To identify the areas of concern regarding international compensation management, it is best to understand the lifecycle of the relocating employee. The most common scenario usually involves the long-term international assignee. The lifecycle of the long-term international assignee normally includes the following steps:
- Cost Estimate – determining the cost of the assignment throughout its duration and establishing a budget/accrual for expenses (including taxes).
- Balance Sheet – delivering a compensation summary to the employee so they can understand their periodic compensation payments and from where those payments will be made.
- Net-to-Net – if a tax reimbursement methodology other than tax equalization is utilized, a Net-to-Net calculation can be done, resulting in a compensation summary that is available to an employee whose net compensation from the home country is kept whole.
- Payroll Instructions – taking the results from the Balance Sheet and feeding them to the corresponding payroll so they can make the applicable payment on a timely and efficient basis.
- Compensation Collection – collecting all the necessary data that needs to be reported in various jurisdictions to meet corporate compliance requirements on a timely basis, including Expense Compensation Collection from expense payments made to/on behalf of the relocated employee.
- Shadow Payroll – reporting cash compensation payments made to those jurisdictions that must report as wages yet not doubly paying as cash.
- Global Statements of Earnings – compiling all the data mentioned above into one, comprehensive report for accurate tax return preparation on a timely basis. An audit process is also built into Year-End functionality for the system to detect missing or abnormal compensation data.
Note: the Global Compensation Modules included with Ineo’s global mobility platform allow the user to conduct all of the processes above within one contiguous database for not only long-term foreign assignments, but also short-term assignments, permanent moves, and localization situations where required.