While the majority of mobility spend comes from direct costs whether they’re domestic or international, organizations are also looking for ways to reduce costs without impacting employee experience. Despite their best intentions however, many companies are unknowingly putting their bottom line at risk.
I spoke with our Vice President, Consulting & Advisory Services, Jennifer Connell, to ask what she considers are potential blind spots for companies when they are looking to reduce spend. Jen states that typically, a lack of awareness of where the money is going is the biggest challenge facing corporations. She identifies three areas that can have the biggest impact on or savings for your program.
Here are the top 3 most expensive compliance mistakes that will drive up your mobility spend:
1. Running a non-compliant program
When Emmott assumed the head of mobility position at his new company, he could see right away that there were inconsistencies within the program that put the organization into a compliance risk. Unfortunately, he was unable to action any specific changes from senior leaders, despite his warnings of potential penalties or fines. That was, until the company was slapped with a hefty fine as a result of a non-compliant tax program into their top destination location.
Compliance issues continue to be a huge thorn for mobility programs. As organizations either consciously or unconsciously cut corners, they are putting their company at risk. Fines can run upwards of tens of thousands of dollars per occurrence and may even include limits on business into the country or jail time which can have an even bigger financial impact.
2. Using your tax firm for out-of-scope services
When Jane onboarded her company’s program to Weichert 3 years ago, she was shocked to see the immediate cost reduction within the first year. The cause of the savings? As a direct result in using Weichert’s in-house tax program, Jane reduced costs by 20% by eliminating out-of-scope fees for the standard collection/coordination of compensation data.
It’s not unusual for companies to tack on additional, out-of-scope services to their existing tax provider contracts. However, these fees can add up quickly, a needless expense that could be addressed by streamlining process or negotiating a more comprehensive contract. Reviewing ad hoc costs quarterly and annually can help you identify any trends that may be costing you more than you realize.
3. Not collecting TEQ overpayments
Maria wasn’t certain she could trim her mobility program any leaner without impacting employee experience. After a recommendation from her Weichert account owner, she began to capture outstanding tax equalization (TEQ) payments. In the first year, thanks in part to Weichert’s TEQ capture/collect process, Maria realized a significant savings.
Tax equalization (TEQ) attempts to cover any additional foreign and home country tax cost resulting from an assignment. When the employee pays more in taxes in the host country, the organization will cover it. However, if the employee’s total taxes paid are lower than they would have been at home, the company can request reimbursement of the overpayment. The challenge is that most companies don’t have a good system to recover these overpayments; this lack of process can translate into big bucks.
Note: Examples are intended for illustrative purposes and do not represent specific people or programs.