Page 153 - DMGT548_GLOBAL_HRM

Global HRM

Notes national practices vary considerably. Transportability of pension plans, medical coverage,
and social security benefits are very difficult to normalise.
Most U.S. PCNs typically remain under their home-country’s benefit plan. In some countries,
expatriates cannot opt out of local social security programmes. In such circumstances, the
firm normally pays for these additional costs. European PCNs and TCNs enjoy portable
social security benefits within the European Union.
Multinationals also provide vacations and special leave. Included as part of the employee’s
regular vacation, annual home leave usually provides airfares for families to return to
their home countries.
Rest and rehabilitation leave based on the conditions of the host country also provides the
employee’s family with free airfares to a more comfortable location near the host country.
Emergency provisions are available in case of a death or illness in the family. Employees
in hardship locations often receive additional leave expense payments and rest and
rehabilitation periods.

5. Taxation: Taxation causes the most concern to HR practitioners and expatriates (both
PCNs and TCNs) since it generally evokes emotional responses. No one enjoys paying taxes
and this issue can be very time consuming for both the firm and the expatriate. For the U.S.
expatriate, an assignment abroad can mean being double – taxed-both in the country of
assignment and in the United States. This tax cost, combined with all the other expatriate
costs, makes some U.S. multinationals think twice about making use of expatriates.

Notes Multinationals generally select one of the following approaches to handle
international taxation:
1. Tax equalisation: firms withhold an amount equal to the home country tax obligation
of the PCN, and pay all taxes in the host country.
2. Tax protection: the employee pays up to the amount of taxes he or she would pay on
compensation in the home country. In such a situation, the employee is entitled to
any windfall received if total taxes less in the foreign country than in the home
country.
Tax equalisation is by far the more common taxation policy used by multinationals. Thus, for
PCN, tax payments equal to the liability of a home-country taxpayer with the same income and
family status are imposed on the employee’s salary and bonus. The firm pays any additional
premiums or allowances, tax-free to the employee. As multinationals operate in more and more
countries, they are subject to widely discrepant income tax rates.

Example: In Singapore, if the expatriate receives the payment for the services rendered
outside the country are not subjected to Singapore taxation, if a separate contract is established
between the expatriate and a non-Singapore employer.

Did u know? Golden parachute is an agreement between a company and an employee
(usually upper executive) specifying that the employee will receive certain significant
benefits if employment is terminated. Sometimes, certain conditions, typically a change
in company ownership, must be met, but often the cause of termination is unspecified.
These benefits may include severance pay, cash bonuses, stock options, or other benefits.
It is for the executive protection.

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