Have Passport, Will Travel

How to secure your finances when on assignment abroad.

In the course of his 26-year finance career, Dean Gardner has lived in Europe, Africa, Asia and South America, for a total of nine years outside his native United States. Looking back, Gardner, CFO of horticultural company International Garden Products, says he found the posts to be lucrative, in more ways than one.

“My overseas assignments resulted in a much quicker learning curve,” says Gardner, who worked outside the U.S. for both Schlumberger and Tektronix. Not only did he get broader experience in treasury, tax and international accounting, but the experiences equipped him with “additional languages and the ability to live, conduct business and manage in multicultural environments.”

Gardner cautions, however, that there are a host of decisions regarding current and future assets that must be addressed before accepting such an assignment. Given that international assignments are on the rise — almost 40% of respondents to KPMG’s 2007 survey on global assignment policies and practices expect to use expatriate employees more in the next five years — resolving those issues means more time devoted to the job at hand and less time worrying about the impact of the job on your personal finances.

Before You Go

Overseas assignments have become more frequent and flexible in recent years. Jonathan Farn, founder of European recruitment firm Farn Williams, cites the rise of what he calls “regional expats” — European executives who are happy to move from country to country as new opportunities arise.

Nevertheless, understanding the various financial aspects of a post and its pay is as important for well-traveled executives as for those heading overseas for the first time.

Compensation is typically structured as a post’s home base salary, plus cost-of-living allowance and any hardship premium, minus hypothetical tax (a tax deduction made by the company). The end result, Farn estimates, is normally a net pay from 5% to 15% greater than the post’s equivalent domestic gross package.

There is also a long list of extras that executives should request when offered an overseas job. Nothing is guaranteed, and Farn adds that an executive receiving all he asks for depends on whether the employer can find an equally suitable but cheaper candidate closer to home. But they should aim to secure perks ranging from the obvious, such as housing and health cover, to the more specific, such as repatriation costs at the end of the assignment and access to a country audit manager to help minimize tax during their stay.

The latter can be a significant financial fillip, especially in the case of European executives, for whom different tax regimes across the Continent can lead to some beneficial outcomes. For example, a British executive taking an assignment in France at a multinational company should sign a British contract through the group’s UK subsidiary if it has one, Farn advises. Due to different tax laws, he says, the executive would then pay social security in the UK, where it’s lower than in France, but pay income tax in France, where it’s lower than in the UK. “You end up with a double win,” Farn says.

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