ITX Insights - October 2024
In focus: Can GECs be used to support Remote Employees?
The concept of working across borders virtually has been around for some time, but the COVID-19 pandemic accelerated its formal adoption in many organizations. This shift forced companies to reconsider how they manage employees working remotely.
Organizations reacted in various ways to this change, resulting in a wide range of approaches. Some created structured frameworks to manage remote employees across borders, including eligibility criteria, policies, and processes. Others, however, continue to handle these arrangements on a case-by-case basis. This inconsistency has raised an important question: can Global Employment Companies (GECs) be used effectively to support remote employees?
While GECs have traditionally been used to manage international assignments, there are situations where they may also be useful for supporting cross-border remote employment. The key is to assess each situation based on feasibility, risks, and costs, similar to how international assignments have been managed for decades.
Establishing a consistent framework can provide organizations with alignment, ensuring that remote employment arrangements are in harmony with their principles, objectives, and overall culture. For example, should a remote employment arrangement be employer-driven, or employee-driven? Are there any limitations on the duration of the arrangement? What preliminary steps are required in order to assess the feasibility, costs and risks of each proposed remote employment arrangement? Can employees work remotely from anywhere, or are the locations restricted by specific criteria, such as the presence of a local office, immigration considerations, tax exposure? These questions, and many more, need to be consistently addressed through well-designed frameworks and decision-trees.
It is also important to consider that remote employment scenarios can occur for various reasons. For example, in some cases, the employee remains in his or her usual home location, but the job is overseas. In some other cases, the employee may move physically, but the job remains back in the home location, which is a scenario often associated with "trailing spouses" who wish to keep their job whilst following their partner on an overseas assignment.
So, in which situations could a GEC be useful in the context of Remote Employment? There may be several scenarios where a GEC would make sense, or even be recommended. For example, many organizations use a wholly-owned GEC to host their Global Executives, who may all belong to the same global or regional leadership team, but physically residing in different locations.
Another common usage of GECs is for the hiring of employees who are physically in locations where the organization does not have an entity. In such situations, having all these remote employees in the GEC provides many advantages, especially in terms of better visibility, consistency, governance and efficiency. It is important to note that in such cases it is necessary to determine whether the employee can be employed directly by the GEC (i.e. "employment without establishment"), or whether the GEC needs to be registered locally as a "foreign employer", or whether it is necessary to use the services of a local "Employer of Record" (EOR). Note that the use of a GEC and the use of an EOR are not necessarily mutually exclusive, in such a scenario (please refer to earlier newsletters for more details on the use of EORs in conjunction with GECs). Needless to say, many other factors need to be considered, such as taxation, social security, employment law, insurance cover, and more.
Similarly, GECs could be used as an interim solution for new hires who are about to be relocated permanently to another location. If the new hire comes from a country where the organization has no entity, the GEC can act as the employing entity prior to the physical relocation, especially if the deployment is likely to be delayed by immigration procedures, employee's circumstances or other logistic factors. As per the earlier scenario, in this case it would be important to determine whether the employee can be employed directly by the GEC, or whether a local EOR is necessary.
Several other scenarios are possible where a GEC could play a role in supporting cross-border remote employment, either as an interim solution or as the chosen administrative model. In all cases, Global Mobility professionals should work with GEC consultants, together with their internal Tax and Risk Management colleagues, to design a Risk Assessment tool to be used for each proposed remote employment request, in order to understand its viability from a risk and cost perspective.
As all Global Mobility professionals would be aware, it is hard to anticipate what situations they will be expected to handle, but as the future of work continues to evolve, GECs are likely to play an increasingly important role in the management of cross-border employment. Therefore, it is important for Mobility specialists develop a deep understanding of GECs and the flexibility that they can add to the existing Global Mobility framework.
If you wish to discuss how a GEC could potentially support your cross-border remote employment needs, please feel free to reach out to an ITX consultant.
Dispelling the Myth: Should GECs have only one Global Mobility policy for all assignees?
A common misconception in the world of global employment management is the belief that all employees hosted in a Global Employment Company (GEC) must be governed by a single global mobility and remuneration policy. This idea suggests that a one-size-fits-all approach to employee management can be efficiently applied across a multinational workforce under the GEC umbrella. However, this view is far from accurate. To successfully leverage a GEC, organizations must recognize the value of flexibility and segmentation in their policies.
At its core, a GEC is an entity that is wholly owned by the parent organization, operating as one of its subsidiaries or branches. This structure gives the parent company full control over the GEC, allowing it to decide how employees within the GEC are managed and compensated. Unlike some external employment providers or consultancies, the GEC is fully integrated within the corporate structure. This close relationship means that the policies governing employees can be as diverse as the organization needs them to be.
While some may argue that having a GEC in place should automatically lead to a streamlined, single-policy approach for the workforce, the truth is more nuanced. The GEC can serve various strategic purposes, from housing global executives to facilitating international assignments in complex markets. Therefore, the idea of managing all employees in a GEC under a single policy does not account for the different roles and circumstances that might exist within the company’s workforce.
Balancing Consistency and Flexibility
Often, a key driver behind the establishment of a GEC is the desire for greater consistency in managing a global workforce. Organizations may seek to bring more order and uniformity to their international employee population, particularly when dealing with varying tax regulations, legal requirements, and employment conditions in different countries. It is true that a GEC can centralize many of these concerns, allowing the parent company to apply a more consistent framework across its global operations.
However, consistency does not necessarily mean uniformity. As mentioned above, it is important to differentiate between achieving consistency in principles and processes, and enforcing identical policies on all employees. While consistency is important for ensuring fairness, compliance, and administrative efficiency, some level of differentiation is essential to meet the distinct needs of various employee groups within the GEC.
The Role of Segmentation in GEC Policies
The number of policies within a GEC primarily depends on the segmentation of its employees. Segmentation is shaped by why the GEC was established and how it is used. For example, a GEC created to host only global executives will likely have a relatively homogeneous employee population. In such a case, it might be practical to manage the entire group under a single policy that addresses their compensation, benefits, and mobility needs. These executives are typically part of a globally consistent management tier, where a uniform approach makes sense in terms of aligning with the organization's overall strategy and rewarding top leadership.
However, not all GECs are created for such narrow purposes. In many cases, a GEC is designed to serve broader operational needs, hosting a more varied employee population. For instance, an organization might use its GEC to host not only global executives but also long-term international assignees, and even employees on rotational assignments in remote locations. In these instances, the diversity in roles and assignment types demands a more tailored approach to managing compensation and mobility.
Global executives may require one policy focused on high-end benefits, strategic mobility support, and executive-level compensation. Meanwhile, long-term assignees could fall under a different policy with more focus on cost-of-living adjustments, housing allowances, and family relocation support. Similarly, rotational assignees working in remote or hardship locations might require policies that rotational travel schedules and differentiation between “on-site” and “off-site” days. Each of these groups has different needs, making it impractical and potentially counterproductive to manage them all under a single policy framework.
In conclusion, a well-designed GEC policy framework is one that finds the right balance between consistency and differentiation. Tailoring policies to meet the needs of different employee groups is not only possible but necessary for achieving the best outcomes for both the organization and its global workforce.
Learning Corner: Starting and ending a GEC contract
Note: This article provides a generic and high-level overview of the topic. You are strongly advised to consult ITX, or your qualified Employment Law Consultant to receive relevant advice for your specific circumstances.
When entering into an employment contract with a Global Employment Company (GEC), it is essential to ensure that the contract is carefully crafted to comply with applicable laws and meet the needs of both the employee and the organization. Since the GEC becomes the legal employer, the location of the GEC is crucial, as it determines the legal framework governing the employment relationship, including the rights and obligations of both parties. This makes it important to understand the jurisdictional implications of the GEC’s location, as they can significantly affect the employment contract's terms.
A well-designed GEC employment contract not only addresses legal compliance but also plays a pivotal role in making the offer attractive to prospective employees. This includes outlining compensation, benefits, and other employment conditions, which are key to securing top talent, especially for global assignments or executive leadership roles.
The process of onboarding employees into a GEC contract can vary depending on their prior relationship with the organization. Typically, organizations deal with three main categories of employees: new hires, existing employees transitioning to the GEC, and expatriates who are mid-assignment.
New hires are generally onboarded into the GEC either for immediate deployment overseas or to join the Global Executive Leadership team. In many cases, new hires who are due to be deployed overseas are brought into the GEC on fixed-term contracts, which specify the conditions that would bring the employment relationship to an end. These contracts often align with project durations or specific assignments, and the employee’s role ends upon completion of the contract’s predefined terms.
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Existing employees transitioning to a GEC contract present a more complex scenario. These employees are typically transitioning from an existing contract to the GEC, often to be deployed overseas. It is crucial to clearly define the changes to their terms and conditions, including adjustments to compensation, benefits, and social security contributions. These employees may also expect some reassurance that any time spent on the GEC contract would be recognized in their home country in terms of tenure, and that they would be reinstated back into the original home country structure at the end of the GEC contract, taking into account any changes in job level and compensation occurring over time. Therefore, once again, it is strongly advisable to make it very clear from the start what happens at the end of GEC contract. Hence the onboarding of existing employees into a GEC is altogether a more complex and delicate process, requiring careful analysis and experience in addressing all the employee's concerns.
In some cases, expatriates who are not yet on a GEC contract may need to be onboarded. This often occurs when a GEC has been recently established, or when the scope of the GEC is expanded to include new types of assignments. Best practices suggest transitioning these expatriates into the GEC at the end of their current assignment, rather than in the middle, to minimize risks and simplify the process.
Apart from these three main categories, other employee profiles might require unique handling. For instance, organizations may employ contractors on fixed-term contracts, which are often treated similarly to new hires. Alternatively, these contractors may be treated as service providers rather than employees, depending on the specific nature of their engagement.
In summary, starting and ending an employment contract with a GEC requires careful consideration of legal, operational, and employee-specific factors. A well-designed contract is essential, but so too is a comprehensive framework of policies and processes that ensure smooth onboarding and offboarding. Clear communication, legal compliance, and tailored solutions for different employee profiles are vital for successfully managing employment relationships within a GEC. Organizations that approach these tasks with diligence and foresight will be better positioned to manage their global workforce effectively and minimize the risks associated with international employment.
ITX News:
ITX discusses the future of Remote Workers in Europe at the CBBA
ITX was represented at the Annual Conference of the Cross Border Benefits Alliance Europe (CBBA) in Brussels. Emilie Rulland, ITX’s Chief Legal Officer and Head of International Mobility Consulting at ITX, contributed her perspectives on the unique challenges faced by Mobile Employees, especially Remote Workers, and their employers, in the context of current European Union regulations, which are still far from being harmonized across the region.
ITX releases the results of its GEC Market Survey
As reported in the last ITX newsletter, the Sales & Marketing conducted a research project to gauge the level of awareness of GECs among Global Mobility professionals, and to identify the factors that influence GEC decisions. in international organisations.
The study reveals various factors that obstruct a wider adoption of GECs, including a widespread lack of familiarity with GECs, even among Global Mobility professionals, with 60% reporting being unfamiliar with GECs or having only a superficial understanding.
Of the remaining 40% of the respondents, 27% claim to have good understanding of GECs, and only 13% claimed detailed knowledge or personal experience with the model.
Although those familiar with GECs had a generally positive perception of them, other organizational priorities made it difficult for them to focus on the feasibility of a GEC implementation.
The decision to establish a GEC appears to be driven by a small number of factors, mainly Compliance, Risk Management and Operational Effectiveness. These 3 factors were also mentioned as the most important benefits that a GEC should deliver in order to be considered a “priority project”.
In conclusion, the study reveals that although GECs have the potential to deliver many of the advantages that organizations are looking for, specifically better Governance, Compliance and Operational Effectiveness, many organizations appear to be missing out on these benefits, mainly due to a limited awareness of the model among HR professionals and senior stakeholders alike. To close this knowledge gap, ITX invests heavily in Thought Leadership and learning opportunities, such as webcasts, events, articles, newsletters, and stakeholder briefing sessions, thus enabling HR and business leaders to enhance their knowledge and understanding of GECs. If you would like to receive a summary of the survey results, please approach an ITX representative.
ITX hosted a new session of the GEC Network Club
On 3rd October 2024 ITX hosted this year’s second gathering of GEC professionals to discuss topics of interest related to GECs. The agenda for this session included:
If you work in an organization with a GEC, or if you are in the process of establishing one, you are encouraged to join this unique network to stay up to date with the latest developments. There are no membership fees.
Members are also invited to use the private LinkedIn Group to exchange information, ask questions and post updates.
Join ITX in Washington DC - Global Workforce Symposium in National Harbor, 22nd to 25th October 2024
Managing continuous and rapid change is the new normal in Global Mobility. Will your current operating model cope with future demands? ITX will reveal why many leading multinational organizations decided to establish a GEC, and the many reasons why these decisions have delivered value despite an ever-changing mobility landscape.
This annual event, hosted by Worldwide ERC, brings together experts from around the world to discuss the latest trends and innovations in the industry, including mobility strategies and practices, immigration, technology and remote work. The symposium offers extensive educational sessions, and interactive workshops, allowing attendees to connect, learn, and collaborate with prominent subject matter experts and speakers.
Join ITX in London, UK, on 29th and 30th October 2024
ITX will host a Round Table discussion at the Forum for Expatriate Management (FEM) EMEA Summit, on 29-30 October 2024. The Forum is an essential gathering for global mobility and HR professionals in Europe, the Middle East, and Africa, offering rich content and networking opportunities. Attendees can participate in workshops, panel discussions, and roundtables, gaining insights into the latest trends and best practices in global mobility. The summit also hosts the prestigious EMEA EMMAs (Expatriate Management & Mobility Awards), recognizing excellence in the field with an elegant awards ceremony. This summit is a key event for professionals looking to advance their knowledge and connect with industry peers.
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