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Beyond Shared Services: The “SHIFT” Model to Transform International HR Management

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Introductions

  • Simon Davies
  • Mario Ferraro
  • ITX – Assisting with the design and execution of HR Transformation for organizations with an international footprint.

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Complexities, costs and risks of managing talent across borders

  • Inefficiencies and mistakes can be risky and costly
  • Can become very complex
  • Needs a lot of bandwidth and technical expertise, which may not exist in every country

​

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Note that ≠ , for example

Germany to Singapore ≠ Singapore to Germany

Country D

Country A

Country E

Country B

Country C

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Inefficiencies, costs and risks are linked to permutations

  • Different terms and conditions.
  • Different payrolls: harder to build a holistic picture
  • Each location has a part of the total information (consolidation is required)
  • Complex internal re-billing
  • Inconsistent Social Security and benefit coverage
  • Higher risk of Corporate Tax liability (Permanent Establishment)
  • Inconsistent level of Mobility experience in each location. More coordination and guidance is required
  • Fragmented processes. Many teams involved. Poor employee and Manager experience
  • More data required, for example Cost Of Living data for specific home-host scenarios
  • Less agile model. Lag-time between strategy and execution.

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Country D

Country A

Country E

Country B

Country C

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A typical evolution to COE and Shared Services

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  • Centralization of some processes, expertise, infrastructure
  • Less duplication
  • More bandwidth for local teams

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Country D

Country A

Country E

Country B

Country C

Shared Services

Transactional tasks

MobilityCOE

Technical Expertise, Program design, Governance, strategic alignment, advice, continuous improvement,…

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Model with Regional COEs

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  • Centralization of some processes, expertise, infrastructure
  • Less duplication
  • More bandwidth for local teams

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Country D

Country A

Country E

Country B

Country C

Shared Services

MobilityCOE

EMEA

N.A.

+

LATAM

APAC

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The model does not address the challenges of permutations

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EMEA

N.A.

+

LATAM

APAC

Country D

Country E

Country C

Shared Services

MobilityCOE

Country B

Country A

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What do leading international organizations do?

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The Global Employment Company model

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Centralized Administration

Mobility Centre of Excellence

Employing Entity

Your GEC

  • Contractual issues
  • Social Security
  • Regulatory & Compliance issues
  • Statutory reports & declarations
  • Corporate Governance (HR, Finance, Accounting)
  • Board of Directors Meetings / Annual General Meetings
  • Strategic Alignment
  • Governance & Control of Mobility policies and processes
  • Expatriate Compensation & Benefits
  • Vendor relationships
  • Support, guidance and advice to assignees and managers
  • Exception management
  • Continuous improvement

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Examples of processes*

*Example only. Each organization is uniquely designed

  • Workflow management
  • Package calculations
  • Assignment documentation
  • Benefit enrolment
  • Coordination of external vendor services
  • Ongoing liaison with expatriates, vendors and overseas subsidiaries
  • Payroll
  • Tracking & reporting
  • Accounting and internal rebilling
  • End of contract activities
  • Internal invoices

​

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Key advantages of the GEC model

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Country D

Country A

Country E

Country B

Country C

GEC

Fully Owned by the organization.

  • Significantly fewer permutations. Less involvement from Home HR
  • Only one legal entity is deploying employees overseas 🡪 Easier to monitor and mitigate of Corporate Tax exposure
  • Better compliance, governance, control, consistency, and holistic visibility 🡪 better analysis and decision-making
  • Easier to introduce a single international payroll 🡪 global picture of the overall spend, and the internal re-billing of the costs to the relevant cost centers.
  • More accurate management reports
  • Aggregation of the headcount into a single entity 🡪 Economies of scale
  • Harmonization of terms and conditions between assignees of different nationalities
  • Opportunity for Social Security planning (if the GEC is in specific locations)
  • Clear point of coordination and accountability for the entire end-to-end process.
  • Better alignment between strategy (COE) and execution (Shared Services) 🡪 Lower fragmentation of the process
  • Faster deployment timelines, better “customer experience”

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Common drivers for transitioning to a GEC model

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  • Cost containment
  • Efficiency gains
  • Risk mitigation
  • Governance & Compliance
  • Employee engagement
  • Confidentiality
  • Operational consistency
  • Scalability & Agility

ITX Global Employment Companies survey – March 2023

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THE “BEYOND” BIT

 

Shared Services

GEC

Is a legal entity or a branch employing the assignees

No

Yes

Facilitate the payroll, expenses management and internal re-billing from a single entity

No

Yes

Can aggregate headcount into a single entity, creating critical mass and potential volume discounts on benefits

No

Yes

Helps to reduce the number of home-host permutations

No

Yes

Helps to mitigate Permanent Establishment risk

No

Yes

Can be established in a location that benefits the assignees and/or the business in terms of Employment Law, Social Security agreements, etc.

No

Yes

Could potentially act as the employing entity for fixed-term contract employees and/or some Remote Employees

No

Yes

Provides centralization of administrative processes and technology infrastructure

Yes

Yes

Can act as the COE for Global Mobility

Maybe

Yes 

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Transitioning to a GEC model

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Involve senior stakeholders (HR, Finance, Legal, Tax)

01

Feasibility Study / Business Case, including choice of location

02

Decide on how to operate it (fully in-house, partially outsourced, fully outsourced)

03

Go / No-Go decision

04

Set-up the legal entity or branch – At this stage the GEC exists only “on paper”, but it is not yet operational

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Decide on resources, physical location and technology infrastructure

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Develop policies, processes, templates (e.g. GEC contracts), Roles & Responsibilities, communication materials, etc.

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Develop a plan and communication to onboard assignees into the GEC

“GO-LIVE”

Project Plan

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CONCLUSIONS

  • Need for an agile model delivering Simplification & Integration
  • Align the design to the business needs and objectives
  • Conduct Feasibility Study
  • Decide on operating model
  • Faster implementation for faster results
  • Ensure proficient operations & continuity
  • Seek support when necessary

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Simon Davies

sdavies@itx-ge.com

Mario Ferraro

mferraro@itx-sg.com