International rotational programs—assigning employees to short work assignments abroad—can be an innovative way for an organization to retain future leaders.
The programs do have immigration compliance and tax risks, however, that employers should recognize, said Jason Rogers, vice president and senior global immigration counsel for Newland Chase in Dallas, TX.
Most employee assignments Rogers has worked on have lasted no longer than six months.
But even short-term assignments can take some time to set up, noted Lieselot Whitbeck, attorney at Hunton Andrew Kurth in Washington, D.C.
Rogers agreed; in one company's well-established rotational program in southeast Asia, new program participants are identified nine months before the program begins, then later work in Vietnam, Indonesia and Malaysia, he noted.
Talent wars have boosted the use of rotational programs, he said, noting that they've become part of the recruitment process at some organizations.
"Technology has given employees the sense that they can work anytime, anywhere," Rogers said.
Many employees' desire to work around the globe can be beneficial for companies that continue to expand into new regions, he observed. And rotational program assignments, which tend to be much shorter than expatriate assignments, can be cheaper for companies, while still resulting in knowledge transfer to and from the employee working abroad.
Rotational programs can lead to happier and more loyal employees, he said. However, he noted that at the company with the well-established rotational program in southeast Asia, 24 percent of employees left within a year of their participation in the program. During the program, they learned about new opportunities. So, companies can't assume rotational programs alone will lead to greater retention with all employees, he cautioned.
Nonetheless, the benefits of rotational programs to companies and workers go beyond employee development and knowledge transfer. Such programs can help build rapport within global organizations more than video conference calls can, he noted.
Employees should not dictate to the company where they will travel or for how long, Rogers said. This may result in compliance problems, such as lack of adequate right-to-work documentation. And business units should not be allowed to create rotational programs on their own, he added, again saying this could increase compliance risks.
Make sure each rotational program follows immigration laws, Rogers said. Don't assume that an individual who can enter a country can also work there. An employer may need to file work permits for participants in the program.
What the employees do may affect whether work permits are required. For example, in some countries workers who attend class and learn while in rotational programs are exempt from work-permit requirements.
Failure to comply with immigration requirements can open companies up to onsite audits, Rogers cautioned. Participating individuals may be deported and barred from returning to the country. That may result in a lawsuit from an employee who blames the company for not taking the time to get the immigration documentation right.
Penalties can be particularly steep for companies that fail to comply with European Union (EU) "posted workers" requirements, Rogers said. Posted workers have been sent by their employer temporarily to another EU member state to carry out a service on the employer's behalf.
Companies should review with tax providers how they can avoid inadvertently creating permanent establishments abroad if they send employees to work there, Rogers said. They may increase their tax exposure through rotational programs.
Payments into local social-security schemes likely will need to be made for participating employees, he added.
Even a stay of a short duration, such as less than 180 days, may have tax consequences for the company and individuals, Rogers said. Tax laws should be reviewed each year, as they may change.