Because multinationals by definition operate internationally, they often post staff overseas. In structuring overseas postings, multinationals inevitably struggle with the interplay between expatriate assignment strategy and the legal ramifications of a particular foreign posting. Legal issues in play in structuring an expatriate assignment go beyond the need for a visa, and include compliance with payroll laws, employment laws and “permanent establishment” (corporate tax presence).
Multinationals sometimes jump to the conclusion that there must be one best way to structure all international assignments. And so they grab whatever expatriate package got used last time, change the names, make some tweaks, and move on. (“Hey, in February we sent Carlos to Brazil—let’s use Carlos’s assignment package as a template now, for posting Susan to Paris.”) This approach skips over the vital step of tailoring the cross-border posting to meet the employer’s human resources needs while complying with legal mandates.
There are several different global mobility and expatriate assignment structures, and they are not interchangeable. In a way, deciding how to structure an overseas employee posting is like deciding how to structure a business entity—whether a business should be a C corporation, an S corporation, an LLC or a partnership. Which of several possible structures is most appropriate depends on the specific situation at hand and requires strategic thinking about both structural and legal issues. (“You know, while we ‘seconded’ Carlos to our affiliate in Brazil in February, now we need to ‘localize’ Susan temporarily to our facility in Paris. So Carlos’s assignment package is the wrong model here.”)
Expatriate postings traditionally came about when a multinational tapped an employee to go work abroad for one of three reasons: to support a foreign affiliate, as a broadening assignment, or to work overseas for the home country employer’s own benefit. Today, though, multinationals increasingly see these “traditional” expatriate assignments as less effective—employers these days turn to new mobility models like commuter assignments, extended business travel, rotational assignments and “local-plus assignments.” We now see more “floating employees” moving abroad to work in countries where the employer has no registered entity, and we see more employee-driven international moves—expats convincing their managers to let them work overseas and telecommute for personal reasons, such as, for example, employees who have to move back to their home countries to nurse a sick relative, and so-called “trailing spouses” married to other companies’ expatriates.
The various types of cross-border personnel moves raise questions of how best to structure a given international assignment. To resolve these questions, we address four threshold issues: (A) who is and is not an expatriate?; (B) four expatriate structures; (C) selecting the best expatriate structure; and (D) written expatriate agreements.
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