In another popular Lunch & Learn session from June 2021, the People Mobility Alliance gathered talent mobility and HR experts to discuss crucial aspects of international expansion, specifically from Europe to the USA. They shared insights on immigration, taxation and relocation challenges faced by European companies and individuals venturing into the USA. In this article, you will find the key findings from all perspectives.
Europe goes USA
Many European corporations have strategically expanded their operations into the USA in recent years. While this presents attractive and exciting opportunities, it also comes with extensive implications and responsibilities, demanding meticulous planning.
1. Talent Mobility and HR Digitalization
Relocation tech providers play a vital role in facilitating seamless international employee transfers in the US.
2. Education challenges
Families relocating from Europe to the USA often struggle with the huge differences between the US and European education systems. Education consulting is recommended to ensure children find suitable schools.
3. Support for families
Approximately 60% of early stopped assignments occur within the first year of relocation due to a lack of support for family members or spouses.
4. Immigration and Taxation Complexities
Perhaps the biggest challenge for international employees moving to the USA is understanding the complex and outdated US immigration and tax systems.
Navigating the complicated and antiquated US immigration system is a challenge for almost every international employee relocating to the USA. Here, we take a look at the challenges and solutions related to immigration.
1. Understanding the immigration challenge
The US immigration system is well-known for its complexity and outdated processes. Navigating this system can feel overwhelming for immigrants relocating to the USA. Understanding and successfully navigating this system is crucial for international employees and their families to ensure a smooth transition to the United States. Relocation tech providers and local immigration experts are essential here.
2. Family needs and Education
Family members often face difficulties when relocating to the US, especially in finding suitable homes and schools due to the substantial differences between European and US education systems. Education consulting is recommended and sometimes required from the start of their journeys to ensure children find appropriate schools.
3. The role of relocation tech providers
Relocation tech providers play a crucial role in simplifying the entire transfer process for individuals involved. Even before employees arrive in the US, relocation tech providers make all the necessary preparations. Their primary function is to act as an intermediary, connecting their clients with the right local tax and immigration providers.
Taxation is a large concern for HR and talent mobility professionals facilitating international assignments in the USA. With tax authorities increasingly vigilant about talent mobility, it is crucial for companies to establish clear policies and procedures to meet the rising tax collection efforts for both corporate entities and individual taxpayers.
1. Payroll obligations for foreign employers
Understanding and complying with payroll obligations is vital for foreign employers entering the USA. This includes having a comprehensive grasp of income tax requirements for employees, and ensuring that tax withholding and reporting are conducted in accordance with US tax regulations.
2. The Role of Social Security
Social security in the US encompasses Old Age, Survivors and Disability Insurance (OADSI) and Medicare, and is a vital component of the US taxation process. Employers must be well-versed in the rates of taxation for both themselves and their employees, as well as the reporting obligations associated with these programs.
3. Reporting annual compensation
Employers operating in the USA are required to submit annual reports detailing all compensation items for their employees. Understanding the fundamental principles of taxable wages, which encompass salary, commissions, benefit, equity and more, is essential for accurate reporting.
4. Planning for taxation as a foreign employee in the USA
Even on an individual level, taxation in the USA is a highly complicated process. Employees must also gain a comprehensive understanding of the various layers of the US tax system, which includes federal, state, local OASDI and Medicare taxes.
During the relocation process, HR and talent mobility professionals often face the choice between two distinct approaches: the “lump-sum” approach and the “hand-on” approach. Each approach caters to different employee profiles and needs, ultimately influencing the overall relocation experience.
1. The lump-sum approach
The lump-sum approach is more commonly adopted by start-up or smaller companies with younger employees that do not have families. In this model, employees are provided with a predetermined lump sum of money to manage their own relocation. This approach assums that employees are tech-savvy and capable of independently researching and coordinating relocation logistics.
2. The hands-on approach
The hands-on approach is used more by traditional companies and is often applied to senior management employees, particularly those relocating with their families. HR departments take a more active role and handle all immigration, tax and housing matters. The emphasis is put on making the move as smooth and seamless as possible, not only for the employee, but also for their spouses and children.
3. Family and Spouse Support
Support of families is of paramount importance. Statistically, approximately 60% of Eary Stopped Assignments occur within the first year, many of them due to insufficient support for family members. This highlights the importance of tailoring relocation approaches to accommodate the unique needs of every employee and their families.
Successful international assignments and expansion for businesses rely heavily on strategic planning and comprehensive support. From understanding the intricacies of the immigration and tax systems to managing relocation, HR, talent mobility and global mobility professionals play a pivotal role in facilitating smooth transitions for employees and their families.
Whether the employer or the employee, one thing becomes clear. In an era of working across borders, HR digitalization, talent mobility policies and relocation strategies are not just a choice – it’s a strategic imperative that can lead to a competitive edge in the global marketplace.
These insights were gained from the People Mobility Alliance Lunch & Learn session in June 2021.
Event Sponsors: Global Tax Network. Noah Mobility, Siskid Susser