31 May International Long-Term vs Short-Term Assignments
Global mobility professionals possess the difficult task of identifying the best candidate for an open position for an international assignment. While all may seem easy, relocating an employee internationally requires analysis and strategy.
As we go along another year with COVID-19, mobility leaders should keep themselves posted on the latest developments in the global mobility landscape. With more innovative options for assignments such as virtual assignments or the work-from-anywhere structure, mobility programs are becoming more and more complex.
But all these newer innovations can lead to global mobility professionals stuck in tunnel vision, overlooking the more traditional types of mobility arrangements. Long-term and short-term international assignments are the most common types that mobility professionals consider.
The length of time that qualifies an assignment to be considered long-term or short-term varies from company to company, but the general rule of thumb is that long-term assignments will range from 12 to 36 months in duration while short-term assignments may last from 3 months to a full year.
Defining the best assignment option can be tricky. Several intertwined variables are involved depending on the candidate and the available position. Moreover, relocation is a top stressor not only for the assignees themselves but for their families.
So, to increase international assignment success rates, mobility teams need to learn which option will best yield favorable results for the company.
One way to identify the best option is to see both the pros and cons of each assignment type.
Global Tax Network and other firms in the global mobility space help us by pointing out these advantages and disadvantages.
This assignment type is a popular choice for companies who desire to obtain specific expertise, target new markets, or offer career development opportunities for candidates who show exemplary performance within the organization. The nature of this type of assignment helps the assignee to build strong relationships and more comprehensive knowledge about the organization that can be valuable for the company.
From the assignee’s perspective, one benefit they gain from a long-term assignment is the possibility of being on their home country’s payroll. This way the employee can:
- avoid having to go through tedious and – at times – unfair currency changes to enable seamless home country payments such as student loans and mortgages
- continue participation in his or her home country’s social security. This will prevent breaks in the required period of contributions so that they could meet the requirements for receiving social security payments in retirement
- enjoy his or her home country benefit plans
Long-term assignments are also seen to be the less risky option of the two types. With COVID-19 still around, it would make sense that employees in long-term assignments be better positioned and entail lesser movement in the whole relocation process. They can have longer immigration status and housing than short-term assignees.
A major drawback of long-term assignments is mostly cost-related. Long-term assignments can be more expensive due to:
- provision of additional allowances and benefits such as cost-of-living adjustments, host country housing, and moving expenses
- on-going costs from immigration, budgeting, tax planning, and more
- additional compliance requirements that are mandated by the host and home country.
- implementation of tax reimbursement for the assignee
- failure to benefit from the expertise acquired by the assignee by not retaining them as employees upon repatriation
Another thing to note is that employee dissatisfaction with long-term expatriates is known to be a common problem. It can be difficult for an assignee’s family members to become accustomed to a new environment causing a lot of stress and unfamiliarity.
Short-term assignments may also offer the same benefits as long-term ones while addressing other points as well. Here are their advantages:
- employees receive compensation from their home countries to prevent currency exchanges that will cause delays in expenditures in the home country
- the company may offer modest compensation and allowance packages to mitigate preventable extra costs
- for tax purposes in the United States, temporary housing and per diems may be paid without taxes for some temporary short-term assignments
dDepending on the tax treaties imposed by a host country, assignees can avoid taxes if they do not exceed a certain time threshold
Short-term assignments might limit an assignee’s ability to achieve set goals and objectives due to time constraints. The nature of this type of assignment will make it more difficult for assignees to settle in and develop strong working relationships with both clients and colleagues in the host country.
Moreover, there are cost implications in shorter assignments from several factors such as:
- the longer processes in administering a short-term assignment caused by its susceptibility to change that require more constant support from mobility teams
- In some cases, the provision of a per diem and reimbursements will cost more than paying an employee under an expatriate policy
- higher state tax costs when a short-term assignee breaks state residency in the given period
Determining which assignment type will reign supreme will ultimately depend on the position and its objectives. Let’s just not forget how much influence employees now have over mobility policies and assignment practices, so it’s important for mobility experts to keep an eye on the latest developments in the field.