EY Human Capital Conference 2012: Global employment organizations - who, where, what, why and how?

2012 Human Capital Conference23–26 October

Global employment i ti h horganizations: who, where,

what, why and how?

Circular 230 disclaimer

► Any US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

Global employment organizations: who, where, what, why and how?

Disclaimer

► Ernst & Young refers to the global organization of member firms of E t & Y Gl b l Li it d h f hi h i t l l titErnst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US.Thi t ti i ( ) 2012 E t & Y LLP All i ht d N► This presentation is (c) 2012 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying facsimile transmission recording rekeyingincluding by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is d st but o o t s o o a y o t e ate a e e s p o b ted a d sin violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.

► The views expressed by panelists in this session are not necessarily those of Ernst & Young LLP.


Presenters

► Rachel D’Argenio ► Chris Debnerg► Ernst & Young LLP► [email protected]

► Ernst & Young Ltd.► [email protected]


Agenda

► Global employment organizations (GEOs)► Current developments► Leading practices► Case studies


Theme and key points

► Define the GEO► Identify current market trends ► Evaluate the pros and cons of the structure


Model without GEO

► This model shows the

Hong

typical pattern of a multinational’s assignee population and how

b dHong Kong

China

Belgium

PanamaUS

India

cross-border moves can develop with complex country combinations

India

Chile Philippines

India

Canada

Chile pp

Spain

Spain

Switzer-land

US

Italy

Mexico


Basic GEO model

In its most basic sense, a GEO i t t tit

Hong Kong

is a separate corporate entity that exists for the sole purpose of providing employment-related services to the Kong

China

Belgium

PanamaUS

India

related services to the organization’s international operations or projects. The GEO is the recognized

l f th iIndia

Chile Philippines

Canada

GEO

employer of these assignees and subsequently seconds or leases these employees to the various international Chile pp

Spain

Spain

Switzer-land

US

various international operations or projects of the parent company.

Italy

Mexico


How a GEO works

► A GEO can act as an in-house l temployment agency:

► An individual is employed by the GEO.Th GEO id l t► The GEO provides employment contract, assignment letter and similar documents.

► The GEO pays salary and

Tax and social security professionals

EmployeeGEO

Payments

Local company► The GEO pays salary and

allowances.► The GEO provides benefits.► The GEO provides

Benefitsproviders

Charges for services

Employs and provides compensation services

p y

► The GEO provides administrative support.

► The GEO bills host company/ receiving entity.

► The GEO keeps markup for its services as an employer.


Current drivers for a GEO

► Risk management opportunities for challenging, non-g pp g g,traditional populations:► Employer of regional teams► Employer of rotational employees► Employer of short-term business travelers► Employer of executive management team► Employer of executive management team

► Efficient corporate tax planning: ► Facilitating corporate deductibility► Facilitating corporate deductibility► Managing withholding tax charges



► Managing swift growth in the number of assignees:g g g g► Maintaining tax compliance► Improving processes► Keeping the program attractive to the employees

► Mechanism for entry into new markets where local d t i tpresence does not exist:

► Fulfill reporting and withholding requirements► Manage corporate tax risk for the company► Manage corporate tax risk for the company► Develop framework to deploy resources into new countries where

there is no current local presence and no local entity is planned



► Increase in speed to deployment:p p y► Efficient and well-established processes and policies

► Cost-reduction opportunities:pp► Administrative cost reductions► Social security tax cost reduction opportunities, especially in

E ropeEurope► Policy and process exception management



► Population bifurcation opportunities: p pp► Set up special treatment for one population while protecting

integrity of regular international assignee program► Manage new types of populations such as globalists, who may

have lost ties to home country► Manage careers and talent► a age ca ee s a d ta e t► Simplify assignee experience


Observations on leading practices

► Evaluate the risk, cost and benefit before you design and , y gimplement any solution; up-front planning and analysis will clearly establish the benefits and costs for the company while highlighting any potential pitfalls

► Address the project holistically:► Think across all functions that touch mobility► Evaluate all areas of tax and law that are impacted by mobility



► Find the perfect fit:p► Consideration of the location for the GEO establishment and the

number of GEOs is very important, as it will drive future savings opportunitiesopportunities.

► Consideration of the goals of the structure may result in a different final design of structure.

► Detailed due diligence identifies potential pitfalls before they become a reality. This allows for the following b fitbenefits:► Risks are isolated and minimized.► It helps identify registrations up front so that the company can be► It helps identify registrations up front so that the company can be

compliant from the onset.► It helps develop an understanding of the compliance requirements

t t bli h t b li tGlobal employment organizations: who, where, what, why and how?

to establish necessary processes to be compliant.


► Implementation and maintenance is key to success:p y► Make sure you have top management buy-in to support

implementation► Have the right resources on the team so they operate and manage

the structure long term► Establish clearly defined processes and procedures to facilitate ► stab s c ea y de ed p ocesses a d p ocedu es to ac tate

ongoing operation► Review the structure periodically to check if it is still meeting

company objectivescompany objectives


Conclusion

► Hold a workshop of key stakeholders► Develop a business case► Design for company needs of today and tomorrow► Don’t rush into a design that isn’t well-developed► Allow time for implementation, including documentation

d t i iand training


Questions


EY Human Capital Conference 2012: Global employment organizations - who, where, what, why and how?

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