ITX Insights - March 2024
In focus: Mitigating the risk of a failed GEC implementation
Implementing a Global Employment Company (GEC) can be a strategic move for organizations aiming to streamline operations, enhance compliance, and drive efficiencies in their global workforce management. However, the success of a GEC implementation hinges on a clear understanding of the objectives, alignment with key stakeholders, and careful planning.
Here are 10 key steps to mitigate the risk of a failed GEC implementation:
?1. Define clear objectives: The GEC should be the solution to a well-articulated problem or future vision, because this will drive the GEC's design. Therefore, before embarking on a GEC implementation, articulate the problem or future vision that the GEC is intended to address, whether it's cost reduction, governance, compliance, efficiencies, customer engagement, or others. These objectives are also called "design drivers", because they will drive the design the GEC and will determine its “measure of success”.
2. Ensure stakeholder alignment: Engage with leadership and key stakeholders to ensure alignment on the objectives and expectations. Stakeholder buy-in is critical for the success of the GEC, as different perspectives and priorities must be considered to avoid misunderstandings and potential conflicts down the line. Unless the objectives are agreed upon with all stakeholders, what may appear as success to one person may look like failure to another, depending on their expectations and priorities.
3. Reflect the objectives in the design: Tailor the design of the GEC to align with its agreed objectives. For example, if better governance and compliance are key drivers, the design may emphasize robust controls and reporting mechanisms. On the other hand, if the key drivers are streamlined processes and faster deployment timelines, the processes could be designed accordingly.
4. Develop a Feasibility Study and Business Case: Conduct a feasibility study and develop a business case to demonstrate the potential benefits of a well-designed GEC implementation. This is essential to justify the investment, and to provide a roadmap to achieving the desired outcomes.
5. Develop clear Implementation and Change Management plans: It is often the case that stakeholders agree on a project's objectives (i.e. the end goals) but are reluctant or unable to commit the necessary time and resources to get there. A clear implementation plan and a Change Management plan will help address any resistance or challenges that may arise during the implementation process, and will ensure that all stakeholders commit the necessary time and resources to support the implementation efforts.
6. Do it well, and do it quickly: Assuming that the implementation of the GEC makes business sense and is expected to deliver benefits to the organization, consider how quickly you wish to start enjoying these benefits.? A protracted implementation would only delay those benefits, representing an "opportunity cost”, therefore it is in the company's interest to reduce the implementation timelines. It is common for the “hidden cost” of a delayed implementation to run into millions of dollars, in terms of lost efficiencies and unrealized cost-savings.
7. Consider co-sourcing some implementation and operational tasks: Outsourcing certain implementation tasks and day-to-day operational activities of the GEC could significantly reduce implementation timelines and deliver the anticipated benefits faster.? The outsourcing option can reduce implementation timelines in various ways: (a) Eliminating the need for lengthy internal processes for staff requisition and redeployment, since the outsourcing vendor can provide experienced resources; (b) With regards to technology tools (for example integrated ERP, international payroll systems), the outsourcing option eliminates the need to go through the selection, procurement, installation, testing and staff training, by using the vendor's technology infrastructure instead; (c) Working with a provider who has gone through many GEC implementations usually helps to avoid mistakes and pitfalls, and provides quicker answers and solutions to various stumbling blocks.? There is ample anecdotal evidence suggesting that a co-sourced GEC model could reduce the implementation timelines by a factor of 3 or more.
8. Future-proof the GEC’s design: Whilst it is important to design the GEC with clearly articulated objectives in mind, it is also important to avoid focusing exclusively on a narrow assignee profile.? Designing a GEC to support only one type of assignee can prove risky in the long run, considering that a particular type of assignment may decline as result of changing business needs or market trends, bringing into question the relevance of the GEC.? In reality, GECs are extremely versatile concepts that can support a very broad range of assignment types and evolve over time to continuously align with the changing needs of international organizations.
9. Establish Baseline Metrics: If the success of the GEC is expected to be measured in terms of specific success metrics (e.g. better compliance, consistency, employee satisfaction, cost, etc.), it is useful to perform a baselining exercise to evaluate these metrics prior to the GEC implementation.? This would make it easier to measure the impact of the GEC, and to monitor how these success metrics change over time.
10. Monitor and Adjust: Monitor the overall value that the GEC is delivering to the organization, expressed in terms of the agreed success metrics, as well as operational KPIs that are relevant to the business stakeholders.? It is better to identify a few, but meaningful, parameters, rather than generating a lot of data that may not be relevant.? If the data reveals that the GEC needs attention, you may need a more detailed analysis to identify what needs fine-tuning.? Similarly, if the organizational needs change, a more substantial re-design may be required, to re-align the GEC.? Don't forget to share the metrics with key stakeholders in a simple and easy-to-digest way, so they continue to recognize the GEC as an important part of the organization's toolkit to operate and thrive internationally.
By following these key steps and mitigating potential risks, organizations can increase the likelihood of a successful GEC implementation and realize the intended benefits of improved global workforce management.
Do you have any questions about Global Employment Companies? Feel free to contact ITX.
Dispelling the Myth: Are GECs and EORs mutually exclusive alternatives?
In the last issue of this newsletter (February 2024), we outlined the key differences between a Global a Employment Company (GEC) and an Employer of Record (EOR). Nevertheless, there are still several myths regarding the relationship between GECs and EORs. For example, it is often assumed that GECs are EORs are mutually exclusive alternatives.
In reality, while GECs and EORs serve distinct functions, they are not mutually exclusive and can effectively coexist within the same organizational framework. The key point to remember is that a GEC is an integral part of the organizational structure, whereas the EOR is a service provider delivering a service to the organization.
A GEC functions as the legal employer of assignees deployed overseas, managing various aspects of HR administration, offering control, visibility, and efficiency in managing mobility programs, leading to improvements in cost management, compliance, deployment timelines, and assignee experience. On the other hand, an EOR serves as a third-party provider, undertaking full employment responsibility for staff on behalf of its clients, particularly in locations where the client lacks a local subsidiary.
Crucially, organizations can benefit from integrating both GECs and EORs within their global employment strategy. When a GEC is already in place to oversee assignees deployed internationally, it is advisable for the GEC to hold the contract with the EOR service provider. This arrangement ensures comprehensive visibility of all employees working overseas, whether deployed to subsidiaries or locations where an EOR serves as the local employer.
In some jurisdictions, it is possible for organizations to register an overseas entity as a "foreign employer" with local authorities. While this process entails longer timelines, it allows organizations to maintain a direct employment relationship with the employee.
It is also possible for organizations to use EORs as an interim solution, whilst going through the process of registering the GEC as a foreign employer, or whilst in the process of setting up a local entity.
In summary, GECs and EORs offer valuable and not necessarily mutually exclusive options for deploying employees overseas under different circumstances. GECs are ideal for countries where the organization has a legal presence, with potential for registration as a "foreign employer" in other locations. EORs provide a swift solution for deployments where the client lacks legal establishment, albeit with considerations regarding costs and limitations. By strategically leveraging both models, organizations can tailor their approach to meet the unique needs of their global workforce, ensuring efficient management of international assignments.?
GEC or EOR? Do you want to know what’s the best solution for your organization? Please do not hesitate to contact ITX.
Learning Corner: Navigating sanctions and blacklists in Global Mobility
Note: This article aims to outline generic principles and does not provide a comprehensive list of sanctioned or “blacklisted” countries or entities. Readers are strongly recommended to seek professional advice specific to their circumstances.
Today’s Global Mobility professionals are expected to navigate many complex challenges, in an increasingly dynamic economic and geo-political landscape. Amidst the many complexities, there lies the critical challenge of navigating international sanctions. As the custodians of cross-border talent moves, Global Mobility professionals should mitigate the risk of inadvertently infringing such international sanctions.
International sanctions are, essentially, measures imposed by individual states or international organizations to commercial, financial, and/or other activities with specific countries, entities, or individuals. These sanctions are often imposed for various reasons, including political, economic, or human rights concerns. Regardless of one’s own personal views, failure to comply with these sanctions can lead to severe consequences, including legal repercussions, and financial penalties.
Therefore, it is crucial for businesses engaging in global mobility programs to keep track of countries and entities on various sanction lists. Hence, before deploying employees overseas, it is advisable to have a step in the process to identify any potential connections to sanctioned entities or activities, which may expose the company to repercussions. Similarly, organizations considering the establishment of a GEC need to be particularly cautious with locations that could be sanctioned or blacklisted.
Apart from having robust procedures, it is important to invest in basic education, and to create a culture of awareness and compliance, to mitigate risks. Onboarding, briefings and training should cover the basics of international sanctions, as well as specific compliance procedures and protocols to follow when managing global mobility activities.? Technology can also play a role in automating compliance processes, such as screening employee data against sanctions lists and flagging any potential risks.
Today, there are several organizations that maintain a list of sanctioned countries, entities, and individuals. Some of the most widely referenced lists include the United Nations Security Council, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), the European Union, the UK Office of Financial Sanctions Implementation (OFSI), and more. Organizations operating internationally should regularly consult these lists and stay informed about updates. It is important to remember that sanctions lists can vary between jurisdictions, so businesses operating in multiple countries should ensure compliance with the relevant sanction regimes in each jurisdiction.
In addition to monitoring sanctioned countries, GEC professionals should also be aware of another “blacklist” compiled by the European Union, commonly referred to the list of “Non-Cooperative Tax Jurisdictions”, or “Tax Haven Blacklist”. This list identifies territories that fail to meet certain tax transparency and fair taxation criteria set by the EU (specifically, Tax Transparency, Fair Taxation, and measures against Base Erosion and Profit Shifting).
Countries on the EU's blacklist are at risk of some reputational damage, and there may be more stringent requirements for transactions involving entities based in such listed jurisdictions.? Therefore, when moving employees across borders, businesses must consider the tax implications of the destination country or jurisdiction. Deploying talent to countries on the EU blacklist may expose businesses to increased tax risks and regulatory scrutiny.
More information on the EU’s list of Non-Cooperative Tax Jurisdictions can be found here.
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ITX News
ITX participating in the Global Workforce Colloquium in London, UK
Meet ITX on 18th March 2024 at the Global Workforce Colloquium, organized by the Expat Academy. The event is an indispensable resource for professionals seeking to stay abreast of industry developments, forge meaningful connections, and enhance their capabilities in navigating the complexities of global talent management. Through its comprehensive program and collaborative atmosphere, the Colloquium empowers attendees to drive excellence and innovation in managing global workforces effectively.
ITX hosting the GEC Network Club event on 28th March 2024
Does your organization use a GEC?? Meet other GEC thought leaders in a professional and confidential forum
ITX announced the date of its next GEC Network Club virtual meeting, which will be held on 28 March 2024. This is the world’s first and largest network of GEC professionals, facilitating the free exchange of information and ideas between Mobility specialists who manage GECs. The network meets virtually at least twice a year, and it has a private group chat allowing Mobility professionals to communicate with each other at any time.
?Membership is free, and it is open to HR/Mobility professionals working in organizations that already have GEC, or in the process of transitioning to a GEC model.
If you would like to join the GEC Network Club, please reach out to your ITX contact.?
Research Project: How do companies make decisions about GECs?
ITX launched a research project to gain insights into the genesis and evolution of GECs within various organizations A full report will be produced in August 2024, and distributed to organizations that participate in this study.
The study is open to all organizations with an international footprint (even if they don’t have a GEC).?? The goal is to understand the level of awareness on the topic of GECs, and which factors influence, whether a specific organization will establish a GEC.? Some of the areas explored in the study include:
?If you would like to participate in this study (or if you know someone who may be interested), you can access the survey here.??
Academic Research Opportunity: The Link Between CSR Strategies and Expatriate Commitment
International assignees are highly valued assets, and their commitment is crucial for organizational success. Understanding the key drivers of expatriates commitment is essential for HR, International Mobility leaders, and managers.
Today, companies are increasingly embracing Corporate Social Responsibility (CSR) strategies to build a more sustainable future, taking into accounts broader stakeholders needs. In this context, it is interesting to understand the links and influences between different types of CSR Strategies and the expatriates’ commitment, as well as the impact on expatriates’ identification to the company, individual performance and behaviour.
Charles-Alban Vernier, Chief Expatriate Management Officer at ITX, is leading an academic study on the impacts of CSR Strategies on expatriate commitment.? To contribute to valuable research and gain valuable insights, we invite companies with expatriate populations to participate.
Participation involves having your expatriates complete an anonymous survey. If you would like to participate in this study, please register your interest HERE and you will receive the survey link and a draft introductory message to send to your expatriates.
In return for your participation, you will receive the research findings, insights, and resulting management recommendations from all participating companies.
Thank you for considering your participation and contribution!
What difference could a GEC make? Find out in less than a minute.
There could be many good reasons why your organization does not use a GEC today.? But are you able to articulate, hypothetically, how a well-designed GEC could potentially address some of your key challenges?? Take a quick self-assessment and receive a free customized report with some initial suggestions, in less than a minute.? The automated report cannot replace a detailed consultation, but it will provide some insights on how GECs are delivering value to many international organizations around the world every day.
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