Business Without Borders – International Business and Tax Planning Blog

Archive for the ‘Executive Compensation & Employee Benefits’ Category

Previously, we published PART I, II, III, and IV of our series, Going Global: A Review of Critical Issues of Executive Mobility.  Here is Part V, our last in the series, on issues to be considered when developing a Global Executive Mobility Strategy:

Labor and Employment Issues – Certain foreign countries require formal employment contracts for expatriate executives on assignment and employers need to fully understand the larger implications of such requirements. On the other hand, employers should be careful not to accidentally create a contract or establish an employment relationship in countries that do not have a contract requirement. Any agreement should address the relationship between the Home and Host country employers with regards to the Executive. Applicable laws, including the US Foreign Corrupt Practices Act and other Host-country ethics considerations, need to be addressed when any Global executive Mobility Strategy is developed. Also, a concise policy needs to be developed to take issues like job guarantees upon the Executive’s return into account.

There are a multitude of issues that need to be considered in connection with the development of a Global Executive Mobility Strategy and a whole host of legal, tax, accounting and immigration law implications.. This article highlights major issues to consider and suggests several potential Best Practices. However, this article is by no means exhaustive, comprehensive nor complete. The author strongly urges anyone involved with these issues to consult with qualified legal and Tax counsel before committing to any course of action.

Previously, we published PART I, II, and III of our series, Going Global: A Review of Critical Issues of Executive Mobility.  Here is Part IV, another issue to consider when developing a Global Executive Mobility Strategy:

Employee Benefits and Executive Compensation Issues – Generally, companies seek to maintain continuity of benefit coverage and parity of compensation for assigned executives in relation to similarly situated home country executives . So, for example, participation and vesting credit in home country social security programs, company pension plans, health and welfare programs,  as well as existing equity and long-term incentive programs, should be maintained and continued where permitted by law and by the specific terms of the applicable plans and programs.  Regarding continued participation in the U.S. Social Security system, U.S. law generally requires social security contributions to be paid on the earnings of a U.S. citizen or resident alien who is working for an U.S. employer anywhere in the world.  An American employer could include a foreign division, subsidiary, or branch of a U.S. employer, where such branch is “a mere extension of the U.S. employer.”  Therefore, wages paid would be subject to FICA withholding.  Also, an American employer can enter into a voluntary agreement to continue coverage under Social Security for U.S. citizens who are employed by a foreign affiliate, which is at least 10% owned by the American employer), or when a US employee is “seconded” to a foreign employer, but the U.S. company retains the right to “direct and control” that employee.

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Previously, we published PART I & II of our series, Going Global: A Review of Critical Issues of Executive Mobility.  Here is Part III, another issue to consider when developing a Global Executive Mobility Strategy:

Tax issues related to the executive’s foreign assignment are complicated and can potentially create concerns for both the employer and the executive. For instance, the executive’s activities on behalf of the employer could potentially create a taxable presence in the foreign jurisdiction for such employer and thereby create the risk of double taxation. Different countries use multiple standards to determine a whether a “taxable presence” exists for Tax purposes. These issues are typically addressed in a Tax Treaty which attempts to standardize the circumstances by which an employer maintains a “Permanent Establishment” for carrying on a trade or business in the jurisdiction for Tax purposes. In addition, will the executive become subject to taxation in the foreign jurisdiction? Once again, Treaties generally define the terms and condition of residency and whether there will be tax on local-source income only or on worldwide income earned. US taxpayers are generally subject to taxation of worldwide income ( with a partial exclusion for certain foreign-source income and housing allowances and a foreign tax credit may be available for all or part of foreign taxes paid). Currently, theU.S. has entered into Tax Treaties with 68 countries. It is critical that these issues be fully analyzed by competent Host country and international tax advisors.

There are a multitude of issues that need to be considered in connection with the development of a Global Executive Mobility Strategy and a whole host of legal, tax, accounting and immigration law implications. This series of posts will highlights major issues to consider and suggests several potential Best Practices.  However, this series is by no means exhaustive, comprehensive nor complete. The author strongly urges anyone involved with these issues to consult with qualified legal and tax counsel before committing to any course of action.

UPDATE:
PART I. Going Global: A Review of Critical Issues of Executive Mobility
PART II. Going Global: A Review of Critical Issues of Executive Mobility – Immigration
PART IV. Going Global: A Review of Critical Issues of Executive Mobility – Employee Benefits and Executive Compensation Issues

Previously, we published PART I. Going Global: A Review of Critical Issues of Executive Mobility in our series on Global Executive Mobility Strategy.  Here is Part II, another issue to consider when developing a Global Executive Mobility Strategy:

Immigration laws and visa requirements vary from country to country and the process of obtaining the appropriate visa or other permit in order to legally work in the host country can be challenging and time consuming.  Initially, the duration of the assignment must be determined.  Will it be for a short-term or temporary stay where the Executive is “seconded” to the host employer or will the assignment be for a long-term or indefinite stay?  Most countries have entered into treaties or bilateral agreements which provide guidance regarding the applicable rules and arrangements regarding work visa or permit requirements, the tax treatment and recognition of income earned in each jurisdiction, and other important requirements.  Accordingly, it is important that every contingency regarding foreign employment be analyzed by a host country attorney prior to the commencement of the assignment.

There are a multitude of issues that need to be considered in connection with the development of a Global Executive Mobility Strategy and a whole host of legal, tax, accounting and immigration law implications. This series of posts will highlights major issues to consider and suggests several potential Best Practices.  However, this series is by no means exhaustive, comprehensive nor complete. The author strongly urges anyone involved with these issues to consult with qualified legal and tax counsel before committing to any course of action.

UPDATE:
PART I. Going Global: A Review of Critical Issues of Executive Mobility
PART III. Going Global: A Review of Critical Issues of Executive Mobility – Tax Issues
PART IV. Going Global: A Review of Critical Issues of Executive Mobility – Employee Benefits and Executive Compensation Issues

Increasingly, companies are realizing that having the appropriate talent at the right place is essential to the success of a globally-focused enterprise.  To that end, the movement of executives globally has accelerated in recent years, whether involving a short-term visit, a temporary assignment, or a long-term foreign transfer of employment.  Careful analysis of the legal issues involved is a critical first step to successfully managing the executive’s employment transition. This series of posts will discuss the major issues involved with the development and coordination of a Global Executive Mobility Strategy, and suggests a Best Practice Approach to optimize the cohesiveness of a global workforce.

Generally, the major issues that a Global Executive Mobility Strategy needs to consider include structure of the employment relationship and other labor and employment issues, immigration, tax, and employee benefits and executive compensation.  As a starting point, it may make sense to formalize the working arrangements of the assignment, whether by entering into a new or amended employment agreement or simply a Letter of Understanding, which sets out the terms and conditions of the expatriate assignment.  Whatever the form chosen, this document should include a clarification of the employing entity (whether it would continue to be the home country employer, a local or host country affiliate, dual employers, or even an international holding affiliate), specific duties and responsibilities related to the assignment; title; compensation and benefit arrangements; any tax equalization arrangements; any negotiated or “special” agreements that are particular to the assignment for that executive (such as mobilty premiums, cost of living adjustments, housing allowances, and home Leave arrangements); relocation and repatriation arrangements; a clear beginning and ending of the term of foreign assignment; termination provisions; a dispute resolution process; and consideration of available confidentiality and intellectual property protections.

There are a multitude of issues that need to be considered in connection with the development of a Global Executive Mobility Strategy and a whole host of legal, tax, accounting and immigration law implications.  This series of posts will highlight major issues to consider and suggests several potential Best Practices.  However, it is by no means exhaustive, comprehensive, nor complete.  I strongly urges anyone involved with these issues to consult with qualified legal and tax counsel before committing to any course of action.

In the next post in the series, we will discuss immigration issues.  Please subscribe to the blog to get email notifications for future posts.

UPDATE:
PART II. Going Global: A Review of Critical Issues of Executive Mobility – Immigration
PART III. Going Global: A Review of Critical Issues of Executive Mobility – Tax Issues
PART IV. Going Global: A Review of Critical Issues of Executive Mobility – Employee Benefits and Executive Compensation Issues

The International Law Group of the Bridgewater-based law firm Norris McLaughlin & Marcus, P.A., represented Lombard Risk Management plc in its acquisition of the regulatory reporting business of banking consultancy SOFGEN Holdings Limited for $4.25 million in cash, loan notes and equity. Robert C. Gabrielski, a Member of the firm and Chair of its Business and International Law Groups, led the team of attorneys that worked on the deal, including Wendy Z. Greenwood, corporate; Charles A. Bruder, employee benefits; Jeffrey M. Casaletto, environmental; and Jeanne Hamburg, intellectual property.

Lombard Risk, a leading provider of integrated collateral management and liquidity, regulatory and MIS reporting solutions for the financial services industry, already had a major business in regulatory reporting through its existing REPORTER product, which is used globally, including in the United States. The main part of the business acquired is the U.S. and Canada regulatory reporting product REG-Reporter, which is used by Bank of America and Royal Bank of Canada, among others. The acquisition catapults the risk specialist into the top three providers, along with FIS and Jack Henry, of regulatory reporting for U.S. domestic banks, and offers those banks improved risk management through the combination of both companies’ reporting products. The deal gives Lombard over 250 clients around the world for bank regulatory reporting.

John Wisbey, CEO of Lombard Risk, says: “This is an important strategic breakthrough for us, as it gives critical mass in the North American market place, both for foreign and domestic banks in the United States. We already had this for collateral management, but we now have it for regulatory reporting.”

Norris McLaughlin Represents Lombard Risk $4.25 Million Acquisition of SOFGEN Regulatory Reporting Business

Doing business in the U.S.? Thinking about entering the U.S. market?  If so, it’s essential that your company considers and properly manages human resource and personnel matters as you enter or continue to conduct business in the U.S. market. Compliance with U.S. personnel-related laws and the development of sound policies should be an essential part of any business plan. One way in which a company can address and consolidate its policies on personnel matters and integrate their compliance into their U.S. operations is through the use of an employee handbook. “New Year Housekeeping: Your Employee Handbook,” an article I co-authored with my colleagues Pat Collins and Keith McDonald, discusses the many considerations you should keep in mind when updating or preparing your employee handbook. Being familiar with U.S. labor and employment matters will materially enhance your company’s ability to manage its U.S. workforce, and to the extent that you are considering acquiring an existing U.S. business, that familiarity will help you evaluate the potential acquisition. Check out our article.

Guest Blogger: Stefanie R. McNamara, General Counsel at St. Peter’s University Hospital (formerly a Senior Associate with Norris McLaughlin & Marcus, P.A.)

After the initial reforms in the health care law go into effect later this year, the bulk of the reforms applicable to U.S. employers and insurance carriers will be effective in 2014.  A few key provisions are detailed below:

• As of January 1, 2014, individuals must obtain minimum essential health care coverage for themselves and their dependents.  Employee waiting periods for coverage may not exceed 90 days.  U.S. employers with more than 50 employees must offer qualified coverage to all employees.  An employer’s failure to do so will subject them to a $2,000 penalty per employee after the first 30 employees.

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Guest Blogger: Stefanie R. McNamara, General Counsel at St. Peter’s University Hospital (formerly a Senior Associate with Norris McLaughlin & Marcus, P.A.)

As health care reform is now the law of the land in the U.S., foreign entities who do business here in the U.S. need to know about a few aspects of the law that will immediately impact them.  While the Senate is expected to further tweak the entire health care reform package that was passed by the House and signed into law by the President, there The following are a few key things that U.S. employers, together with their insurance carriers, must begin to address now.

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