In last week's blog, I covered some basic tips for keeping tabs on globally mobile employees. This is an area where companies are still struggling to figure out a streamlined method to track and appropriately tax their mobile populations. In working through last week's post, I realized that I only had enough space to barely scratch the surface - there is simply a lot to talk about when it comes to mobility. I promised more this week, and in today's blog I'll venture into a couple of areas where companies may want to consider focusing attention or implementing procedures.
Audit the actions of local payrolls. The Stock Administration and Payroll departments are closely tied when it comes to withholding taxes and reporting to tax authorities about equity compensation transactions. When it comes to global populations, most companies have local payroll staff at the jurisdictional level. A typical process flow for a mobile employee’s equity award tax withholding may include a calculation of the tax due at the corporate (stock administration) level, and then supply of that information to the local payroll for withholding and remittance to the tax authorities. What happens after that handoff is where we want to focus. In an NASPP Quick Survey on Globally Mobile Employees (February 2013), 42.9% of respondents said that they do follow up with local Payroll to verify that the tax collected for mobile employees is actually deposited with the local tax authority. I’ll offer my kudos to those companies. However, the majority of companies still do not appear to follow up with the local Payroll in this regard. Oversight, particularly when it comes to tax and other compliance matters, is crucial. We can’t just assume just because a report was provided to local payroll personnel that everything happened perfectly from there. If you’re not following up after remitting data to Payroll (including global payrolls), it’s time to implement an audit that ensures proper withholding occurred, and was correctly remitted to the tax authorities.
Track Business Travelers. In the NASPP’s Globally Mobile Employees Quick Survey, only 14.4% of companies say they notify business travelers that the company may report and/or withhold in multiple jurisdictions. This number is reflective of feedback about business travelers across the survey board. As a category, they are the most unattended in terms of tax compliance, tax assistance, and tax equalization. One of the biggest challenges with business travelers is that it’s very hard to track their movements. They typically don’t change address and rely on a “home base” as their address of record. Often the only way to know someone has traveled is by their out of office notification or expense report. That may be one reason companies have limited their efforts with this population. However, as we know, complexity in monitoring a population is not a defense for non-compliance. I asked Marlene Zobayan of Rutlen Associates to chime in on whether or not companies should be putting more focus into tracking their business travelers. She had the following to say: “Each company should assess its exposure from non-compliance for business travelers. While states and countries are increasingly auditing payroll compliance for business travelers, some companies may have a low exposure while others have high risk. A Rutlen Associates survey conducted in September 2013 found that 78% of respondents were looking to increase conformity. As payroll compliance for business travelers becomes more common, tax authorities, even those in currently low enforcement locations, will likely expect a higher level of compliance from all companies.” This seems like an area where companies want to comply, but are struggling to figure out the mechanics. If you haven't evaluated your business traveler population, I would recommend at least having the discussion around the size and risk factors related to this population with your mobility internal and external teams. I have a feeling we’ll be seeing more on this topic in the near future.
Mobility is certainly a large and complex set of topics within a topic. What’s important is that companies continue to evolve their practices to become more and more compliant with tax withholding and reporting across the board for these tricky populations.
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