- with readers working within the Basic Industries industries
Many international assignments are underestimated in terms of budget because only the obvious cost aspects such as housing and school costs, flights, or relocation are taken into account initially. These items are clearly visible and usually easy to quantify. The background work involved in assignments is often underestimated, especially in small and medium-sized companies, even though it is precisely this effort that determines whether an international employee assignment runs smoothly or requires attention for months.
Indirect and hidden costs arise from clarifications, implementation, and ongoing corrections. These include contract drafting, tax aspects, social security, registration requirements, and setting up and coordinating payroll across more than one country. Without this necessary administrative work, there can be no legally compliant and operationally viable international assignment.
Implementation costs: The underestimated effort behind the scenes
Implementation costs are not incidental expenses of foreign assignments, but rather the price that must be paid to ensure that an international assignment is set up correctly and becomes operationally stable. In many companies, they are not visible because they are incurred internally in HR, payroll, finance, and legal, distributed across several people and parallel to day-to-day business—supplemented by external support, which often only comes into play when internal uncertainty arises or deadlines are approaching.
The effort begins before the person is abroad or regularly working across borders. Even the initial clarifications take time because tax issues, social security, contract drafting, and payroll implementation are interrelated and cannot be answered in isolation. If these issues are dealt with one after the other or in silos, coordination efforts are inevitably required, which are rarely included in an expatriation budget.
Corrections due to changed circumstances
Corrections rarely arise because someone "makes a mistake," but rather because assumptions at the outset were not precise enough or because the circumstances of the assignment abroad have changed. This is because international assignments are particularly sensitive to small changes. If travel dates are postponed, periods of presence are extended, or the place of work is actually different than planned, it can quickly happen that the clarifications regarding taxes and social security are no longer correct.
This quickly leads to a need for corrections, especially in payroll. And this is not because payroll works poorly, but because it needs clear and stable parameters. International setups involve additional interfaces and dependencies. Variable compensation, bonuses, expenses, and benefits make this even more complicated because they can have different tax and social security implications depending on the timing and allocation. Every correction means queries, data collection, review, implementation, and documentation, tying up resources in several places at once.
Tax equalization is also a classic area for corrections. The problem rarely lies in the calculation itself, but rather in the process. The data must be complete and compiled from various sources (e.g., payroll and accounting departments at home and abroad). In addition, assumptions about foreign assignments must remain traceable and external factors (e.g., foreign tax calculations) must be correctly reflected on the payroll. If parameters change during the year or information is delivered late, this almost always results in additional rework.
Reconciliations as a cost factor in the international setup
HR and global mobility do not need to calculate these indirect costs in great detail. However, they must identify early on where the greatest expenditure will arise and manage it in such a way that the international setup remains stable. It is crucial to identify challenging constellations in good time and communicate them internally before payroll, external partners, and the employee get caught up in a cycle of constant corrections. This can only be achieved if a few key points are firmly established at the outset:
1. Key data for the international setup
The countries involved, the planned duration, travel arrangements, and work locations must be defined at an early stage. Once this key data is known, clarifications regarding social security, taxes, and the general payroll setup can begin. As soon as the basics have been clearly defined, implementation can begin on the payroll, thus avoiding the need for major corrections at a later date.
2. Clear responsibilities
It must also be clarified who is fundamentally responsible for implementing the international setup. This concerns, for example, coordination with external partners, the timely involvement of payroll, documentation of the case, and communication with the employee. If responsibilities are not clearly defined, this can quickly lead to unnecessary coordination and delays in practice.
3. Documentation as a basis for work
Documenting the international setup is not a formality, but a prerequisite for ensuring that decisions remain traceable, payroll can be implemented consistently, and knowledge is not lost within the company. If there is no clear documentation of the case, the same questions are often clarified multiple times, leading to higher internal costs.
4. Managing expectations with employees
Employees need to know what information and documentation is required, how to report changes in travel or work location, and what happens in the event of deviations. International setups are only stable if the employee's obligations to cooperate are clear and the consequences of inaccurate information flows are understood (e.g., incorrect social security contributions or changed tax obligations).
Conclusion
Originally published by Linkedin
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
