Guide to Expatriate Employee Management for International Businesses
There are many aspects that need to be taken into account by an international company regarding expatriate management. In this guide, our Global Mobility team composed of lawyers specialised in employees’ expatriation gives you all the best HR practices for an efficient expatriate management process – from determining the expatriation package to assisting with the repatriation of employees.
Our Law Firm’s Expertise in International Expat Management
Thanks to its tax and legal expertise, the Valoris Avocats’ Global Mobility team can advise you regarding the expatriation and repatriation of your employees.
Our strength lies in our ability to provide a global and complete analysis of the future expatriate’s situation and to answer all your questions in the following areas:
- Immigration: does the employee need a visa/residence permit/work permit in the host country?
- Employment law: which legislation applies? Is a new employment contract necessary or is an amendment enough? Are they any mandatory rules to apply?
- Social protection: in which country’s mandatory social security scheme the expatriate should be affiliated? How are they socially insured? How to improve their protection? How much will it cost to both the employee and the employer? Is there a possibility to guarantee rights in the home country during the expatriation period (voluntary contributions)?
- Tax law: in which country the expatriate will be a tax resident? Where will they be taxed? How much will they have to pay?
This cross-disciplinary approach ensures that all the implications of expatriation are covered for your employee.
Our team can assist you with expatriation to or from France thanks to its in-depth knowledge of the current domestic and international legal texts signed by France.
Our lawyers all speak several languages, so they can easily assist you in French, English, German and Spanish, and act as a link between the HR teams in the expatriate’s home and host countries.
What is The Meaning of “Expatriate” in HR Management?
An expatriate is an employee or executive that is being sent abroad by their employer for a definite or indefinite period.
During this expatriation, the relationship between the expatriate, the home country (where the employee was first employed) and the host country (where the employee is sent) can be various.
Regarding social protection, the term “expatriate” normally infers that the employee is not maintained in the social security scheme of their home country but is rather affiliated in the social security scheme of the host country. This stands in opposition to the notion of “secondment” where the employee continues to pay social contributions in their home country.
Regarding employment law, the term “expatriate” usually means that the legal employer changes, i.e. the host country company becomes the official employer of the expatriate.
Example of an Expatriate Situation
For example, a British group based in Birmingham with subsidiaries all around the world wants to send one of its employees to its French company for 3 years, in order for them to help develop the French market.
Determining the legal framework and the remuneration package: The First Step in Expat Management
Legal framework of the expatriation: What happens to the current employment contract?
Whether it is decided to “second” an employee within the meaning of employment law or to “expatriate” them, it is important to define this clearly and to provide for what happens to the current employment contract.
Indeed, some countries, including France, require the employer in the home country to repatriate the employee at the end of the expatriation period, whether it is the normal end of the expatriation period or an anticipated termination for any other reason.[1]
In this context, it is important to determine before the expatriation what happens to the original employment contract (whether it is suspended, terminated or continued) and its articulation with the eventual new contract and/or amendment concluded with the host country’s company.
Please note: Fixing the “reference remuneration”, i.e. the remuneration which will once again apply upon return from expatriation, is important in any expatriate management process.Otherwise, the employee could ask to continue to benefit from elements of remuneration which were actually linked to his or her mobility abroad.
Anticipating the Immigration Process in Expatriate Management
When needed, a visa/resident permit, linked to a work permit, can take some time, i.e. several weeks, to obtain. That is why we recommend any required visa and work permit applications to be prepared and filed well ahead of the planned departure date.
The application itself can generally be submitted around 3 months before the planned departure date.
But before that, it is also necessary to take into account the time to obtain all the supporting documents from the expatriate employee (who may have to request the documents from institutions such as the town hall of their place of birth, etc.), as well as the time it may take for translations of these documents by a sworn translator (if needed).
Defining the Remuneration Package of the Expatriate Employee
Depending on the length and context of the expatriation, there may be consequences in terms of social security and income tax.
Therefore, if the expatriate employee has to be affiliated in the social security regime of the host country (or not) and has to pay income tax in the host country, with application of the same “gross salary”, the “net in the pocket” salary of the employee will not be the same as in their home country (whether upwards or downwards).
This is why it is necessary to define the expatriate’s remuneration package by calculating the gross salary to be paid in addition to the different remuneration components (cost of living allowance, housing bonus or benefit in kind, car bonus or benefit in kind, family package, etc.) so that the employee has the same (or a higher) net salary after deduction of employee social security contributions and income tax in the host country. This is usually realised with U-curve calculations.
Our Global Mobility team, thanks to its expertise and large database, can run these calculations on your behalf.
When a social security secondment is possible (i.e. employee can remain in the social security scheme of the home country), it can be interesting to run comparative calculations in case of a secondment vs. in case of an expatriation (i.e. the employee is transferred in the social security scheme of the host country) to see which scenario is most attractive for the employee and/or the employer.
How to Manage an Expatriate Employee?
Preparation Before the Expatriate’s Deployment Abroad
Expatriation is a change of life, moving to a country with a culture and way of life that are potentially very different from the employee’s country of origin.
It can therefore be a very stressful situation for the expatriate employee, who has a lot of questions. This is especially so if the employee is taking the whole family along on the adventure.
In this context, it can sometimes be complicated for the employer and the HR team to answer all these questions, particularly if there are any questions relating to private matters (e.g. tax treatment of other income, impact on the expatriation on employment insurance or retirement, etc.).
Our Global Mobility team generally proposes to organise a work meeting with the employee (called a “Departure Tax Briefing”) prior to the expatriation, during which our lawyers can answer any questions the employee may have about the consequences of their mobility.
On-site Support During Their Expatriation
During the expatriation period, our Global Mobility team remains available to answer any questions.
Among the questions that can arise during the expatriation period, there are the following:
- Social security contributions: depending on the retained scheme (secondment or expatriation), the employee will either continue to pay social security contributions in their home country (social security secondment) or pay social security contributions in the host country. If the expatriate is on the payroll of the host country, a “shadow payroll” in the home country can be necessary in order to calculate and pay the social security contributions in the home country. Our experts can explain how this works to your payroll team.
- Annual income tax return of the expatriate: depending on the context and length of the expatriation, the tax residence of the employee may shift from the home country to the host country. In this case, in addition to the income tax paid in the host country throughout the year with the withholding tax, the expatriate will have to file an annual income tax return in the host country and may have to file one in the home country too, especially if they still have home country-sourced income.
Our Global Mobility team can assist the expatriate for the preparation and filing of a French annual income tax return and can refer you to one of its partners abroad if a declaration needs to be filed in another country.
- Reconciliation of the remuneration package: It can be a good idea to check, once a year, if the expatriate has received the correct amount of remuneration based on the remuneration package designed before the departure, after payment of social security contributions and annual income tax. A regularisation can be done if the expatriate has not received enough remuneration, or in the contrary has received more than originally calculated.
- Eventual renewal of the resident permit of the expatriate: depending on the length of the expatriation, the initial resident permit (or visa) that has been obtained may expire before the expatriation period is over. In this case, a renewal of the resident permit has to be requested.
Repatriation of employees After the Expatriate’s Assignment
Upon completion of the expatriation, the employees are supposed to return to their home country. The return should happen in the same conditions as those defined before departure (resumption of the original employment contract, importance of having determined the reference remuneration, etc.).
The return may also give rise to many questions on the part of the employee, particularly if the employee has to switch back to the social security system of the home country. In this case, it will be necessary to claim the rights (for pension, unemployment insurance mainly) thanks to contributions paid in the host country by requesting the corresponding relevant forms.
Our Global Mobility team also offers a “Return Tax Briefing” upon return from expatriation in order to assess all these issues and questions.
[1] Article L.1231-5 of the French Labour Code (“Code du travail”)
Our experts in Expatriate Management in International Businesses
