As the traditional expatriate assignment of three to five years becomes less common, new forms of mobile working are taking its place. Rob Hyde assesses the four general types of assignments.

Swings and roundabouts, pros and cons - each type of international assignment will prove wonderful in certain respects and disastrous in others. For instance, some types of assignments, because they are still fairly new, can lead to tax liability issues not easily resolved.

Ideally, HR wants to match their company's needs with the employee's lifestyle and goals as closely as possible. The right match can set a good course for achieving a successful posting abroad.

• Virtual assignments
• Long-term international assignments
• Short-term international assignments
• Commuter assignments

Virtual assignments

Definition: a worker manages a variety of international activities across several countries and works with a team whose members are scattered across those countries. Although the worker does not need to relocate, the job involves extensive travel to work with team members. Further support comes from heavy use of information technology (IT).

Virtual assignments are the most recent form of international assignment and are also proving popular with many multinationals. A survey by PricewaterhouseCoopers in 2001 on managing mobility in Europe showed that the use of virtual assignment had increased more than 60 percent in the last two years.

At first glance, the advantages of a virtual assignment over the traditional expatriate assignment seem overwhelming.

First, virtual assignees are generally far less expensive than traditional expatriates. These workers tend to require only a local wage (without expatriate allowances) along with travel expenses for visiting various offices. The increasing use of video conferencing and other technological developments may make such visits less necessary in the future.

Second, virtual assignees do not need extensive arrangements for foreign social security, health insurance and pensions. They can stay within the home-country scheme.

Third, a partner's career is not affected here, since the virtual assignees do not move their partner and family abroad. Similarly, the children's education is not disrupted.

On a theoretical level, however, virtual assignments could soon prove wrought with difficulties, as they appear to be developing faster than the regulations governing them.

If, for example, a British-headquartered multinational sends an employee on a virtual assignment to Switzerland, it is hard to establish the location of the corporate tax liability.

Under Swiss law, any managerial duties related to work performed in the country mean the company who employs this person is subject to a degree of corporate tax.

In theory, this should therefore mean that all companies operating virtual assignments in Switzerland should be liable for this tax. But how can the company afford corporate tax in the UK and Switzerland?

Similar issues arise with virtual assignee's income tax liability. Unless a double- tax treaty is already in place between two countries, then a company and their virtual assignees are in for a difficult and potentially expensive time trying to ensure they meet legal obligations.

The fact that this assignment type is new is also a problem - nobody knows for sure how effective these assignments are in the long-term. While some expatriate consultants such as PricewaterhouseCoopers are now researching the area, even their official reports are not due to be published until September 2002.

And although moving abroad can cause family problems, so can frequent trips away from home, which are common in virtual assignments. Additionally, virtual assignees may not have a full understanding of the cultures in which they are working since they do not live in them.

Long-term international assignments

Definition: Long-term assignments tend to last between two and five years and involve moving the worker and family to the host country. The worker is expected to return "home" after the assignment is completed.

Long-term assignments, also known as the "traditional" expatriate assignment, still exist but are no longer standard as companies seek to cut costs. According to the 2001 Global Relocation Trends report, only 23 percent of assignments last longer than three years, compared to a historical average of 30 percent. Also, 59 percent of the 150 companies who participated said they are looking at alternatives to long-term assignments.

Companies still opt for long-term assignments because, despite their high cost, an executive with deep company knowledge can transfer that knowledge to a local office and fill a skill/knowledge gap that a local employee cannot.

Also, multinationals need executives with international experience, and employees who have worked abroad can play important, strategic roles as the company grows and evolves.

Unlike a virtual assignment, tax and social security liabilities are more clear. Many assignees don't have burdensome taxes thanks to double-taxation treaties between countries. Oftentimes, they can opt to stay in their home social security system.

Since long periods of separation can strain an employee's family relationships, keeping the family together in the host country can alleviate that pressure. They can also experience the adventure of living abroad as a unit.

But as many companies know from bad experiences, this works only when HR ensures that family needs are taken care of, including the trailing partner's career, the children's education, and language and culture training for all. Assignments can fail if the assignee's family is not happy in the host country.

However, taxes, social security and pension issues are rarely trouble-free. Tax rates, tax rules and forms all differ from country to country. In regards to social security, the home system could prove more expensive than the host country's, or the assignee could be in a situation where they lose their social security rights (ie, unemployment) in the home country.

Differing tax treatment of pensions may prove just as strange and difficult to understand. A company with a long history of sending workers abroad and that has well-established procedure and programmes in place is most likely to provide a satisfying long-term assignment.

Short-term international assignments

Definition: Short-term assignments can last from a few months to one year and involve moving only the worker abroad, not the family.

The short-term assignment's rise in popularity - a nearly 60 percent increase according to PricewaterhouseCooper's 2001 survey on managing mobility in Europe - is nearly the same as that of the virtual assignment.

Short-term assignments mean the employee's spouse does not have to give up their current job and look for a new one.

For the employer, these assignments solve critical skills shortages and are generally easy to manage and administer, though this depends on location and duration.

It is often cheaper than a long-term assignment on the whole, as less administrative work is required to manage it and trips home may not be needed. Usually, the assignee remains in the home-country social security scheme.

But employers should be wary that some countries, such as Switzerland, may require work permits even for a short-term assignment.

Also, an employee may be liable for tax in both home and host country and identical benefits may be tax differently in both locations.

While the partner may continue to be employed in the home country, short-term assignments can cause many more family problems than they solve. Increased childcare costs and sole responsibility for household chores weigh on the working partner who remains at home. Strained relationships can take away from the employee's performance.

Short-term assignments can work well for single, younger employees, though issues related to that stage of life can cause complications.

Commuter assignments

Definition: An employee commutes from home to an office in another country, usually travelling by airplane on a weekly or bi-weekly basis.

As with a short-term assignment or virtual assignment, a commuter assignment allows a company to fill a skills shortage without disrupting the employee's spouse's career or their children's education.

Europe has thousands of commuters, who commute to such international hubs as London and Brussels and then go home on the weekends.

On the surface, commuting seems like a great solution, but there are a multitude of disadvantages.

Although the family stays in the same place, the quality of family life inevitably suffers. The worker is likely to return home late and tired from the travel, which means he neglects his partner and children. The longer the commuting assignment, the worse the family situation can become.

On a tax level, the commuter assignment no few tax advantages, and if anything, can be far more complicated than tax arrangements for a short- or long-term assignment.

The employee, in a worst-case scenario, could be subject to double-tax liability and be taxed differently on certain benefits from country to country.

May 2002

UK-based freelance journalist Rob Hyde is a regular contributor to Expatica HR. A British national, Rob has lived and worked in England, France, Germany and Austria. His work has appeared in The Times, The Sunday Express and the Wall Street Journal Europe.