step by step - expatriation


There is indeed quite a lot of work for the human resources at the beginning of an employee’s assignment abroad but it is also important to follow him during his entire assignment. What are the essential elements to keep an eye on throughout his assignment ?
We have already drawn your attention on the importance of coordinating payroll services abroad and home. However, it is important for the HR to be able to understand, analyze and explain the payroll problems that can arise.

In general, the expatriate will come to his HR for payroll issues. When you only have one expatriate, this can be handled quite easily. However, when you increase the number of expatriates, the workload can increase exponentially. While an HR is usually comfortable discussing French local payroll issues, handling an expatriate payroll is a completely different matter. Therefore, you must assist your local payroll department and the employee in understanding the complexity of this new payroll and help them solve each issue / question.

Ideally, an HR must check at least twice a year that the expatriate’s payroll is correct and is coherent with the package that was guaranteed to the employee but also that the social contributions (French or foreign) are correctly paid and calculated on the correct amount.
The expatriate’s package
As mentioned in the section “the expat’s package”, it is preferable to have a package that is not static and which is very distinct to the French compensation of reference. Having package that evolves means that premiums are reviewed at least once a year.

The premiums that absolutely have to be reviewed once a year are the expatriation and hardship premiums, as well as the cost of living allowances.

The expatriation premiums, usually tied to the conditions of life in the host country, have to be reviewed once a year. By doing so, it shows the employee that this premium is not something decided arbitrarily. Most of the specialized firms who calculate these premiums also review these annually.

The cost of living allowance also needs to be adjusted annually because of the changes occurring in the host country but also because of the evolution of the exchange rate. In addition, this allowance reflects the employer‘s desire to guarantee to the employee the same level of income in the host location as per the home location. If it is not regularly modified, the employee will take it as a sign that his employer is not careful of the evolutions in both home and host countries. You will be surprised to see how quickly this allowance will evolve either in favor of the employee or the employer, which explains that firms specialized in calculating this cost of living allowance usually do so twice a year.

When you update the package of the expatriate, do not forget to update also the hypothetical income tax. We recommend that you update the hypothetical income tax by calculating what would have been calculated by the French tax authorities. This will request that you update your calculations annually taking into account the new ceilings, deductions, etc.

If you also have elements of compensation that vary (i.e. bonus for example), it will also need to vary according to the employee’s package.

Finally, do not forget to inform the different payroll services abroad and home of all these changes so that they can make sure that they impact the payroll accordingly.
Local budgets for the benefits-in-kind
The budgets of the different benefits-in-kind (housing, car, school, trips home, etc) have to be fixed at the beginning of the assignment. However, because of the cost for these different services in the host location evolve, it is necessary to modify the fixed budgets to show these changes. The HR will, for this reason, have to follow these evolutions to adjust the budget accordingly, preferably before the employee requests this evolution. As an HR, try to remain open-minded when discussing these aspects with your employee, even if you challenge the employee’s requests.

In order for the budget for these services to be correct, the home HR will have to maintain a close relationship with the host HR. The home HR can decide to trust the employee on this matter but it is always better to have two opinions. If you do not have any structure or contact in the host location that can help you, do not hesitate to ask a relocation agency in the host location on this.

The housing budget can represent 50% of the employee’s net salary in certain countries. Therefore, do not undermine this aspect of the employee’s package.

Finally, you must think about your global expatriate population. Budget differences will never be understood, no matter what the reasons are.
Tax assistance
As mentioned previously, it is better to request the assistance of a firm specialized in tax and social security matters for all formalities in the host country, whether it is at the beginning of the assignment (i.e. to explain to the employee the host local tax and social security rules) and throughout the assignment (i.e. monthly or annual income tax returns, income tax payments, etc).

The specialized firm will need a maximum of information to solve all the problems that may arise or simply inform the employee of his obligations while in the host country. The HR must, for this purpose, provide this information accordingly (i.e. inform the specialized firm about the arrival and departure of an employee, changes in his expat‘s package, in his family situation, etc). All this information will allow the specialized firm determine who must pay taxes and in what portion (professional vs. personal income taxes), when, etc.
Immigration problems are of course more important at the beginning of the assignment. However, it is important to follow expiration dates of the different visas, work permit or resident permit the employee might need. Indeed, often these papers are not valid during the entire employee’s assignment. Therefore, though it may be difficult to remember after two years that the employee needs to request a new visa, for example, the HR and the employer in general are legally responsible of the employee’s immigration status. For this reason, they must be certain that its employees have the proper documents.
Social security coverage
This concerns primarily certificates of coverage. These are also given, by social security authorities, for a limited period of time of one year, maybe two. You must therefore make sure that these are renewed appropriately and that you have enough time before the expiration date to renew them (i.e. it sometimes takes more than two months to obtain a renewal).

For an expatriation, coverage is easier since the employee will be affiliated to the host social security scheme. However, you must make sure that voluntary contributions in France are adjusted according to the employee’s new salary, family status, age, etc.
Duration of the expatriate’s annex to the work contract
This is a simple task but it must be done. Make sure that the annex, which is for a determined period, is renewed in case of an extension of the assignment or prepare the return of the expatriate if his assignment is to end soon.

Having a good memory is helpful but we recommend that you keep spreadsheets that allow you to follow in a timely manner all of these aspects.