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Extended business travel can be costly if you don’t monitor who’s going where—and for how long.
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The term "extended business travel" has worked its way into the lexicon of mobility professionals.
Yet the phrase remains ripe for misinterpretation inside and outside human resource departments. When business leaders fail to understand, evaluate and monitor the immigration, tax and health care implications of international extended business travel, such travel—often used as an alternative to traditional expatriate assignments—can become an "overextended business trip" fraught with compliance risks.
"The beauty of the extended business trip is the flexibility," says eBay's Director of HR Global Mobility Eric Halverson, who notes that shorter, leaner assignments appeal to business-unit managers because they cost less and appeal to employees because they are less disruptive.
The big risk occurs "when an extended business trip of less than six months gets extended [past six months] and you do not track it correctly," he says. That "can trigger serious tax implications, and employees can lose their medical coverage. We are careful to avoid that six-month problem."
Adds Jane Malecki, vice president of international assignments for Weichert Relocation Resources Inc. in Norwell, Mass.: "Some people think that there is a standard 183-day rule—[that] as long as an employee is not in the host location for more than 183 days, the company is safe from a tax and immigration perspective. That's not necessarily the case."
Hence, many managers would benefit from applying more care to their oversight of extended business travel, mobility experts say. Hallmarks of vigilant oversight include:
Drivers and Uses
Malecki says well-planned extended business trips can be effective, and other HR professionals cite examples.
Managers at New York City-based KPMG LLP routinely use extended business travel assignments to supplement the company's U.S. ranks from February through April.
"We bring in people from other countries whose 'busy seasons' occur at a different time," explains Achim Mossman, KPMG's national director of global mobility advisory services and international executive services. In Germany, for example, tax returns are due in late September, so some German tax professionals sign up for one-, two- or three-month assignments in the United States each year in the spring.
KPMG is not alone. And, most mobility practitioners and experts are seeing an increase in such assignments. Ninety-three percent of the 408 mobility professionals who responded to Atlas Van Lines' 2011 Corporate Relocation Survey indicated that their organizations plan to increase or maintain the use of international assignments lasting less than 12 months.
That said, specific growth figures are difficult to come by because many companies do not diligently track extended travel and because organizations may define "extended business travel" differently. For instance, a company might limit it to three months, six months or 12 months.
The fact that extended trips cost companies less money than expatriate assignments represents one driver. Employers save on tax equalization, shipments of household goods, family housing, cost-of-living adjustments and other allowances typically spelled out in longer-term expatriate assignments. These perks are usually excluded from extended business travel arrangements. The fact that more companies, of all sizes, are conducting business overseas also generates more trips.
Percentage of international assignments less than 12 months in duration:
Companies with less than 500 salaried employees 6%
Companies with 500 to 4,999 salaried employees 16
Companies with 5,000 or more salaried employees 22
Source: 2011 Corporate Relocation Survey, Atlas Van Lines.
Malecki points to other drivers:
One of the reasons employees appreciate extended business travel is "They don't feel like they're putting their careers at risk," notes Halverson, as returning employees rarely find their positions filled.
That said, employers should still make clear the purpose of each assignment, what completion looks like, and what awaits the employee when he or she returns, Malecki says.
At San Jose, Calif.-based eBay, some U.S.-based employees use extended business travel to fill in for European colleagues on maternity leave. "These assignments are a great tool to fill open gaps that are temporary," Halverson says.
Tom O'Connor, GPHR, director of global mobility for United Technologies Corp. in Hartford, Conn., and a member of the Society for Human Resource Management's (SHRM) Global Special Expertise Panel, adds that such trips provide an excellent means of responding quickly to unexpected customer service challenges. If one of the heating systems, aerospace systems, helicopters, elevators or security systems that the diversified global company manufactures needs immediate attention, "an engineer can get on a plane tomorrow morning to go to another country, take a few days or a few weeks to address the issue, and then return home," O'Connor says.
Managers at Nalco Co., a global water treatment and process improvement company based in Naperville, Ill., often use extended business trips "as development assignments," says Director of HR and Senior Global Business Partner Judy Wierman, GPHR, who also serves on the SHRM panel. "The assignment gives the company the opportunity to get a critical job done, and it gives employees an opportunity to expand their skills sets. … You can gain a rich development experience from putting someone into a different culture and a different area even for a short period."
Nalco offers extended business travel—typically addressing specific business needs such as temporarily replacing an engineering position at an offshore platform in West Africa, for example—in addition to "true rotational assignments." Both provide a development component and can take place during a similar period of time, but the rotations are part of the company's talent management strategy and include longer-term assignments.
Nalco's use of some extended business travel as developmental exercises may be relatively rare. While other mobility professionals agree that some development benefits accompany extended travel, they say development takes a back seat to business needs such as filling a temporary gap, completing a short-term project, providing post-merger integration assistance or opening a new office overseas. Few organizations use extended business travel "as a tool for staff development, talent management or cultural immersion," reports Mossman, who works with dozens of mobility departments.
Instead, Mossman sees traditional expatriate assignments—what he describes as long-term assignments of more than 12 months—and short-term assignments lasting six to 12 months used for development. He defines extended business travel as trips lasting 30 days to three months. He reports witnessing in the past two years an increase in the use of six- to 12-month development assignments among his client companies. In such an assignment, field employees of global companies perform stints at headquarters to "get immersed in the headquarters culture."
While Halverson agrees in principle with Mossman's breakdown of assignments according to length, he says this breakdown posed a practical problem within his company.
Several years ago, eBay's mobility function had separate travel policies—one that covered assignments of less than six months, a short-term policy covering assignments of six to 12 months, and a long-term policy for expatriate assignments of 12 months or longer. The short-term policy contained many of the same benefits and allowances that expatriates on three-year assignments received; however, the policy covering trips of less than six months in duration offered far fewer benefits and were therefore more attractive from a cost perspective. Because managers wanted to avoid bearing the benefits costs of trips lasting six months or longer, many began using the shortest assignments and then extending them as they neared the five-month mark.
Many of these extensions posed problems: When extended business travel stretches past six months, the arrangement can trigger tax requirements in host countries and raise health care coverage risks. EBay's home-based health care plan covers employees outside the country for up to six months. Employees living out of the country for more than six months need to be moved to another policy with global coverage. In terms of taxes, many countries, including most European countries, allow U.S. citizens to work within their borders for up to six months, or 183 days, without being subjected to local tax withholding. This arrangement is contained in treaties the United States maintains with many other, but far from all, countries.
"We did not want employees to get hit with an additional tax and then lose their medical coverage," Halverson says. So, he and his team changed the policy. Today, a policy specific to extended business travel covers employees on assignments of 31 days to 12 months, while a long-term policy applies to employees on assignments of greater than 12 months.
EBay's policy for extended business travel "kicks in at 31 days because we wanted to get our arms around the tax compliance and we wanted to get our arms around the immigration issues," Halverson says. "If you did not track extended business trips until 90 days, you would have a lot of extended business travelers flying off your radar."
Additionally, eBay's mobility team conducts reviews of frequent business travelers at least twice a year to monitor any potential compliance risks. The team also creates a monthly report with the company's emergency services and security group to ensure that the current location of every employee is identified and monitored in case unrest—such as that in North Africa earlier this year—requires employees to be evacuated.
Given the tax compliance, immigration and health care issues, mobility experts say organizations should have specific policies for extended business travel. A survey of approximately 100 Worldwide ERC members, conducted in May and June by the U.S. mobility association based in Arlington, Va., indicates that more than 40 percent of U.S. organizations do not have formal policies that cover extended travel in the United States.
It's hard to find best practices outside of extremely large companies, Wierman says.
Halverson, Wierman and other mobility executives say that any approach or formal policy should contain leeway so parameters can be adjusted on a case-by-case basis, particularly when it comes to allowances.
Halverson emphasizes that eBay's assignments are "lean" on allowances. These assignments typically do not include spouse or family relocation, shipment of household goods, transportation allowances, cost-of-living adjustments, or cash lump sums for miscellaneous relocation expenses. In some cases, the company will fly family members overseas for visits or fly the traveler home once a quarter.
Nalco follows a similar approach. "I have not seen one of our extended assignments go longer than three months without a trip home, unless the employee chooses not to return home," Wierman says.
Halverson stresses that what he describes represents eBay's typical approach to extended business travel; there are exceptions. "Our priority is to make sure that [the employees] are legally authorized to work where they're going and to make sure we understand any and all tax implications," Halverson explains. "We give them economy class airfare, put them up in a hotel or possibly corporate apartments, and then bring them back. If there is tax, we take care of the tax. If there is a family situation, we deal with family situations independently. They might get home leave to come back and visit. We might fly family members up to visit.
"The biggest challenges are trying to determine the best lodging answer and whether to assist them with a per-diem payment or by using a cost-of-living adjustment," Halverson adds.
In terms of reporting relationships, extended business travelers typically maintain their traditional reporting relationships in their home countries while reporting to a manager in their host locations.
Wierman completed extended assignments to Singapore earlier in her career. "My direct, hard-line reporting went back to my corporate function head in the U.S.," she recalls. "But my operational reporting during the assignment was to the president of our [Asia] region. Many times, the reporting relationship for extended business travelers becomes a matrix."
Mossman points out that many assignees request these opportunities. Mossman, for instance, previously lived in Germany; while working for a former employer, he accepted a U.S. assignment and eventually relocated permanently.
In many ways, the allure of extended business travel—the ability to quickly deploy people around the world at low cost without incurring tax liability—also represents the primary risk of such assignments. If this type of travel is granted too quickly without preparation and oversight, the benefits may never materialize, or worse.
What type of housing solutions do you provide for domestic assignments of less than one year?
Short-term leased apartment 53%Corporate-leased apartment 48Executive apartment 35Hotel 37Lump sum 22
Respondents could select more than one answer.
Source: Worldwide ERC survey.
The author is a business writer based in Austin, Texas, who covers human resource, finance and social marketing issues.
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