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Best and Worst Practices in International Assignment Policies KPMG 2007 Global Assignment Policies and Practices GAPP S

Objectives. To explore current issues in international assignment managementDiscuss and review the results from KPMG's International Assignment Policy and Practices Survey To help you to build the case for or against these concepts within your own organization. Agenda. 2007 Global Assignment Prac

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Best and Worst Practices in International Assignment Policies KPMG 2007 Global Assignment Policies and Practices GAPP S

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    1. Best and Worst Practices in International Assignment Policies KPMG 2007 Global Assignment Policies and Practices (GAPP) Survey Georgina M.G. Tollstam, KPMG LLP

    2. Objectives To explore current issues in international assignment management Discuss and review the results from KPMG’s International Assignment Policy and Practices Survey To help you to build the case for or against these concepts within your own organization

    3. Agenda 2007 Global Assignment Practices and Policies Survey Background Participants 2007 Results

    4. Agenda (cont’d) Issues in International Assignment Management Expatriate Return on Investment (ROI) In Your Opinion Family Issues Tax policy & tax equalization Home Leave Housing Issues Wills and estate planning In Your Opinion

    5. KPMG Survey 2007: Background and Participants Survey is dynamic More than 400 multinational companies participate over the past 5 years Results are frozen as of January 31, 2007 Divided into three broad categories: Organization Profile Program Profile Policy Real-time information is available at www.kpmglink.com

    6. KPMG Survey 2007: Program Demographics of the Survey Participants

    7. Benchmarking and Surveys Appropriate comparisons: Company location (geography) Size (company and program) Industry (more than one?) Integrity of data: Age (policy changes) Methodology (limited choices, phrasing) Input error (terminology, understanding) Interpretations (why) Multiple policies

    9. KPMG Survey 2007: Selection & Assessment

    10. Selection and Retention Succession planning Train locals Expatriate position Repatriation / career planning ROI versus OOSOOM Integration of assignments into career plan / performance management process Collaboration with Organizational Development group

    11. KPMG Survey 2007: Repatriation

    12. KPMG Survey 2007: Assignment Success

    13. In Your Opinion In your opinion: Do assignees take too much time to administer? Are assignees over-compensated?

    14. KPMG Survey 2007: In Your Opinion

    16. KPMG Survey 2007: Families With laws and social norms differing greatly from country to country, what is a practical approach for a “global organization” regarding unmarried partners? With laws and social norms differing greatly from country to country, what is a practical approach for a “global organization” regarding unmarried partners?

    17. Defining Families Strong social, cultural, and legal considerations “Partners,” same- and opposite-sex Differing definitions of marriage Domestic partner legislation Non-discrimination requirements Visa/residency permit limitations Also complex: Dependent parents and extended families Step-children, children from previous marriages, children-not-at-post

    18. KPMG Survey 2007: Families How hard should employers try to convince dual career couples to take an assignment? How hard should employers try to convince dual career couples to take an assignment?

    19. Trailing Spouses Limited menu of options available Money can only do so much Challenges Visas and work permits Transferability of licenses and certificates Loss of place on the corporate ladder Loss of practice (clients) that takes years to build (lawyers, doctors, accountants, etc.) If a spouse interrupts a rewarding career, will resentment result?

    21. KPMG Survey 2007: Home Leave What is the purpose of home leave? Does a lump-sum payment help achieve that purpose? What is the purpose of home leave? Does a lump-sum payment help achieve that purpose?

    22. Home Leave Trend toward laissez-faire and/or lump-sum administrative approach Upside: Less administration and tracking Greater flexibility for assignees Downside: Resentment from host locals regarding “company-paid vacation” ; confusion of purpose Missed opportunity for repatriation planning Missed potential opportunity for cost savings

    24. KPMG Survey 2007: Taxes

    25. Tax Equalization Versus Tax Protection Tax Equalization: Assignee pays no more or no less than approximate home country burden Tax Protection: Assignee pays no more than home country burden; might pay less Differentiators Assignee mobility Equity among locations Cost effectiveness to the organization Fairness to the employee Cost, effort, and complexity of the process

    27. KPMG Survey 2007: Host Housing Purchase Does it really matter if the employee buys a house at the assignment location?Does it really matter if the employee buys a house at the assignment location?

    28. Host Housing Purchase Short-term financial impact for the employer: minimal Long-term: potential for large negative impact Inequitable treatment of employees Loss of mobility Capital gains and exchange rate gain and loss issues Financial risks to both employees and employers

    29. KPMG Survey 2007: Housing If the employee’s “actual housing cost” is considerably less than the norm, shouldn’t the norm be waived or greatly reduced? For those assignees to whom you provide a host country housing benefit, do you deduct a notional housing expense (also known as a housing norm or housing offset), to reflect the assignee's share in housing expenses? 33% Yes – in all cases 23% Yes – in most cases with rare or specific exceptions 4% Yes – in a minority of cases 5% Issue treated on a case-by-case basis 35% No – we never withhold a notional housing deduction from assignees If the employee’s “actual housing cost” is considerably less than the norm, shouldn’t the norm be waived or greatly reduced? For those assignees to whom you provide a host country housing benefit, do you deduct a notional housing expense (also known as a housing norm or housing offset), to reflect the assignee's share in housing expenses? 33% Yes – in all cases 23% Yes – in most cases with rare or specific exceptions 4% Yes – in a minority of cases 5% Issue treated on a case-by-case basis 35% No – we never withhold a notional housing deduction from assignees

    30. Home Housing Norm Elements: Interest on a mortgage (not principal!) Utilities Property taxes Repairs (roofs, windows, boilers, pools, fences, etc.) Maintenance Common charges Less common among non-US multinationals Do you want to determine “actual costs”?

    32. KPMG Survey 2007: Will Preparation/Review Why should the employer care if the employee does not have a will? Isn’t it a private matter? Why should the employer care if the employee does not have a will? Isn’t it a private matter?

    33. Wills and Estate Planning Assignees are usually at greater risk of life and health when on assignment Increased stress Lower standard of health facilities in many parts of the world, and (often) inability to communicate with medical professionals in their native tongue Terrorism and economic targeting (e.g., kidnap and ransom) Driving on “the wrong side” of the road

    34. Wills and Estate Planning (cont’d) Rules change when you cross borders (state and national) Taxes Disposition of estate Custody of children To whom will the grieving spouse turn to for help?

    35. In Your Opinion In your opinion How frequently will assignees be used in five years? Considerably less Somewhat less About the same Somewhat more Considerably more

    36. KPMG Survey 2007: In Your Opinion

    37. KPMG Survey Participation is free Log on to www.kpmglink.com Enter the details of your company policy and benchmark the results Hard copy of the 2007 survey available shortly

    38. ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

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