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Taxing Expats, Poaching Talent, E-Newsletters
Q: When our company sends U.S. employees overseas, where do they pay income tax?
A: Employers should be aware that almost every country has some type of income tax that applies to all workers. In addition, the employee is responsible for U.S. tax on income regardless of where the income is earned. The Internal Revenue Service (IRS) has two provisions to help ease the tax burden for employees on international assignment.
The first provision is Internal Revenue Code (IRC) Section 901, which provides that if the U.S. tax is higher than the host country tax, the employee pays the U.S. tax. If the host country tax is higher, the employee is able to take a credit, or the host country tax can be claimed as an itemized deduction.
The second provision is IRC Section 911. This section allows employees to claim an exemption for a portion of their foreign income. The Tax Increase Prevention and Reconciliation Act, enacted in May 2006, changed the maximum amount of foreign earned income that an employee working abroad can exclude from gross income under this section.
An employee who plans to claim this exemption is required to meet either the bona fide residence test or the physical presence test. The employee is also required to complete the IRS tax Form 673 for payroll tax purposes.
Generally, Social Security and Medicare taxes are deducted from wages of employees working outside the United States if one of the following applies:
The employee is working for a U.S. employer.
The employee is working in one of the countries with which the United States has entered into a totalization agreement (also called a binational Social Security agreement).
The employee is working for a foreign affiliate of a U.S. employer under a voluntary agreement entered into between the U.S. employer and the U.S. Treasury Department.
State income taxes can further complicate the situation. Each state has requirements on residency as it relates to income tax liability. The employee will need to contact the specific state to determine the tax requirements.
Q: Recruiters are calling and e-mailing our employees at work during business hours. Is this legal?
A: Yes. Employers on the receiving end of these calls might very well question the ethical nature of such a practice, but it isn’t illegal. It is commonly known as “poaching,” a term associated with illegal hunting.
The object of “talent poachers” is to provide their clients with top talent. But much like an endangered species, top talent is in short supply. As a result, talent poachers pursue employees who haven’t even expressed an interest in leaving their current employers. The talent poacher commonly contacts an employee directly at work, and if the employee isn’t interested, the poacher may offer a gift for the name of another unsuspecting employee.
Employers aren’t taking poaching lightly, but they are finding that stopping it is not easy. In 2005, a highly publicized poaching incident involved a Microsoft executive who allegedly was poached by Google. Microsoft sued Google and the executive for violating a noncompete contract. The two companies reached an undisclosed agreement.
To prevent or discourage poaching, employers should consider removing employee contact information from company web sites. Employers also may institute policies to restrict nonbusiness communications during work hours and should remind employees of company communication monitoring policies. Employers may also consider using noncompete agreements to prohibit employees, especially those with access to proprietary or confidential company information, from working for competitors after the end of their employment.
Work with legal counsel to determine the best preventive measures for your company.
Q: Can you provide tips for producing an electronic employee newsletter and some ideas for content?
When writing for an online publication, it is a good idea to:
Write in a concise, conversational tone.
Keep stories short and sweet.
Think of each article as a personal note to your employees.
A good start for content ideas is an employer-specific calendar of events such as benefits open enrollment, employee recognition, important deadlines and training schedules.
Society for Human Resource Management (SHRM) members may obtain content and ideas for content from SHRM Online. As an SHRM member, you are authorized to distribute copies or excerpts of SHRM’s Managing Smart newsletter for educational purposes internally within your organization. You also may use SHRM’s Glossary of Human Resources Terms for a regular feature of the definitions of HR-related terms.
Another source of newsletter content is SHRM’s Going Beyond HR Calendar. Here you’ll find events related to employee relations, health and safety, diversity, and community relations.
The National Health Information Center publishes a similar calendar, which lists national health observances, along with the sponsoring organizations. Employers can use these special times to sponsor health promotion events, stimulate awareness of health risks or focus on disease prevention.
Press releases from government agencies, HR associations and HR consulting firms are also excellent sources of free content.
Check with your employer’s health plan provider, retirement plan administrator, employee assistance program, consulting firms, third-party administrators and any other organization with which your employer has a relationship. Many such organizations provide clients with articles ready to drop into a newsletter.
And for any electronic newsletter, don’t forget to consult with your information technology department early and often.
Lisa Orndorff, SPHR, GPHR, and Regan Halvorsen, SPHR, are information specialists in the Society for Human Resource Managements Information Center. Anne St. Martin, SPHR, CEBS, is manager of express operations in the center.
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