Global Mobility cost controls — managing risk and reward when relocating talent

Controlling the costs of relocating employees internationally is complex and time-consuming. Cross-border compliance and ever-changing local tax rules mean it’s all too easy to get caught up in a web of inefficiency and risk.

In this edition of Reloverse, we look at how and why organisations outsource their expense, compensation and payroll management to accelerate recruitment, relocation and reporting in the regions.

Insource or outsource?

Organisations relocate their best people to where they’re needed most, often recruiting from tight global talent pools to fill gaps to remain competitive. Many practical problems are predictable, but rapidly changing political and economic conditions in host countries can quickly create unforeseen challenges. One of the highest hurdles is time delay. Global property hotspots will not wait for employers to react and respond to a rental offer—undermining the attraction process of securing new talent.

Why don’t leading Global Mobility (GM) professionals retain this activity in-house? It’s easy to imagine that internal finance departments might be better equipped to administer expenses or process payroll. However, producing and reporting on cost estimates, expense payments and disbursements in an accurate, timely way requires particular, specialist skills.

On time, every time

Continuous updates to local accounting legislation and tax treatments can derail even the best-laid plans of seasoned GM professionals, creating extra work for the in-house team and disenchantment from leadership. Opening overseas bank accounts, reimbursing relocation-related expenses and handling currency transactions require expert timing: when salaries, rents and school fees aren’t paid on schedule, talented assignees can feel frustrated, disengaged, and distant. Pressured situations can escalate quickly, adversely affecting arrangements, and it can take a long time to regain trust. It’s a diversion from the all-important strategic function GM teams are increasingly being tasked with. An expert, external point of coordination guarantees fast, reliable reimbursement—and compliant reporting to inform payroll and end-of-year tax filing.

Hard cash and soft currencies

Handling restricted currencies in remote or hard-to-reach places such as Brazil, India, Mexico, Russia and South Africa, can be a major headache for many organisations. As China is reopening its doors to foreign workers and investment, remitting any currency out of the country remains seemingly impossible. Process law, specific tax controls and the need for every single transaction to have the right paperwork add another, opaque layer. Thus, it pays dividends (sometimes literally) to have a partner with up-to-the-minute local expertise and financial feet on the ground.

Reliable remuneration

Managing and delivering cross-border expatriate payrolls can also be complicated and create compliance risks. Managing international tax and social security obligations normally relies upon dispersed, decentralised data, across the organisation. The critical step in establishing control is to consolidate data and, in effect, allocate it between payroll and expense management. To understand the technical detail behind the reports, GM teams need to appreciate what’s behind those headline numbers.

Many organisations use external providers to calculate expatriate pay, such as home salary balance sheets to consolidate and compare data down to individual assignee or candidate level. This consolidates salary, allowances, compensation, tax equalisation, employee housing contribution, Cost of Living Adjustment (CoLA) data, relocation costs and other assignment expenditure. Balance sheets offer an exceptional level of insight and control throughout the assignment—and are a dynamic alternative to a simplistic, static spreadsheet.

Focussed on the future

Research shows* that business leaders require GM and HR professionals to spend less time on administrative tasks and more on talent, advisory and risk management.

John Rason, Group Head of Consulting, Santa Fe Relocation, explained, “Over the past decade, Global Mobility functions have reported their desire to be engaged in strategic talent, workforce planning and higher engagement with leadership. In parallel, the more recent dynamic growth in hybrid international work arrangements and cross-border remote working have seen Global Mobility’s desire to be more visible and strategic become a reality. However, that comes at a resource and time cost, which means that activities which could be better delivered by external, specialist partners need to be seriously evaluated. Accurate payroll and compliance reporting is a necessary cog in international work arrangements but per se, doesn’t drive competitive advantage. Attracting, engaging and retaining the right people must be the focus for leadership, Human Resources and Global Mobility teams.”

Informing strategy

International payroll and assignment cost control touch GM, Human Resources, finance functions and regional management. Parallel processes and multiple payment systems can create overlap, confusion and duplication of effort and expense. When estimated and actual costs are processed by a single, external partner, it’s easier to make informed, strategic decisions. Getting this holistic data needn’t mean complete outsourcing—simply shifting the burden of the day-to-day to a trusted, expert partner—releasing GM to focus on the future.

Santa Fe’s Aki Amde, Head of Global Expense Management, Compensation and Payroll explained “Managing a relocation compensation programme yourself consumes internal resources. Understandably, Global Mobility professionals want to be more engaged in their organisation’s talent decisions at a strategic level, without constantly worrying about cost and compliance. With a well-organised mobility partner, they can avoid pitfalls and the knock-on effects that undermine employer reputation and restrict opportunities”.

If you’re looking for a financially astute partner that understands expenses, compensation and payroll spanning the entire relocation journey, we would love to support you and your international teams. Simply drop an email to reloverse@santaferelo.com and we’ll get back to you.

*See 2021/22 p. 6, fig. 2, GMS tenth anniversary findings—Global Mobility activities ranking from 2014 to 2019.