If you missed any of the questions that our attendees put to Fred Schlomann, Vice President, AIRINC Asia-Pacific Limited during our APAC Online Summit you can catch up here.
Fred has kindly answered in further detail, questions that were submitted both prior to the event and during the broadcast of our Expert Insight Interview, September 9th.
Virtual Assignments – An Emerging Approach to Mobility
With Fred Schlomann, Vice President, AIRINC Asia-Pacific Limited
Facilitated by Claire Tennant-Scull, FEM's Global Director of Content & Events
Q. What have the practical approaches been to virtual assignments?
Fred Schlomann: Virtual assignment are a new and evolving area. While virtual assignments don’t usually involve physically moving the employee (and family) to the worksite, the employee may need to visit the worksite for a limited period of time. In this type of situation, companies will usually apply existing mobility policies covering Commuter or Short-Term Assignments, or Business Travel.
The complexity of virtual assignments involves assessing the impact of having an employee live and perform work in one location for an employer that is located in another country/tax jurisdiction. The key to using virtual assignments effectively is to be able to assess the compliance and other risks that can result from this remote working arrangement before it is actually deployed.
Q. What impact has the lock down period had on the assignment expenses in general and taxation specifically?
Fred Schlomann: AIRINC’s most recent survey data indicates that all mobility activity is currently “on hold” for over 60% of companies. This means that the costs companies typically incur by relocating employees and their families is significantly lower than it was pre-COVID. And because companies are sending fewer (if any) employees on new assignments, the typical expenses they normally would incur around allowances and income taxes paid during the assignment are also much lower.
For employees that are still at the assignment location, the ongoing assignment costs (including income taxes) have remained about the same.
Q. In what ways do you feel international assignments will change post Covid compared to pre-Covid? Will they be as popular? More lump sums? Shorter assignments?
Fred Schlomann: Our survey data indicates that significant changes in the volume and types of international assignments are already underway. The overall volume of mobility is expected to decline, particularly in the area of long term-assignments (a change that was occurring beforehand but has now been accelerated by the pandemic). Companies are looking at shorter-term, lower cost assignments where it makes sense to use them. Virtual assignments are already being adopted by companies as way to access global talent without the need to physically move the employee (the work now goes to the where the employee lives).
Lump-sums were a growing trend pre-pandemic because they provide flexibility to the employee and require less administration. Virtual assignments may not require the same level of support since there is no physical move of the employee and family – lump sums in this case may be provided to address upgrading the home office (or similar type expenses). However, where a more traditional assignment approach is used (say, long-term), I would expect that the trend towards providing lumps sums will continue (particularly in areas like home leave allowances).
Q. With virtual collaboration reaching another level, will corporate relocations disappear? Or will it allow us to embrace global talent wherever they live changing the demands on employee benefits and regulations completely?
Fred Schlomann: AIRINC’s recent survey data indicates that companies don’t expect their mobility activity to return to pre-COVID levels until 2021 and perhaps not at all. While not all jobs can be done remotely, where feasible, virtual assignments will provide a mechanism for companies to access talent globally wherever it is located. Virtual assignments will require rethinking of how these employees are paid; it will also require understanding which country’s regulations around immigration, tax, and labour law will take precedence. Having a process for assessing the risks of virtual assignments will be key to making the right decisions. In addition, with remote work arrangements growing in popularity, virtual assignments are expected to grow in volume. Companies may need to start considering the types of candidates most suitable to work virtually as the popularity of virtual assignments grows.
Q. Cash out options and approaches for Home Leave due to Covid-19 travel restrictions - how can you monetise this benefit?
Fred Schlomann: Monetizing home leave has been an ongoing trend in global mobility for several years prior to COVID-19. Many companies adopted a “cash approach” to home leave in order to provide more flexibility to employees and to reduce the administrative burden of managing actual tickets. The simplest approach is to use a consistent, repeatable methodology for determining airfare costs and deliver this as a cash allowance to the employee (note that cash does attract income tax so your company position on this will need to be sorted out). While current travel restrictions may prevent employees from using the home leave allowance for actually travelling to another location, this approach does give flexibility to use the cash in other ways that maintain the “intent” of home leave (for example, booking a “staycation” at the current location).
Q. How do companies define the "right" benefit package for virtual assignments? How do they slot virtual assignments compared to real-life assignments?
Fred Schlomann: The “right” approach for one company may not be the “right” approach for another. Each company needs to clearly “define” what they mean by virtual assignments. Equally important is to understand how virtual assignments will support the organization’s talent strategy – are there specific roles where virtual assignments make more sense than others.
Also, it will be important to explore how virtual assignments will connect into the company’s global mobility framework: For example, an employee on a virtual assignment may need to travel to the “worksite” for a limited period of time – should a “Short-Term” assignment approach be used? Once the key design questions like these are resolved, the “package” for virtual assignments can more readily identified.
Q. With regards to Virtual Assignments, how can we avoid workforce exploitation for employees physically located in low pay-scale locations yet working for higher pay-scale locations?
Fred Schlomann: What should the pay approach be for virtual assignments? Should the employee be paid based on where they reside (and do the work) or should it be based on location of the employing entity? Some countries have clear regulations that require local employers to pay foreign workers a minimum of the local market rate for that job. Companies will need to grapple with setting consistent and equitable internal policies that govern how they will pay their employees who can now potentially work remotely from anywhere.
Please note that each virtual assignment situation will need to be reviewed carefully to understand which laws in which jurisdictions take precedence, including those that govern compensation, benefits, leave, etc.
Q. Whether the virtual assignments will meet the requirements like "developing the talent" in host country and developing "global leaders" for an organization?
Fred Schlomann: Virtual assignments represent one option for enabling access to talent globally. It is early days, but if done correctly VA's can help in developing talent globally.
Q. I can foresee a significant drop in benefits if virtual assignments become an option - how can we review this to avoid mobility assignments becoming demotivated or not wanting to take up the assignment?
Fred Schlomann: Compensating employees on Virtual Assignments will require companies to evaluate the impact of "working from home" on the overall total rewards equation. By definition, the benefits offered for VAs will be less than for other types of assignments. The key with VA's is to clearly communicate the key benefits to the employee.
Q. Can you please confirm if the survey was a worldwide survey or APAC only?
Fred Schlomann: The survey was global and included respondents from all regions.
Q. How are companies dealing with the tax and employer obligations that are created by virtual assignments?
Fred Schlomann: Tax is key element of virtual assignments. While it is early days for virtual assignments, like any assignment, tax costs need to be balanced to ensure you can attract the talent you need. Each company needs to identify the key risks it faces and for each assignment situation, assess if a virtual assignment is feasible.
Q. Are there any guidelines in place that will assist in developing a policy on virtual assignments?
Fred Schlomann: This a key question - the guidelines for each company may be quite different depending on where the company operates, the type of business, etc.
Catch up with the video interview here:
An Expert Insight Interview with Fred Schlomann, Vice President, AIRINC Asia-Pacific Limited, facilitated by Claire Tennant-Scull, FEM's Global Director of Content & Events