Cross Border Expansion: Seen from a Global Mobility Perspective
Recently one of my foreign network partners (from France) requested me to assist him in advising and assisting one of his clients in a take over of a Dutch company. He was asked to provide expertise and guidance in the areas of employment law and employee benefits taxation (wage withholding taxes, social security, etc.). In fact he needed to perform a due diligence of the Dutch company in those areas. The due diligence had a special focus on the cross border activities of the Dutch company. Because the Dutch company had a significant number of employees working cross border and/or being assigned to a foreign country.
Although I have seen and judged quite a lot of employment contracts and assignment contracts in my professional life, most of the time the lack of (up to date) knowledge about just basics in employment law and global mobility issues strikes me. Because of this lack of knowledge and because those employers do not know what they do not know, those employers/companies will often hit unnecessary risks, additional costs en quite some irritation for both employer and employee when employees are requested to work cross border or are assigned abroad. Most of these risks, costs and irritations can be avoided if employers are upfront aware of some important aspects when assigning employees abroad. Therefore, I have listed below some basic steps and actions to be taken which guide the employer in the right direction.
Important steps and actions for the employer who wants to assign an employee abroad or have the employee working cross border:
- Investigate the consequences of the assignment in the various areas, being tax (wage withholding tax and income tax), social security, pension and employment law. Have first a thorough look at these individual areas and subsequently ensure that the areas are also looked at in combination. A tax driven decision might for example trigger adverse effects on the social security and pension position of the employee.
- Investigate which country will tax the salary of the employee. Double tax treaties concluded by the Netherlands with other individual countries will determine which country is entitled to tax the salary. In case of cross border working or a foreign assignment the salary will most often be taxable in the foreign country. That implies for example a wage withholding obligation for the employer in the foreign country and a personal income tax return filing requirement in that foreign country for the employee.
- Ensure that the employee is covered by the correct social security system and ensure that the social security contributions due are paid timely and correctly. Within the EU there are clear and simple rules for this. Provided that certain conditions are fulfilled, it is most often possible to continue the current social security coverage for the employee. Outside the EU, it has to be checked whether the Netherlands have concluded a bilateral social security agreement with the foreign country involved.
- Investigate whether and if yes how, the current (company) pension coverage can be continued. If it can not be continued, ensure implementation of an adequate alternative for the current pension scheme.
- Draft and sign an adequate assignment contract, which contains all additional agreements regarding the assignment (such as salary, allowances, housing, home leave, tax and social security consequences, assistance, return agreements, etc.).
- Respect also the compulsory clauses of the foreign employment law (such as minimum wage, collective labour agreements, holidays, working times, etc.).
Following these steps ensures that cross border working and foreign assignments will be implemented upfront in the correct, compliant and most beneficial way and will normally avoid unpleasant surprises afterwards for employer and employee. Also the employer who does not have the specific expertise inhouse to arrange all these aspects by himself, should with these guidelines be able to ask the right questions and to ensure external assistance if necessary in this respect. My extensive experience has learned me (and quite a lot of employers also) that it is very important to implement cross border working and foreign assignments upfront in the proper way, because remediation afterwards is always more expensive. And moreover, the time and money involved in remediation afterward can be better spend in a different way.
Fabiënne Hol-van Goethem | Werque.nu | 29-11-2016
About the author
Fabiënne Hol-van Goethem graduated at the law faculty of UM (civil law) in June 1988. Additionally, she graduated in September 1990 in tax law at the University of Tilburg.
Before starting her own consultancy firm Werque.nu, Fabiënne was director in the HRS Services practices of PwC (Eindhoven and Rotterdam) and member of the management team of the Dutch PwC global mobility practice. Subsequently she was partner at Witlox Van den Boomen (Eindhoven) responsible for the HR Advisory practice.
End of 2014 Fabiënne started her own consultancy business, Werque.nu. Werque.nu is a niche consultancy firm in the HR area, focussing on global mobility, employee benefits taxation, social security, employment law and HR. It has an extensive national and international network to ensure high quality consulting and compliance services for its clients.
Fabiënne writes blogs, columns and articles on a regular basis for a.o. RegioBusiness, Expand|Connecting HR and Over de Grens. She is also co-author of “Zakendoen in Duitsland”.