Significant increase in global mobility assignments to emerging markets creates challenges. Nearly half of companies expect to increase growth market assignments. Yet, 68 percent do not have control framework to manage payroll, tax and social security risks.
Nearly half of global companies interviewed on the issue of global mobility assignments intend to increase the number of staff sent to growth markets, such as Africa and China, over the next year. Ernst & Young’s Global Mobility Effectiveness Survey – Driving business success, which interviewed more than 520 companies across the globe to ascertain their views on expatriates and business travellers, also found that the number of both short- and long-term assignments being initiated overall is on the rise and this figure is expected to continue to almost double over the next three years. Dina Pyron, Ernst & Young’s Global Mobility Leader, says: “As the global economy remains uncertain, many leading companies are directing new investment and talent to growth or emerging markets; while simultaneously trying to maintain margin and revenue in mature regions with experienced manpower and more focused strategies. Continued and increased demand for international staff means that the global mobility function has, potentially, a pivotal role in supporting and driving company growth.”
The survey indicates that with emerging markets bringing their own set of challenges to the table, the influx of people to emerging markets is pushing existing global mobility policies, process and systems to the limit. The report highlights that 68 percent of companies surveyed do not have a control framework to manage payroll, tax and social security risks. Forty-five percent of companies surveyed believe that global mobility functions are understaffed – up by four percent from the previous year. Pyron comments: “There is a real disconnect between global mobility department’s aspirations and day-to-day operations with the number of assignees increasing significantly. The lack of control frameworks for managing payroll, tax and social security compliance together with the increased level and complexity of its workload, could result in exposing the business to significant risks, through strategic oversights and operational lapses.”
The top-ranked global mobility challenges, according to the survey respondents, include tax compliance (19 percent), immigration (18 percent), compensation and benefits (16 percent), housing and schooling (13 percent), policy management (13 percent) and payroll (5 percent). Governments have also increased enforcement and pushed more compliance demands onto employers. Financial and reputational losses from inadvertently breaching regulations remain a real threat and increase the risk profile of the company. Kevin Cornelius, Human Capital Partner at Ernst & Young Switzerland says: “Overall, companies want to be more strategic and better connect their mobility and talent programs. They still face challenges operationally however and many companies are a long way away from putting in place the proper global control and compliance frameworks that can allow them be more effective in cost and risk control.”
Companies indicated that the top four compliance risks to the global mobility process include income tax reporting and withholding (39 percent), short-term business travellers (21 percent), immigration (11 percent) and social security reporting and withholding (5 percent). Almost two-thirds (65 percent) of all surveyed organizations do not have a formal tracking process for cross-border travellers, despite the survey noting it as the second highest compliance risk. During the first two years after repatriation/localization in 2011, 46 percent of assignees within the respondents’ companies, returned to another position within the company, 27 percent returned to their previous positions, 20 percent accepted another assignment and 11 percent resigned. Within the global mean figures for failed assignments, there are clear regional trends. Regionally, African companies haemorrhage 26 percent of returning assignees within two years of repatriation, compared with Asia-Pacific companies, which lose ten percent.
North American corporations manage 72 percent of their returning assignees into new positions or assignments but still lose 12 percent to resignations. European organizations, with 64 percent and 11 percent, respectively, and South American businesses, at 60 percent and 10 percent, respectively, are some ways behind. Pyron concludes: “To meet the many challenges that organizations face it is essential that talent management and global mobility are integrated to ensure that expertise and experience are exploited to the best advantage. Growth is the primary goal for many organizations and it is essential to use your best talent to stay ahead of the pack.”