The cost of sending an employee to a foreign location is a major obstacle. These costs can be broken down into three main categories:
Cost of Relocating
The initial relocation costs, including compliance costs, taxes and social security, wages, housing allowance and any other moving fees can add up. Oftentimes, companies find that it may be cheaper to hire new employees in the host country rather than relocating a current employee. However, there are certain benefits of relocation that outweigh this cost, such as specialized knowledge, better talent retention, personal growth and increased skill depth.
Cost of Living
Cost of living varies by country and must be taken into consideration when providing an employee with a reasonable salary, as well as allotments for housing and other expenses. Healthcare costs are also an important factor, as employers will need to look into medical coverage in the host country. Other considerations include education, transportation, personal care (food, clothing, toiletries, etc.) and utility expenses such as electricity, water and gas.
Cost of Operations
Operating a business in a foreign country can lead to unexpected expenses for both the business and employee. While direct foreign manufacturing costs may go down, if the market for the product produced is elsewhere, the taxes and shipping costs may overshadow those savings. Bookkeeping can also be more difficult when foreign currency and conversions are involved, so there may be the additional expense of hiring an accountant who is experienced in foreign transactions. If you don’t have an experienced team, you may be subject to even steeper costs such as penalties and legal fees if you find yourself out of compliance.
Employees will have a lot of questions when considering a move abroad, such as:
There are also local logistics, such as whether to sell or rent their home, and what to do with furniture and large goods. It is important that the employer be able to answer these and similar employee questions or serve as a resource so employees can get these and other questions answered in a timely fashion. Open communication with employees is crucial to a successful global mobility program.
Eide Bailly is Here to Answer Your Global Mobility Program Questions
Eide Bailly’s international tax professionals are experienced in the global mobility program environment and will work closely with you to understand your foreign activities goals. We want to ensure you’re connected to the information and resources you need to remain in compliance, and that you and your company implement relevant company policies to help you manage your global mobility program.
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