Tax and insurance advice for expats

Overseas postings can cause a lot of upheaval for staff, so they will appreciate good advice to help deal with issues such as tax and insurance, and make the transition smoother, says Alison Coleman

Many years ago, long-term overseas assignments were few and far between, but as international operations have become common for most large organisations, they are posting more and more employees abroad.

As well as providing a comprehensive package of benefits, the best employers are arming staff with valuable financial education and support to smooth the transition to new countries.

Given that banking, pensions, and tax regimes vary enormously from country to country, it can be very difficult to provide the right financial information. The solution for many employers is to outsource this support via banks, independent financial advisors, and human resource consultants.

But George Yeandle, a partner at PricewaterhouseCoopers, believes financial education should begin long before staff depart for international assignments. “They need to know their finances in their home country are in hand before they leave; that bills will continue to be paid and, if they are planning to rent [out] their property while they are away, that the rent will be collected, possibly through a lettings agency,” he says.

Employers can also provide staff with current information on living costs in their destination country. The main priority for expats, however, is their banking arrangements; particularly in terms of opening and selecting an account abroad. Most major banks now have international departments that can offer professional help and advice to expats, so employers can offer this facility to their staff.

Chris Dear, head of global employee banking at NatWest, says: “Individual circumstances vary, but for some expats an offshore bank account could be a tax-efficient way of protecting their income, yet very few of them consider it, or are even aware that it is an option.”

Employees’ tax affairs also need to be put in order. Elsbeth Blekkenhorst, an associate at Mercer Human Resource Consulting, says: “It is fairly standard practice for expats to have a meeting with HR to discuss their tax and National Insurance (NI) status before they go, and again when they return. If problems arise during the assignment, a good employer will facilitate help and advice for their staff in the host country.”

Other key financial issues include the management of employees’ pensions, given that a traditional assignment can last up to five years. Sam Instone, chief executive of Abbey Expatriate Services, says: “Since the pensions A-Day last year, people have had more choice about how they organise and manage their pensions. Their options might include an overseas self-investment element, or if they have several small occupational pensions, consolidating and transferring them to another provider, but they should have access to professional advice.”

Employees’ benefits package may include insurance cover, but staff should ensure that what they are leaving behind is insured as well. In some cases, they may be unaware of this need, so financial education to cover all bases may be welcome, particularly if it provides peace of mind that all outstanding matters have been taken in hand.

Instone recalls one worker in Iraq who owned a house in Cyprus but had no insurance on the mortgage. “Unfortunately he was killed and because there was no insurance, his family also lost their home,” he says.

Senior personnel working overseas may also appreciate access to wealth management advice, including tax planning and trust planning services. However, one area of finance where employers are generally reluctant to get involved is that of overseas property investment, which a growing number of expats are exploring. “It involves an element of risk and is entirely a personal decision. Employers might be willing to signpost expats to sources of information and advice on the local property market, but it can be a minefield and few would want to offer specific advice in case anything went wrong,” says Dear.

But the better the financial advice and education expats receive, the better they are likely to perform. “It is all about seamless transition, and the more help and support the employer can provide, the sooner staff will adjust to their new roles and the more productive they will be,” says Yeandle.

If you read nothing else read this…

  • Financial education and support should begin before staff depart for long-term assignments overseas, and should cover ongoing financial responsibilities in their home country, as well living costs in the host country.
  • Employers should ensure prospective expats are clear on their salary, tax and national insurance status before they depart, keep them briefed on any changes while they are away, and update them again on their return.
  • Employers should be aware that if they facilitate access to professional advice on tax, pensions, and savings it is likely to be valued by expats, especially first-timers.