• Nearly half of companies expect to increase growth market assignments
• Yet, 68% do not have a control framework to manage payroll, tax and social security risks

31 OCTOBER 2012 – Nearly half of global companies interviewed on the issue of global mobility assignments intend to increase the number of staff sent to growth markets, such as Africa and China, over the next year.

Ernst & Young’s Global Mobility Effectiveness Survey 2012 – Driving business success, which interviewed more than 520 companies across the globe to ascertain their views on expatriates and business travellers, also found that the number of both short- and long-term assignments being initiated overall is on the rise and this figure is expected to continue to almost double over the next three years.

Dina Pyron, Ernst & Young’s Global Mobility Leader, says: “As the global economy remains uncertain, many leading companies are directing new investment and talent to growth or emerging markets, while simultaneously trying to maintain margin and revenue in mature regions with experienced workforce and more focused strategies. Continued and increased demand for international staff means that the global mobility function has, potentially, a pivotal role in supporting and driving company growth.”

Significant increase in global mobility assignments to emerging markets creates challenges

Ukraine is also an active player in the worldwide global mobility practice. It has already been known as a country where multinational corporations send their assignees to explore the new market. Most recent trends show that the multinational companies that have their representation in Ukraine are sending their Ukrainian employees for assignments abroad not only to gain new experience, but also share the experience they already have.

“Global mobility in Ukraine, similarly to other countries in the world, is also related with certain challenges from tax, social security and immigration perspectives, - says Halyna Khomenko, Human Capital Senior Manager at Ernst & Young Ukraine. - The key challenges are mostly caused by the peculiarities of the current Ukrainian law. In particular, the law is either archaic and does not prescribe modern patterns of employment relations (e.g. Labor Code of Ukraine was adopted in 1971), or does not provide for regulation of global mobility assignments, or the relevant provisions are constantly changing creating additional tax, social security and immigration risks.”

“One of the challenges related to global mobility assignments in Ukraine is the gap in individuals’ Ukrainian pension record when they go on assignment to other country (as their employment relations in Ukraine are usually terminated and thus they are no longer covered by the state mandatory social security), - explains Halyna Khomenko. – In view of this companies sending Ukrainian employees to work abroad within the compensation package tend to provide the assignees with a possibility to voluntary participate in the state pension security (i.e. cover the respective costs for such individuals)”.

“In a word, Ukraine is not an exception, and very careful planning of each particular assignment, both bound and outbound, should be made in order to avoid huge unpredictable costs”.

Key challenges

The top-ranked global mobility challenges, according to the survey respondents, include tax compliance (19%), immigration (18%), compensation and benefits (16%), housing and schooling (13%), policy management (13%) and payroll (5%). Governments have also increased enforcement and pushed more compliance demands onto employers. Financial and reputational losses from inadvertently breaching regulations remain a real threat and increase the risk profile of the company.

Kevin Cornelius, Human Capital Partner at Ernst & Young Switzerland, says: “Overall, companies want to be more strategic and better connect their mobility and talent programs. They still face challenges operationally, however, and many companies are a long way away from putting in place the proper global control and compliance frameworks that can allow them be more effective in cost and risk control.”

Companies indicated that the top four compliance risks to the global mobility process include income tax reporting and withholding (39%), short-term business travellers (21%), immigration (11%) and social security reporting and withholding (5%). Almost two-thirds (65%) of all surveyed organizations do not have a formal tracking process for cross-border travellers, despite the survey noting it as the second highest compliance risk.

Systems challenges

The survey indicates that with emerging markets bringing their own set of challenges to the table, the influx of people to emerging markets is pushing existing global mobility policies, process and systems to the limit. The report highlights that 68% of companies surveyed do not have a control framework to manage payroll, tax and social security risks. Forty-five percent of companies surveyed believe that global mobility functions are understaffed – up by 4% from the previous year.

Pyron comments: “There is a real disconnect between global mobility department’s aspirations and day-to-day operations with the number of assignees increasing significantly. The lack of control frameworks for managing payroll, tax and social security compliance, together with the increased level and complexity of its workload, could result in exposing the business to significant risks, through strategic oversights and operational lapses.”

Returning home

During the first two years after repatriation/localization in 2011, 46% of assignees within the respondents’ companies returned to another position within the company, 27% returned to their previous positions, 20% accepted another assignment and 11% resigned. Within the global mean figures for failed assignments, there are clear regional trends.

Regionally, African companies lose 26% of returning assignees within two years of repatriation, compared with Asia-Pacific companies, which lose 10%. North American corporations manage 72% of their returning assignees into new positions or assignments but still lose 12% to resignations. European organizations, with 64% and 11%, respectively, and South American businesses, at 60% and 10%, respectively, are some ways behind.

Pyron concludes: “To meet the many challenges that organizations face, it is essential that talent management and global mobility are integrated to make sure that expertise and experience are exploited to the best advantage. Growth is the primary goal for many organizations and it is essential to use your best talent to stay ahead of the pack.”