“Ensuring Compliance in International Staffing: Navigating Tax, Social Security, Work Permits, and More”

Working across international borders and frequent joint business trips have become normal for global companies. Whether for long-term assignments, to open up new markets, to build up knowledge abroad or for short business trips abroad.

Awareness of the risks in companies and the close involvement of authorities has led to an increased demand for compliance in business travel. While we could graciously ignore the need for a work visa and simply enter the country on a tourist visa, those days are long gone. At least for companies that value compliance and want to minimize their liability risks.

The international deployment of personnel harbors many legal pitfalls. In the following article we will show you the most important compliance challenges for supporting international employees – without getting lost in the specific legal details.

income tax

Most HR and global mobility managers probably know that they have to deal with tax issues when working abroad. But the question: how much? It all depends on the individual situation. Does the employee only go abroad for work for a few days? Is he going abroad for a few weeks or even months? Does he regularly work abroad and now come to meetings at the company headquarters for a few days?

With all of these questions, both the specific situation of the employee and internal company aspects must be taken into account. Where is the center of life of the employee? Where are non-wage labor costs settled? – These and many other questions must be answered in order to determine the tax liability of the employee in Germany and abroad. Because only when the background is fully clarified can the right conclusions be drawn about the tax liability of the employee and any obligations of the company (e.g. withholding taxes).

Social Security

The topic of social security in international staffing is increasingly emerging from the dark. Many companies are aware of the high liability risks associated with inadequate social security, so that today more attention is paid to adequate social security for employees.

Global mobility managers and HR managers with employees who work internationally also know that obtaining A1 certifications is also becoming a must for business trips within the EU. This annoying but necessary management move means companies are now better informed about their employees’ international travel activities.

work permit and visa

Of course, long-term or regular foreign advertising requires work permits and visas. In the case of business trips and short assignments abroad, the expense can be taken into account for the duration of the trip. It is therefore not surprising that practical solutions are often sought here.

However, companies must ensure that they obtain the right permits and visas – even for short stays abroad. On the one hand, this means more work for HR managers and employees. On the one hand, this is the only way to significantly reduce the risks for the company.

reporting procedure

The EU registration process is a relatively new phenomenon and is far from being properly implemented in all companies. For business trips within Europe, the so-called registration procedure (in addition to obtaining an A1 certificate) often has to be carried out.

However, EU-wide regulations are interpreted and implemented very differently by the individual states. While some countries are relatively lax about reporting procedures and grant generous exceptions (eg Germany), others are notorious for their strict handling and harsh penalties (eg France or Austria).

With regard to compliance with the international deployment of personnel, it is therefore important to continue to monitor the development of reporting procedures in the EU area and to implement them appropriately, even for short business trips.

Employment Law

In principle, there is freedom to choose the law – provided that there is a link to the place of work. However, if the employee is sent abroad or works permanently “remotely” abroad, the mandatory provisions of the External Labor Act must also apply. The same applies to regulations that are more favorable than the chosen law.

When recruiting internationally, it is essential to deal with at least two legal systems. Sometimes organizational gaps or inconsistencies remain that are difficult to identify or fix. Personnel managers must be aware of this risk and react appropriately to legal disputes with a foreign element. It is recommended to seek support in good time.

Damage payment

When employees are sent abroad from Switzerland, there is no risk of compliance with the foreign minimum wage due to the high wage level in Switzerland. When working in Switzerland, on the other hand, an additional payment for the days worked in Switzerland must often be expected in order to comply with the Swiss minimum wage regulations (for work permit reasons).

However, there are many other regulations that must be observed when posting employees abroad. For example, some countries provide for a mandatory employer deductible that must be paid to the employee at the end of the employment relationship. These provisions can represent a significant salary supplement and must therefore be taken into account when determining compensation.

fixed installations

In times of “teleworking”, the topic of fixed installations is increasingly coming into focus. Many companies recognize that they may be taking a permanent location risk when employees work permanently abroad. However, the risks of a permanent establishment are often neglected or not explained in detail.

From a compliance point of view, it is advisable to at least limit the room for negotiation and prevent local employees from signing contracts abroad. This does not eliminate the risks of the permanent establishment, but at least reduces them somewhat.

Diploma

Compliance in the context of international activities and appointments remains challenging. Increasing globalization and changes in work behavior (e.g. workplace) and teleworking increase the demand on companies to carry out employee assignments abroad in a legally secure manner.

This not only requires more know-how in the HR departments, but also an awareness of compliance risks in connection with foreign assignments and business trips at employee level.

In addition, the appropriate structures must be created in the company in order to be able to adequately map various foreign assignments and to be able to take the right steps in relation to taxes, social security, work permits and the like.

Therefore, to ensure compliance with international labor mobility, companies need to raise employee awareness and seek support from partners who specialize in complex cases.

The content of this article is intended to provide a general guide to the topic. It is recommended to seek the advice of specialists in such cases.