We are nearing three months since the formal outbreak of the COVID-19 pandemic and the situation has now changed significantly since our first article about the outbreak and the subsequent update six weeks ago. At the time of writing, over 400 000 cases have now been reported worldwide and the pandemic, which was largely confined to China as recently as six weeks ago, has now spread worldwide, with many countries in the Americas, Europe and the Middle East now reporting high rates of transmission. As the crisis has become a global pandemic, one question that HR personnel responsible for managing employee mobility have been facing is whether or not they should repatriate staff who are presently working overseas. This blog post aims to address some of the questions GM professionals have been asking themselves when making the decision, and how best to manage the process.
The current situation and what to consider when repatriating
In recent days, many countries have advised temporary residents to return to their home countries and have warned that their ability to provide consular service to citizens based overseas may be impaired. This has prompted many assignees to ask their employers whether they should return to their home location. We have heard from many clients already who are concerned for their assignees and take their duty of care to their employees extremely seriously. However, although repatriating employees can seem simple in principle, there are a number of practicalities and considerations that will need to be taken into account.
The movement of people can accelerate the spread of the virus and many countries have advised against non-essential travel. Therefore, if employees are repatriated, there is an associated risk that they may assist the spread of the virus and hamper efforts to contain its spread in their home countries. Indeed, while China has reported a significant drop in local cases in recent weeks, it has seen an increase in imported cases. Locations such as Hong Kong, Singapore and Taiwan, which have had considerable success in keeping locally transmitted cases under control since they reported their initial cases in January, have also experienced spikes in cases in recent days as people returning from overseas have brought the virus back with them. Any decision to repatriate should consequently include a risk assessment which takes factors into consideration such as the danger of further disease transmission during the process.
Any assessment should also try to balance the risks of remaining in the host location versus those of repatriation. For example, would it be sensible for an Italian employee currently on assignment in China to be repatriated to Italy where cases continue to rise and medical facilities are likely to be under more stress than those in China? If, however, the employee is assigned to a location where host country infrastructure is unlikely to be well-equipped to deal with a major outbreak of the virus, repatriating the employee may be appropriate and we would recommend liaising with medical experts to seek their opinion regarding whether or not a host location would be able to cope.
Due consideration should also be given to your host country operations. If your assignees occupy leadership positions in the host location, would repatriation have an impact on business continuity in the host location? Would it impact the livelihoods of local employees if repatriation led to the closure, albeit temporarily, of host operations?
What are the logistical challenges associated with repatriation?
In the event that a decision is made to repatriate, even temporarily, there are several logistical arrangements that will need to be considered. Firstly, are there any requirements that need to be fulfilled in the host location in order for the employee and/or accompanying family to be permitted to leave? Secondly, how easy is it to travel back to the home location? As countries have advised against non-essential travel, many airlines have either stopped flying internationally or have severely curtailed their routes. Therefore, direct flights home may no longer be possible, and the difficulty of returning home may be compounded by the fact that some countries may not allow travellers to depart from areas which are considered to be a transmission hotspot (e.g. Hubei, China, or northern Italy, plus other major cities across Europe). Finally, upon arrival in the home location returnees will likely need to undergo some form of quarantine or isolation for a period of time, which tends to be 14 days. Do these returning assignees have somewhere they can do this? In some cases returnees may be kept in government quarantine facilities. But in many others, they may be required to self-isolate. If so, returnees may not have accommodation in their home countries immediately available to move into upon repatriation. As such, they may need to move into temporary accommodation, such as a hotel, during their time back in the home location. This may lead to questions regarding who should meet such costs: the employer or the employee. In this case it is important to decide after evaluating two key factors: firstly, at whose request has the repatriation been undertaken: the employee or the employer? If the latter, the employee would expect accommodation costs to be met by the employer.
The other factor to take into consideration is how ongoing home country housing commitments are taken into consideration when determining the employee’s assignment compensation. If a home housing deduction is used, where home country housing commitments are omitted from the assignment salary based on the assumption that the employee may not have to pay these during the assignment (as the company assumes that they may rent out their home country accommodation during the assignment, or that the employee previously leased accommodation prior to the assignment and the lease was ended before the assignment started), it would be reasonable for the employee to expect the company to meet costs associated with their housing in the home location during this period of repatriation.
If you repatriate your employees, should you adjust their assignment salary?
When an employee is on a long-term assignment, a common approach companies may use is the home-based approach when calculating the employee’s assignment salary. This means allowances or adjustments such as a cost of living adjustment, location allowance and assignment allowance may be provided. A question HR staff will likely have to deal with is should the employee’s salary be adjusted during repatriation with these assignment-related adjustments being removed? Our general advice is that an employee should continue to retain these allowances while in the home location if it is expected that the employee will return to the assignment location again within a short period of time (e.g. within six months). The COLA, for example, is designed to ensure that the employee’s purchasing power, based on a wide range of goods and services, from groceries through to electrical goods, is maintained throughout the assignment. Not all of these expenditure items are consumed on a daily basis but may be consumed as infrequently as once a year (e.g. purchasing certain electrical or recreational items). Removing the COLA during the time when the employee is back in the home location, therefore, may limit their ability to purchase such items upon their return to the assignment location.
When making decisions regarding whether to repatriate an employee, other factors should also be taken into consideration. These include:
Ability to work in the home location and working from home arrangements
The employee will likely need to work remotely while in the home location if their role allows it, at least for the period during which they are required to quarantine or self-isolate upon their return. The employee will need to be informed and brought up to speed with any working from home arrangements that the company has introduced. If the employee’s role does not allow them to work from home, the question arises of how the time spent in isolation should be treated. Will the employee be paid during this time or will they be required to take annual leave, medical leave or unpaid leave? Due consideration should be given to who is requesting the repatriation (the employee or the employer) as well as ensuring compliance with relevant legislation regarding enforced absences from work due to the repatriation process.
While the employee is back in the home location, the majority of their assignment-related costs in the host location will still need to be met. For example, rent for host accommodation and host location school fees will still need to be paid even if the employee is not in the host location. As these are both significant items of expenditure, repatriation is unlikely to therefore lead to significant cost savings for the company.
In order to minimise the disruption of COVID-19 regarding children’s education, many schools have adapted and incorporated online learning into their programmes, with lessons now often live-streamed. Repatriating the employee and dependent family back to a home location which may be several time zones removed from the location of assignment may impact children’s ability to participate in these lessons and interact with fellow students in a learning environment.
Whilst the employee is in the home location it is likely they will still try and continue to undertake work for the host country entity where possible. This may lead to complications in terms of tax liability. Firstly, by returning to the home country for an extended time, the employee may once again become classified as resident in the home location for income tax purposes. Depending on the home country’s tax system, the employee may therefore become liable to pay taxes in the home country on some or all income received during this time and even for part of the time upon return to the host location. Furthermore, if an employee is living in their home country but performing work for the host entity, this may give rise to complications associated with corporate tax liability of the home country entity in the host location or vice versa. As such, any decision to repatriate an employee should also take the potential impact on both the employee and the company’s liability to tax in both the home and host locations into consideration.
The decision to repatriate expatriate employees during the current pandemic is unlikely to be straightforward and many factors need to be considered, with the health and safety of the employee and their family paramount. The issues above are unlikely to be an exhaustive list of factors which will influence a company’s decision regarding whether or not employees and their families should be repatriated. However, hopefully this discussion assists in identifying some of the key considerations.
As ever, we remain available to support our clients during the current situation. Therefore, please do not hesitate to contact us or your ECA point of contact directly if you would like to discuss any of the above in further detail, or seek our advice regarding how to manage your mobile employees during the pandemic.