Many companies unprepared for risks that go with sending employees to emerging markets

As companies push into rapid-growth markets, they are sending more employees on international assignments, especially to Asia and Africa. But, too often, problems arise because corporate mobility teams supporting employees on international assignments are not equipped to fulfill their growing responsibilities, an Ernst & Young survey found.

The survey of more than 500 companies found that, through 2014, the number of employees on assignments lasting less than a year is expected to rise 20% and the number of employees on longer assignments is expected to increase 11%. The number of employees to be sent overseas is projected to climb 60% in the next three years.

The focus on international assignment reflects companies’ efforts to establish footholds in new growth markets at a time when uncertainty dominates the global economy. The teams are frequently understaffed, overlooked by the executive team and excluded from decision-making, and they often lack tools and clout, the survey found.

“This disconnect from the wider business disadvantages both parties,” Chris Debner, E&Y’s human capital executive director, commented on the survey findings. “The business can be hasty in decision-making, hiring international staff and initiating assignments without consulting those in the know. This often leads to unforeseen burdens on the mobility team and a disappointing outcome for the business unit’s aspirations.”

Many countries have made their tax and immigration laws stricter in the past few years to raise revenue and protect their domestic labour markets. But 68% of companies polled had no control framework to manage international assignments’ payroll, tax and social security compliance risks, the survey found. As a result, half of all respondents considered tax compliance one of their biggest challenges, and 37% named immigration issues.
 
Only 29% of global mobility professionals are involved in selecting employees for international assignments, even though 84% of respondents said mobility staff should participate in the selection process. Also, nearly 65% of companies polled lacked a formal tracking process for short-term business travellers.

“This opens businesses up to serious risk in numerous countries, with organisations facing escalating costs and challenges in tax, social security, immigration and permanent establishment risk,” the E&Y report concludes.

The high cost of international assignments – three to six times higher than keeping the employee at home – means even relatively low failures rates can cause substantial losses. Twenty per cent of the polled companies said 6% or more of their employees on international assignments return prematurely.

Respondents most frequently named family and spouse issues (61%) as the reason that an assignment failed.

To help global mobility teams deliver their full potential, the E&Y report suggests that companies:

• Better align mobility strategy with business strategy by analysing the role of their global mobility team in light of the increasing focus on growth markets.

• Review the global mobility team’s resources, processes and systems and provide the right tools to allow the team to work efficiently and in pursuit of business goals.

• Assess the human resources department’s involvement in global mobility, with the goal of creating collaborative HR and global mobility teams.

• Conduct a full risk assessment of current processes, especially around control frameworks for managing payroll, tax and social security, and systems for identifying business travellers in high-risk locations.

• Review existing policies with a particular focus on repatriation to reduce failed assignments.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.