March 22, 2013:
The Global Tax Network (GTN) has recently published an article regarding pay delivery. In general, there are three different delivery methods: home, host and split.
All Points finds that this article (found on GTN’s website) should prove to be very useful to clients when coordinating assignees. To summarize the three methods:
Home Delivery. Employee continues to be paid from the home country payroll in the home country currency. This delivery method is best for extended business travellers or short-term assignees. Main benefits include ability to continue current practices and the employee is able to easily fund social tax payments. However, most notable drawback is the fact that tax implications in the Host country typically do not directly correspond with compensation delivery. Thus, part or full earnings may need to be reported and taxes paid in the host country.
Host Delivery. Employee is now paid from the host country payroll in the host country currency in full. This delivery method is best for permanent transferees. The primary benefit of this method is that the employee is better able to pay for expenses in the host country and is supported in efforts to integrate into the new location. However, they may also be subject to exchange rate risk if they have ongoing financial obligations in the home country.
Split Delivery. The employee’s salary is split between the home country payroll and the host country payroll, as well as in the respective currencies. This delivery method is best for long term assignees with continuing financial obligations and/or intent to return to the home country. The greatest benefit of this method is that the employee receives funds in the host country where it is needed, while participation in the home country’s system is uninterrupted. However, this method is the most challenging of the three and required greater coordination to ensure no errors.
It is worth looking over the original article to view the full details of each payment delivery method as well as other considerations worth recognizing.
This Relo-lert is intended for informational use only. If you have any questions regarding the impact of this information on your organization, please contact All Points Relocation at [email protected].