Running an international assignment compensation practice is a highly customized process for most companies. Yet there’s one aspect that’s common to everyone—the Year-End process—and judging from the requests and questions we’ve received from clients over the years, it’s one of the most problematic. This is where every data collection failure shows up, as all of the data that has accumulated over the year needs to be verified, reconciled, saved, and included in a final year-end statement of total compensation.
This Global Statement of Compensation (GSOC) report should include base compensation, employee contributions, recurring allowances, and other items that may be provided in company base, home, or host currency. Anything that has been paid to or on behalf of an assignee needs to be collected and reported to maintain compliance. The GSOC should be reported timely to the tax provider to facilitate efficient tax filing on the part of the assignee and be without error, or risk the unpleasant prospect of costly reviews and redo’s by tax firms.
Though many relocation managers find the prospect of year-end reporting daunting, the process actually goes more smoothly if the relocation department runs it. Recently, I spoke to a group of corporate representatives about a few basic steps that can make this a streamlined, more efficient task. I call this the 7-Step Plan.
1) Develop a Year-End Checklist. A detailed checklist will itemize all of the information needed to provide accurate and timely year-end compensation reporting. The checklist should include due dates and departmental responsibilities. A comprehensive checklist will also include items such as identifying early cutoff dates, identifying all employees who will receive the tax filing services (employees on the tax eligibility list), and providing for the time needed for verification and processing. It will also set firm deadlines for the reporting and tax filings. Establishing the responsibility for reporting all of the relevant compensation data is an important component, and can include wages, imputed income, benefits, equity, taxes, etc. Some things to consider:
• Don’t forget, year-end isn’t just December 31st. When building your checklist, consider countries such as Australia, South Africa, and the United Kingdom, where year-end dates are different.
• Involve your tax provider. Find out when the data is required.
2) Set up a Year-End Prep Call. When setting due dates, remember that several countries will have mandatory vacation times around the end of December, and you must account for no one being available at that time. The checklist should be reviewed in this call to ensure that all involved parties are aware of their role and understand the due dates, as well as provide an opportunity to build understanding and relationships. Ideally, the call should take place in September or early October, giving enough time for consideration and preparation; if you have not already held a call, consider holding one now.
3) Verify your data. Accuracy is vital, especially when it comes to compensation reporting. Data such as addresses and tax ID number/Social Security numbers should be confirmed, as well as wages, benefits, sick and vacation time. Double-checking data prevents backtracking and costly errors down the line.
4) Finalize your data! Make sure that the final payroll reports of the year have been included, plus any end of the year benefits. Then, back up the program data again and be sure to store it in a secure location for future reference.
5) Tackle report completion. Check the deadlines for each country and be prepared to provide specific data for those countries. Some tax providers may ask for data for different assignee populations. Follow your year-end deadlines and, whenever possible, send the data ahead of time. Some locations may have very tight turnaround times to make that final tax payment of the year.
6) Celebrate! This step is fairly simple and well deserved. However, don’t forget to follow it immediately with Step 7.
7) Begin preparing for the New Year. You can get a good head start on next year’s process by setting the foundation now. Consider any areas you think you can improve on, and add or enhance your checklist. Throughout your review process, remember that education, communication, and escalation are your guiding principles. Starting the process off with all parties involved and fully aware of everyone’s roles and strong communication throughout the process will take you a long way toward ultimate success. Establish a plan for escalation in the event an issue should arise. This will help you avoid wasting critical time in problem resolution. Then you can celebrate again for a job well done!
For more information on Cartus’ International Compensation services, visit us at Cartus.com.