The incessant march of globalization. The accelerating pace of digital disruption. New generations of employees entering the workplace. The advance of digital labor. Businesses today face unprecedented challenges to evolve and transform in their quest to remain competitive. To stand still is to lose ground. To innovate or reinvent is sometimes just enough to keep up.
This article explores the confluence of pressures being exerted on today’s human resources (HR) and global mobility professionals by employees, internal stakeholders and emerging external factors. From hundreds of conversations KPMG professionals have conducted with senior HR and mobility professionals across all industries, it’s clear that the pressure to deliver more for less has never been so acute. That said, challenges present opportunities and we will share some key insights on how organizations can respond strategically.
Competing demands on mobility today are creating an extraordinary challenge for organizations. On the employee and workforce front, ambitious young employees entering the workforce are seeking greater flexibility and a different work-life balance than previous generations could have imagined. Amid mobile technology, opportunities for ’gig’ employment, and online and social networks, the world at large is actively encouraging and enabling a new approach to how we work.
Amid mobile technology, opportunities for ’gig’ employment, and online and social networks, the world at large is actively encouraging and enabling a new approach to how we work.
Internal stakeholders are also creating new demands. We’ve witnessed an unprecedented explosion in offshoring in recent years and businesses continue to pull the ’reduce cost’ lever to enhance efficiency and maximize the value brought by human resources. Along the way, as KPMG’s 2018 Global Assignment Policies and Practices Survey1 reveals, more is being demanded of HR and mobility professionals. They are expected to deliver evidence-based business insights via data and analytics to inform the people strategy, predict assignment success, even quantify return on investment (ROI) for key personnel and initiatives. The survey also shows that companies are increasingly seeking innovative new workforce solutions and efficiencies via automation, robotics and flexible working arrangements.
Companies are increasingly seeking innovative new workforce solutions and efficiencies via automation, robotics and flexible working arrangements.
Beyond changing employee attitudes and workforce expectations, and the trend to reduce costs while meeting an array of internal stakeholder demands, external factors are creating their own challenges. For example, three game- changing regulations will require major multinational firms to put into the hands of authorities around the world more information than ever about their operations and employees. This includes:
- Bilateral information-sharing as a result of the US Foreign Account Taxpayer Compliance Act (FATCA)
- the multilateral sharing of country-by-country reports from July, 2018 as demanded by the OECD’s Base Erosion and Profit Shifting Action Plan
- the European Directive for Posted Workers, which says that workers posted to other countries should be treated and paid as regular workers, and registered with local authorities as workers, to enable tracking of mobility. not just to ensure tax compliance, but key to making use of data and analytics in ways that position companies to make more-informed and strategic decisions regarding design of their reward plans and to attract and retain the best talent around the world.
Three game-changing regulations will require major multinational firms to put into the hands of authorities around the world more information than ever about their operations and employees.
New challenges in the digital age
Digital technology today offers dramatic and truly unprecedented new capabilities to enhance the work of HR and mobility professionals. That said, new digital capabilities and tools do not change the need for HR and mobility pros to recruit the right number and types of workers. This is particularly true in today’s challenging new era of digital transformation of business models in every sector imaginable and increasingly fierce global competition for workers offering critical new skills.
Unfortunately, employers can no longer rely on the traditional ‘full-time employee’ model and its stable working patterns, nor can they expect that seconded workers will relocate with their families and stay put during the secondment.
As has been noted, many of today’s workers bring vastly different expectations to the workplace regarding flexibility, work-life balance and job satisfaction. This trend and the challenges its poses is compounded by the pressure on governments and revenue authorities to protect national tax revenues. As a result, there is a clear and pressing need for organizations to develop agile and operational options and responses that are designed to effectively manage both their workforces and emerging compliance requirements as employment conditions continue to evolve.
Use data analysis to ‘tell the story behind the numbers’
Organizations today often collect a significant amount of data on their workforces in areas such as travel, payroll and more. Data is knowledge and knowledge provides the power to manage not only your workforce but your compliance, too. To manage compliance precisely and comprehensively, however, simply collecting and mapping data is not enough. You need to appropriately combine, analyze, understand and act on data to meet increasingly complex regulatory compliance demands that include:
- income and corporate taxes
- social security contributions
- immigration requirements
- registration obligations
- payroll taxes, and more
Data analysis that’s managed appropriately and that includes different tax areas in order to ‘tell the story behind the numbers’ comprehensively will reveal the direction you are headed, providing insights regarding the most-critical exposure areas for your organization and workforce.
Managing compliance on a global level
Once you have developed a comprehensive and insightful ‘data story’ for your workforce and know your exposure, your next step is to find the most-efficient end-to-end process to manage compliance. Organizations have several options, such as tracking mobile employees for business-related purposes, pre-approvals for travel, implementing clear policies and strategies, and standardizing processes to obtain necessary documentation such as certificates of coverage, work permits and registration obligation.
Organizations can devise and implement strategic plans and use technology to improve process efficiency and quality and, in doing so, can measure the impact on compliance with an exceptional level of speed and precision.
Taking a multi-disciplinary approach
Country-by-country reporting, registration obligations, electronic exchange of information between European authorities, labor inspections, tax reforms and numerous other national and international initiatives — some yet to be implemented — will enable authorities, tax authorities in particular, to enforce compliance more aggressively. Different authorities accessing data that they then can cross-reference means that organizations (or their advisors) can no longer afford to look only to siloed functions within the business when dealing with mobile workforces.
Some multinationals have recognized this development and are already organizing teams consisting of professionals from HR, mobility, security, corporate tax and finance. The multi-disciplinary approach will support the business strategy and ensure that employers and workers are not exposed to compliance risks that could be damaging for them, for instance in terms of reputation, duty of care and more.
Businesses therefore need to recognize that in order to plan their business activities, protect their reputation and protect their employees, it’s no longer enough today to pursue a traditional approach. In today’s connected world, where personal taxation has implications for corporate taxation, everything businesses do must be more transparent and connected from a strategic global perspective.
The need for change should be obvious in the digital age
In conclusion, the need for strategic change is inevitable in today’s evolving global environment — and there’s no time to lose. This is particularly true considering digital technology’s dramatic impact on the global business landscape, combined with the need for compliance amid increasing requirements and scrutiny among authorities trading digital information in areas such as taxation, work permits, worker movement and beyond. Authorities in different countries and jurisdictions are now able to scrutinize and assess compliance — and exchange information — with unprecedented depth and speed thanks to digital tools and data-gathering capabilities.
Such international cooperation is creating new pressures for businesses and to fall behind is to run the risk of litigation, fines and serious reputation damage in today’s connected world of social media. More companies are gaining a new awareness of this reality and becoming more informed, strategic and proactive in order to comply with the new environment they and their employees find themselves working in.
KPMG Acor Tax
T: +31 8890 91854
KPMG in Switzerland
T: +41 582 496 863
Head of Global Mobility Services, KPMG International and Partner
KPMG in the UK