, refers to the transfer of employees, their families, or entire organization departments to a new location. Relocation is considered a benefit and is usually administered by a company’s HR team.
Other terms used to describe employee relocation and global mobility include:
- Employee Transfer
- Employee Mobility
- Corporate Relocation
- Talent Mobility
What are the main differences between local and international employee relocation?
Even though the goal is the same, there is a significant difference between local relocation and global mobility and international relocation.
Local relocation: Companies usually relocate employees domestically for a few reasons:
- Full-time moves
- Temporary or rotational assignments
While local relocation benefits for employees and interns will vary, HR professionals and organizations are familiar with the logistics of the process.
According to a report by Upwork published in October 2020, in the U.S. alone, 14 to 23 million workers are expected to relocate due to remote work.According to a report by Upwork published in October 2020, in the U.S. alone, 14 to 23 million workers are expected to relocate due to remote work. Click To Tweet
International relocation: If your company is prompting the international relocation, rather than the employee voluntarily requesting it, there are many costs to consider. Besides overall international relocation costs, employees may also need additional benefits, including assistance with finding a home, living expenses, and a travel budget to fly back home every so often.
Is the employee requesting the international relocation of their own accord? In this case, the employer must ensure they have the ability to pay and offer compliant benefits packages to the employee.
If the company has no business entity setup in the country where the employee will live, they will not be able to do so.
Beyond the cost of entity setup, payroll registration, and benefits administration, employers must ensure they keep up to date with changing local laws and regulations.
How can companies ensure compliance through talent relocation and global mobility best practices?
You may know the basic details involved in the employee relocation process. But would you know exactly how you would ensure compliance if one of your employees told you they were moving to France? Let’s take a look at five steps that will help you maintain compliance globally.
- Know the country’s rules. How long can an employee be in a country before they establish residency and it begins to have a business impact? Each country may be different, but 180 days is the average time a worker can live in one location before their stay counts as residency establishment.
- Find out if your employee has the legal right to work in their new locations. Of course, every citizen has the right to live and work within their own country, but what about international employees who want to move to another country or go back to their own country after working abroad? Knowing where they have the right to attain residency will save you and them a lot of trouble.
- Determine how you will continue to employ them. If you don’t have a corporate presence in the respective country, there are two options.
- Option 1: Set up your international entity. This process can take 4-6 months, and it will require tax filings and significant labor and financial investment over time.
- Option 2: Work with an international hiring partner that already has an entity in place through which you can hire international employees, such as an Employer of Record (EOR).
- Determine the total cost of employment in the new location. Each country has different employer requirements and social charges.
- Determine if salary should change based on local benchmarks. There are benefits to keeping employees’ salaries the same when they move to a lower-cost jurisdiction, and readjusting their salaries when they move to a higher-cost location.
These steps will help you guarantee compliance and employee happiness while your company experiences global mobility and employee relocation. After all, the future of international work points towards a global migration of employees looking for new countries to call home.
Check out the infographic: What to Do When Employees Relocate Internationally
What’s the solution for international employee relocation?
With employees on the move, your company might have to deal with multiple relocations at the same time. It is good to develop a relocation program to avoid any surprises when your new or current employees decide to relocate. An Employer of Record (EOR) can help you hire international employees without the need to set up a global entity.
An EOR acts as the legal employer and takes care of compliance, payroll, tax filings, and HR functions. In addition to this, one of the significant advantages of hiring through an EOR is that you can offer benefits to your employees wherever they choose to live.
An EOR is 100 percent responsible for managing compliance, which means that it’s the EOR’s job to follow and stay updated with all local rules and regulations.
This allows you to hire employees compliantly in just a few days. Learn more about hiring through an Employer of Record.