Common pitfalls when working abroad and how to manage them

Occupational pensions for employees working abroad are an increasingly important issue, particularly as more and more Swedish employers operate globally. If you work for a global company and have already sent staff abroad, or are considering doing so, it is important to understand the challenges and risks that may arise.

This article is for those working in HR, employee benefits, payroll or tax at a company with global operations.

Overseas assignments can be considered one of the more complex areas of HR. And one that can prove costly if handled incorrectly. Both for you as an employer and for the individual. Some common risks include incorrect reporting of pensionable salaries, double taxation and incorrect payments of occupational pension contributions.

At FörsäkringsGirot, we help over 200 companies with their occupational pension administration, covering approximately 320 000 employees. Of these, only 0,07% are registered as working abroad, but the actual figure is much higher, as many are managed outside FörsäkringsGirot’s system. Whether your employees are based in Sweden, abroad or both, we support you with accurate reporting of employment changes, pensionable salaries and other important matters.

Fantastic opportunities with major challenges

Globalisation and digitalisation are bringing greater mobility to the labour market, allowing work to be carried out in places other than the physical office. The opportunity to work abroad for a period appeals to many people and can help set your employer brand apart.

However, this development brings some challenges. Particularly in relation to HR, payroll and benefits such as occupational pensions. Although this area may seem narrow and limited, it is actually very important. Incorrect handling can have a significant financial impact on your company.

The challenges and risks you may face as an employer

To offer your employees the opportunity to work abroad, you need to know which rules apply and keep up to date at all times. Let us look at some of the most common challenges and risks, and how to manage them.

No policy in place?

As an employer, it is important to have a comprehensive pension policy in place that gives you clear guidance on which benefits apply and how they should be provided.

As an employer, you are often pressed for time. If there is no policy in place, and perhaps no time to develop one either, the risk of mistakes increases.

How to manage it

The first thing you need to consider when preparing for an overseas assignment is getting up to date on the subject and developing a clear policy. Even with a policy, getting things right can feel difficult, so you need to keep refining it to ensure it is accepted and feels easy to follow. This may seem like an unnecessary step, with the expectation that things will work themselves out along the way. And things may work themselves out along the way, but a well-developed pension policy is essential.

Are salaries and pensions being reported correctly?

The greatest risk you and your employee face is that salary, pension and other benefits are reported incorrectly. Or, in the worst case, not at all. Something that can, in turn, mean your employee misses out on social insurance, a state pension and an occupational pension. Which may not come to light until several years later and can have both financial and serious consequences for the employee.

How to manage it

Precisely because so much can go wrong, it is important to have access to the right expertise, whether you have it in-house or bring in external support.

Managing employees on overseas assignments is complex and involves several steps beyond reporting accurate pensionable salaries. Close cooperation between departments and clearly defined responsibilities are therefore recommended and are essential for error-free administration going forward.

What is the best way to manage changes?

It is important to bear in mind how changes to employment affect tax, occupational pensions and benefits. Both in the home country and in the host country. Changes that can have an impact include, for example, changes to salary, benefits packages, type of employment, assignment country and assignment duration.

How to manage it

Your pension policy needs to explain the consequences of different choices and how changes should be managed. This is to make it clear to everyone involved what the various elements mean and what implications they have for the business and the individual.

Clear communication with both the individual and the manager sending them abroad about what applies in different situations is essential to managing this effectively.

What rules and laws apply in the host country?

First of all, rules vary considerably between countries. This affects how you, as an employer, must and can manage salary, tax, social insurance and pension matters.

In Sweden, we are used to secure pension arrangements and good agreements covering our occupational pensions. But this is not always the case in the country your employees are sent to.

Rules governing working abroad and overseas assignments are constantly changing and have become increasingly strict in recent years. This is often because countries want to protect their tax base and thereby maximise their tax revenue.

How to manage it

Understanding the rules and the differences that exist is the first step. It is also important to maintain good dialogue between the home country and the host country to identify changes in the rules that may affect the assignment.

And once again, it is important to understand whether you have sufficient in-house expertise in this area to address the various issues, or whether you need to bring in help from an external expert.

Set your business up for success

Ultimately, it is about having a comprehensive pension policy and access to the right expertise. Whether that expertise is in-house or provided by an external party.

A clear policy and well-defined rules reduce the risk of mistakes and simplify the process and communication surrounding overseas assignments. This also ensures that all employees are treated equally, rather than leaving things to their negotiating power and individual knowledge.

Understanding the rules well before the assignment gives everyone involved the opportunity to raise any questions. Because although many things can be corrected afterwards, doing so can have major consequences, incur additional costs and require resource-intensive corrections. Getting it right from the start is always preferable. In addition, the employer comes across as competent and professional when things are handled correctly from the outset.

Would you like to deepen your understanding of overseas assignments and the challenges and pitfalls you need to be aware of? Watch our webinar with Linde Gas and BDO.

An expert you can trust

From our experience, we know that the administration of occupational pensions and insurance can vary greatly between employers, as can their support needs. If you need help or support with any of the following, we could be the right partner for you:

Payroll:  ensuring correct pensionable pay, accurate calculations and reporting, the right insurance cover, a reliable monthly process, etc.

HR:  ensuring benefits, delivering on your promise to employees, saving resources, etc.

Finance:  cost control, payroll tax, tax deductibility, invoice management, accurate bookkeeping, etc.

Contact us to find out how we at FörsäkringsGirot can help you simplify and streamline your administration, saving time and providing the correct benefits for your employees.