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Quick Fix Is a Bad Idea

The assignment was a success, so much so that the expat asked to extend her stay an additional two years.

September 18, 2003
Related Topics: Finance/Taxes, Expatriate Management
Employees: 11

Employees naturally expect to be treated well by the company that produces theGreat Places to Work lists for 23 countries. So when Amy Lyman, president of theinstitute, wanted to put together a package for the company’s first expatriateassignment, she struggled with how to make it good--but not too good.

    In 2001, the institute already had several affiliates established in foreigncountries, but Lyman needed someone with experience to set up the 100 BestCompanies in Europe list. Fortunately, the employee who had established theoriginal Best Companies structure for the U.S. lists wanted to move abroad, andher partner had dual citizenship in the U.S. and the United Kingdom. "Theyboth saw relocating as an exciting opportunity for them, not as being uprooted.It made tremendous sense for both of them," Lyman says.

    But Lyman didn’t have the first idea what needed to be done. She admitsthat she was very naive about the complexities of arranging an expatriateassignment. "My biggest problem was creating a compensation package that wouldwork for anyone we moved overseas, not just something special" for therelocating employee.

    Lyman also quickly discovered that the institute’s tax accountant did nothave enough expertise in foreign taxation laws to manage the assignment. "As asmall company doing this for the first time, we needed someone who could explaineverything, from how to compensate for housing and living costs to how to count401(k) contributions and pay medical benefits in the U.K."

    Finding a service provider that talked to her in plain English about the taximplications was critical to the success of the assignment. "It’s amazinghow complex the tax laws are," she says. "If we had done this on our own, itwould have been a financial disaster."

    Lyman used a firm that specializes in expatriate tax law, which helped heravoid some costly mistakes. For example, she initially wanted to go with an "easyfix," raising the expatriate’s salary to accommodate all of her financialneeds in the U.K., but quickly learned it was not the right approach. "Wefound out that it was better to set the salary at what it would be in the U.S.and add living adjustments." That way, the compensation expectations for theemployee’s return were managed, and Lyman can justify the package if otheremployees want to know why they aren’t receiving the same amount.

    Because they got the expertise early on, the assignment was a success, somuch so that the expatriate asked to extend her stay an additional two years,Lyman says. "It changes the tax situation, but we trust that our tax personwill make it work."

Workforce, June 2003, p. 104 -- Subscribe Now!

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