CONVINUS Global Mobility Alert - Week 11.2023

Best Practice Case

Best Practice Case Study: Is an expat payroll always required for an international assignment? An expat payroll is only required for an international assignment if either the remuneration components of the expatriate are paid in two countries, or the social security and tax liability exists in different or several countries and must be accounted for. In the following example, we go into this in more detail. Example: Drinks AG in Zurich has an employee who has been employed by Drinks AG for one year. The employee is an American citizen and has been living in Zurich with his wife and two children for one year. The employee is offered a two-year assignment to the Chinese branch, which the employee is very happy about. His children will not start school for another 2 or 3 years, so this would fit in well. However, the company is not yet sure whether they would like to offer the employee a "classic" assignment or rather local employment. The company decided a few years ago, for various reasons, that when employees are transferred from one company to another, it should always be on a local basis. This means each employee will be employed locally in the country of assignment but will receive some additional benefits for the move. 6 convinus.com

Best Practice There are advantages and disadvantages to both options. If we now look at this from a payroll perspective, the setup for these two options also looks different. In the case of local employment in China, the payroll in Switzerland ends when the employee leaves the Swiss company and the Chinese payroll begins when the employee joins the Chinese company. This is certainly the simplest option from a payroll perspective. (Variation 2 of the diagram) However, if a secondment is envisaged, it now depends on whether the employee either still receives remuneration components in Switzerland or possibly even receives a fixed portion of his salary in Switzerland, as well as whether he should remain insured in the Swiss social security system during the assignment in China. If one of these points is given, then it needs a payroll in Switzerland. In China, however, a payroll is also required, simply for the payment of Chinese taxes. If payroll has to be kept in both countries, this becomes very complex and requires a good flow of communication between the payroll in Switzerland and China. (Variation 2 of the diagram) To set up such an "expat payroll", the local payroll managers often reach their limits, because a complete payroll must be kept in both countries, with the difficulty that the payroll of the other country must also be taken into account. However, once both countries know exactly what needs to be done, this can be managed independently in one company. 7 convinus.com