International Assignments: How to manage international assignments

19 January 2012 |

We look at the key considerations to bear in mind when approaching the question of managing international assignees.

Before the employee leaves the UK

Assignment policy

Employers that would like to deal with international assignments in an effective and efficient way should have a flexible but robust international assignment policy in place.  This policy should address the full spectrum of assignments that are now commonplace, from the traditional secondment (long or short-term) to the commuter assignment or project worker, and should be consulted prior to an employee leaving the UK.

A typical policy will cover such matters as identifying the compensation and benefits to be provided to employees while on secondment, as well as dealing with many of the practical issues that need to be considered, such as allowances for accommodation in the host country, the provision of flights home for the employee and his or her family, and arrangements for relocating the employee.

Compensation and benefits

Most employees will be concerned that their compensation and benefits are retained during their stay in the host country and that they are compensated for any additional expenses incurred, especially if their move is to a country where the cost of living is higher than in the UK.

Employees may be concerned about their long-term incentives and retirement benefits such as company pensions.  Typically they will want to know whether they can stay in the home company scheme and, if so, how the employer contributions will be funded post-departure.  If it is not possible to stay in the home company scheme, they will want to know what arrangements will be put in place to compensate a break in their home country pension.

Likewise, the employer will need to consider how participation in bonus plans and share schemes will be dealt with and whether or not the employee can continue to participate while on secondment.

Most expatriates will also expect to receive support for housing costs, travel expenses, medical expenses and school fees.  They might also expect to receive a cost of living allowance to help with living expenses in the host location.  Employers that are looking to ensure competitive packages should obtain relevant, up-to-date country cost of living data to enable them to carry out a meaningful comparison and benchmark their policies against similar organisations.

Tax issues

Tax is usually the largest part of the cost associated with secondments.  Careful planning can reduce the overall cost while taking away some uncertainty for the employee.

Tax issues in multiple jurisdictions can arise when seconding employees overseas, but these should not be daunting provided that they receive due consideration.  The employer should give thought to whether or not the employee should be “tax equalised”.  Under tax equalisation, the employee is put in no better or worse position, tax wise, as a result of taking up a secondment.  The employee will remain responsible for tax on his or her home country compensation and benefits package.  The employer will meet the tax liabilities arising on assignment-specific benefits like accommodation and school fees as well as additional taxes due to higher tax rates in the host country.  Clearly, where the host country has higher tax rates than the home country, equalising will potentially add to the employment costs.  Employers will need to take into consideration that, although taxes may be higher, some countries provide tax breaks to expatriates, which help mitigate the tax costs.

The terms of any tax equalisation policy are usually set out in the employer’s assignment policy.  It is crucial to clarify what elements of the compensation and benefits package are covered by tax equalisation, especially where long-term incentives are provided, and employers may want to consider a robust policy with regard to taxes arising in the host location on personal income.

Some countries do not allow tax efficient contributions to a foreign country’s pension scheme and it is therefore important to consider the host country tax implications on home country pension contributions for both the employer and the employee.

Administrative issues

When leaving the UK, individuals who are likely to become non-resident will need to notify HM Revenue & Customs (HMRC) by completing form P85 (leaving the UK form).  This form is a set of questions that HMRC will use to determine the employee’s UK residence and tax status.

It is outside the scope of this article to explain the circumstances when an employee ceases to be UK resident for tax purposes but, broadly, where the absence and employment abroad both last for at least a whole tax year and, during the absence, visits to the UK total fewer than 183 days in any tax year and average fewer than 91 days a tax year (taken over a period of up to a maximum of four years), subject to certain conditions, the employee will be treated as not resident or ordinarily resident in the UK from the day after leaving the UK to the day before returning (although the employee is entitled to his or her full personal allowance in the year of departure). As a non-UK resident, the employee will not be subject to UK tax on employment that is carried on outside the UK.

Tax filing and withholding of taxes in the UK and the host country will need to be considered to ensure that both the employer and employee are compliant and penalties are avoided.

Immigration issues

For the purposes of this article, we have assumed that the employee is being seconded to a European Economic Area (EEA) country.

The employer will need to consider whether or not the employee requires a work permit or some other permission to work in another EEA country.

If the employee is an EEA national then he or she will be entitled, under EU freedom of movement laws, to accept employment in any other EEA country.  However, citizens of the new eastern EU states, namely the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia, do not yet have full free movement rights.  The terms governing these countries’ accession allow the existing EU states to impose restrictions on their free movement.  Therefore, if the employee concerned is a citizen of any one of these eight countries the employer should check whether or not there are any restrictions on his or her working in the proposed new EEA country, before the transfer takes place.

If the employee concerned is not an EEA national then he or she will almost certainly need to obtain some kind of permission to work before travelling to the new country.  It may be that the employee needs a work permit and/or residence permit, so professional advice should be sought as early as possible.  The Van der Elst decision may be relevant.  This European Court of Justice decision means that, if certain conditions are met (which vary from country to country), a non-EEA national working for an EU employer in the EU is entitled to provide services, on his or her employer’s behalf, in another EU member state without the need to obtain a work permit.  It is vital, therefore, that the employer seeks timely immigration advice if the employee to be transferred is a non-EEA national, and this should be factored into the secondment timetable.

Social security

The UK has entered into a large number of bilateral and multilateral social security agreements that apply to secondments so as to avoid the employee paying social security contributions both in the UK and in the host country.  The general rule is that the employee will be subject to the social security legislation in the host country where he or she works, but there are exceptions to this.  If the employee is sent to work in an EEA country or Switzerland for no more than 12 months at the outset, the payment of UK social security will normally continue where a certificate of coverage E101 is obtained from the UK authorities and the conditions as stipulated in the European Social Security Regulations have been met.  If the secondment is unexpectedly extended for a period of up to another 12 months then UK social security may continue to be paid for no more than another 12 months.

With effect from March 2010, the new European Social Security Regulations (Regulations 883/2004 will replace Regulations 1408/71) will allow secondees to stay in their home country social security system for up to 24 months.

There are additional provisions that would allow individuals to remain in the UK social security system for a period of up to five years if special circumstances apply and where the UK and host EEA country authorities so agree.  After the maximum period of five years has expired, the employee will generally come within the host country social security regime, except in rare circumstances where application to stay in the home country system beyond five years may apply.

In some circumstances, when the employee comes within the scope of the host country’s social security system, he or she can continue to make voluntary payments into the UK social security system to preserve any pension rights that are dependent on continued contributions if certain conditions are met.

Secondment agreements

The employer will have to discuss the terms of the secondment agreement with the relevant employee, and consider how such terms will interact with the employee’s existing contract of employment in the home country.  The secondment agreement must make it clear that its terms prevail over those in the employee’s contract of employment.  However, the employee will have to be reminded that all the terms and conditions of his or her contract of employment will be otherwise unaffected during the secondment.

The secondment agreement should include obligations for the employee:

  • to carry out the duties assigned by the secondee company;
  • to comply with the standards of conduct and performance and rules and procedures of the secondee company;
  • to comply with any relevant local laws or practices; and
  • to devote all of his or her time and attention to the secondee company.

The secondment agreement should also inform the employee of his or her reporting line at the secondee company.  The employer will have to consider how the employee’s performance and any discipline or grievance issues are to be monitored while he or she is on secondment and who determines permissions relating to vacation requests and the like.

The employer should ensure that the secondee company’s confidential information and trade connections are adequately protected by the contract terms.

On secondment

Administration issues

Tracking global employees is notoriously difficult, especially when they move frequently.  It is vital for the employer to keep track of such employees in order to deal correctly with tax and social security liabilities.  For instance, tax and social security payments, or the withholding of such payments by the employer, will depend on the employee’s residence status in a particular jurisdiction, which in turn often depends on the number of days that the employee spends in that jurisdiction.  Employees working in the UK before their secondment are subject to Pay As You Earn on their earnings.  If the employee remains on the UK payroll, once seconded, withholding of payments in the UK can be stopped if a No Tax code is obtained from HMRC.  However, if the employee is transferred to the host country payroll, withholding of payments in the host country will need to be considered.

The employer may have to keep track of the employee’s holidays if his or her holiday entitlement continues to accrue under the contract of employment.  The employer may also need to keep track of any sickness or injury absences if its procedures continue to apply.  It is important for the employer to ensure that the employee is under an obligation to advise it of the relevant dates and take responsibility for any negative consequences for failing to do so, such as disadvantageous tax treatment with potentially negative ramifications for it or the secondee company.  An effective tracking system is a necessity.

Some employers provide individuals with support or guidance regarding tax filings in the host location to ensure that the employee is compliant in the host jurisdiction.

Preparation for the employee’s return to the UK

Return to work with the employer

The secondment agreement should deal with the issue of the employee returning to work with the employer on termination of the secondment.  It might, for example, set out whether or not the employee is entitled to return to his or her previous position, or give the employer the opportunity to consider alternative positions.

Tax and social security issues

The returning employee will be treated as UK resident and ordinarily resident from the date of arrival if he or she intends to come to the UK to live permanently or remain for three or more years.  If the employee becomes UK resident the employee can claim his or her full personal allowance in the year of return.  Care is, however, needed where the employee will be in the UK for only a short period before being seconded once more outside the UK.  In these circumstances it may be that the employee does not become resident in the UK at all or is resident, for tax purposes, in both the UK and another country.  In cases of dual residence, the employee may be able to claim exemption or partial relief from UK tax under a double taxation agreement.  The employer should check whether or not such an agreement is in place and gauge its effect on the tax position.

All employees coming to the UK should complete a Form P86 and submit this to HMRC.  This will allow determination of their residence and tax status.

Corporate issues

Although it is outside the scope of this article to consider these issues in depth, a number of corporate issues should be taken into account when sending employees abroad.

One of the key questions is who will take responsibility and bear the costs of the secondment.  Often this is not clear and will need to be answered before the correct tax treatment can be established.

The employer should consider who is to be responsible for dealing with obtaining tax and social security refunds paid erroneously in the home country and identifying if tax and social security should have been paid elsewhere.

It should also consider whether or not there are any recharge arrangements in place if the home company is to continue paying the employee’s salary and benefits package.  If not, the employer’s corporate tax function will be able to advise on whether or not an arrangement should be put in place.

Where an employee is being sent to set up a new business in a new location, the employer should consider whether or not a permanent establishment might be created, resulting in any income derived from the new location being subject to corporation tax in that jurisdiction.  A permanent establishment may consist of a place of management, a branch, an office, a factory or a workshop.

The employer should also identify whether or not there is an employer social security liability arising in the host country, and who is responsible for dealing with this and making any necessary payments.


Seconding employees abroad can be a minefield.  However, where the employer has robust assignment policies in place and effective systems for dealing with the taxation and social security issues, this will reduce management time in dealing with expatriates and help make the assignment a successful one for both employee and employer.

The golden rule is, where possible, to plan ahead to save time and money.

This article was first published on XpertHR, the award-winning subscription website for HR professionals.  (

For further information or to discuss the issues raised, please contact Guy Abbiss ( or Bina Gayadien ( on +44 (0) 203 051 5711.


Content is for general information purposes only.  The information provided is
not intended to be comprehensive and it does not constitute or contain
legal or other advice.  If you require assistance in relation to any
issue, please seek specific advice relevant to your particular


Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.

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