Dave Leboff, President of US Operations for Immedis, has put together a series of articles with advice and tips for the payroll community. In this post, Dave addresses the skills and competencies required for Expatriate Payroll Professionals.
Payrolls are transactions that operate consistently by applying rules (law and policy) to the compensation and benefits received by employees. The law is consistent among your paid population. The policy is used to either address questions of employer practice in how to apply the law, which may differ from employer to employer, and how to execute company programs that are employer-specific.
For example, if your company employs a salesman that travel constantly among states, there are state laws that apply to withholding. Your company may decide to set a policy about how long an employee must spend in a state before withholding must be taken, as well as a process by which that data is captured and passed to the payroll department.
An example of policy around a company program might be a program that pays a bonus for employees at a set percentage determined by the level at a particular point of tenure. To execute this program, the payroll manager must know the general rules of the program and the means by which the affected employees will be identified to payroll, so the correct amounts can be determined and paid in a timely manner.
To effectively execute these types of policies for expatriate programs requires that your payroll resources have certain skills and competencies that are not required for operating a traditional domestic payroll program. These skills and competencies are not addressed as part of formal training, such as your CPP certification.
Some specific expatriate-related concepts to understand include:
- The expatriate “Balance Sheet” model
- Foreign exchange as part of payroll transactions
- How does “Tax Equalization” work and how does it show up in payroll?
- What are the differences between Tax Equalization and Tax Protection?
- What is Totalization and what are certificates of coverage? When are they used?
- How does my company want payroll to deal with “Claim of Right” transactions (return of tax equalization payments or tax refunds to the company in years after they were included in employee compensation)?
- What and how to gross-up for states
- What payroll forms are unique to expatriates
- How does a US payroll ensure that it does not duplicate payment for an expatriate that may have been paid by a local payroll for an item of compensation or benefit that is reportable on both payrolls?
- How do I know if a tax treaty applies and what are the treaty rules to be expressed in payroll?
- What is a shadow payroll?
Specific training in expatriate payroll matters helps. There are programs run by APA and other networks that cover these concepts.
Author Dave Leboff is the President of US Operations for Immedis, a specialist division of The Taxback Group, a multi award-winning global financial services group established in 1996, with over 1,200 employees in over 33 offices worldwide, providing payroll and tax services to organisations and individuals in over 100 countries every day. Dave has over 35 years of experience in international human resources and expatriate program management. Get in touch if you have questions about expatriate payroll for your own organisation: firstname.lastname@example.org