17 February 2016
Do you know the feeling of uncertainty when sending employees across borders? Today, short-term business trips or longer projects go hand in hand with complex and challenging regulations that are subject to frequent changes. Non-compliance often leads to significant sanctions.
Before sending employees abroad read these eight most important questions that HR professionals should have in mind:
YES / NO – As the employer or employee may have tax and/or social security obligations depending on the number of days spent in each country(ies), tracking business travel forms the basis of handling all international employees activities.
YES / NO – Under EU regulations the employee may have to be affiliated to the social insurance system of the country of residence if 25% of the activity is performed in the country of residence (for instance, someone employed in Switzerland who lives in Germany and who performs at least 25% of the work in Germany). The employer is therefore responsible for reporting the employee to the appropriate country and paying the employee and employer contributions. Heavy penalties apply in case of non-compliance.
YES / NO – Employees may get stopped at the border by immigration, or during spot-checks at the workplace. Employers run the risk of reputational damage, fines and a potential ban from applying for further work permits.
YES / NO – Reputational risks for the employer and fines for non-compliance have increased significantly in the last years. Employers need to make sure they meet the minimum wages applicable in the country of deployment.
YES / NO – If no taxes are paid in the relevant jurisdiction or in the wrong jurisdiction (home country), the employer becomes responsible and has to bear the costs with gross ups if the employee cannot be charged with the correct amount of taxes.
YES / NO – The employer will be held responsible for misreporting and may have to bear the tax costs, including penalties and late interest. The non-reporting of taxable income, such as housing or school allowances, in the annual salary certificate results in considerable problems for the tax payer and employer (equity compensation, such as stock options, is not a typical benefit in kind).
YES / NO – Employees working abroad (even if at a client site) or concluding contracts for the Swiss company might result in the constitution of a permanent establishment. A permanent establishment usually results in a double taxation if not managed in advance.
YES / NO – You may risk unequal treatment of employees. Incorrect social security treatment may lead to significant gaps in coverage. All payments from one country, e.g. tax gross ups, benefits in kind, have to be reflected in the other country and vice versa in order to be compliant with tax and social security laws.
Are you able to answer “YES” with confidence to all of the above questions? If not, your company should review and improve the current process to manage the complex and changing national and international requirements.
The consequence of non-compliance are not limited to statutory and legal penalties. The indirect cost to a company are often more significant such as additional resource to fix the non-compliance, damage to the company’s reputation or credit rating and even possible loss of contracts. Access to experts helps to reduce the risks that employers and employees may be exposed to when being sent abroad.