August 21, 2018 ILN

Advising Clients with Globally Mobile Workforces: Going Beyond Immigration Law

By Donald C. Dowling, Jr.

An earlier version of this article was published by Littler Mendelson PC in October 2017.

Globalization is driving workforce trends and reshaping the expectations for multinational companies to mobilize and manage globally mobile talent, cross-border commuters, and foreign-based employees. But moving, managing, and classifying those employees across borders requires a proactive, strategic, and legally compliant approach across the relevant countries. In structuring overseas postings, multinationals need to consider compliance with immigration, privacy, customs, payroll, and employment laws and with tax requirements, particularly for corporate tax presence.

While the immigration law component here is vital—a globally mobile employee without the right work visa cannot legally work—at least the compliance imperative around immigration is well recognized. In addition to immigration law, cross-border employee assignments trigger a cluster of other thorny legal issues, issues of expatriate and “secondment” structuring, which are less understood. When mishandled, these other global mobility law issues can cause serious and expensive compliance problems.

Multinationals sometimes jump to the conclusion that there must be one best way to structure all international assignments. So they grab whatever expatriate package got used last time, change the names, make some tweaks, and move on. This approach skips over the vital step of tailoring the cross-border posting to meet the employer’s human resources needs while complying with legal mandates. There are several different global mobility and expatriate assignment structures, and they are not interchangeable.

This article will help you determine who qualifies as an expatriate, what common types of expatriate structures are used, and how to select the best expatriate structure for an international assignment.

Who Is a Business Expatriate?

Not all globally mobile employees are business expatriates. Arrangements for international assignees who are not expats are easy to structure, while structuring assignments for bona fide expats can be complex. Before structuring any cross-border work assignment, the first step is to ascertain whether the mobile staffer is, or is not, an actual business expatriate. Colloquially, an “expatriate” is anyone who lives somewhere other than his native country. But here we are addressing business expatriates.

A business expatriate is someone originally hired to work in one country but later reassigned to work in a new overseas place of employment temporarily. A business expatriate expects to return home or be “repatriated” at the end of the assignment.

Two common global mobility terms are in effect synonyms for “expatriate” that betray the speaker’s point of view: “inpatriate” and “third-country national.” An inpatriate is an expatriate coming into a host country, while a third-country national is an expatriate not working at headquarters on either end of the assignment. For example, if the Paris office of a Kansas City–based multinational were to assign an employee to work temporarily at the company’s Tokyo facility, the assignee would be an “expatriate” to her former Paris colleagues, an “inpatriate” to her new Tokyo colleagues, and a “third-country national” to human resources back in Kansas City. For our purposes here, she is an expat.

Who Is Not a Business Expatriate?

It is important not to confuse a business expatriate with a permanent transferee and to safeguard against false expatriates, those internationally mobile staff who do not meet our definition of business expatriate and therefore usually should not get structured as expats. Also watch for actual expats whom an employer misperceives to be nonexpats.

In separating out who is and is not a genuine business expatriate, account for the concepts of permanent transferee, foreign hire, business traveler, and stealth/accidental expat. You also need to consider issues related to the place of employment, participation in an in-house expat benefits program, and whether the company is structured as a so-called “global employment company.”

Permanent Transferee. An overseas assignee who does not expect to repatriate is a localized permanent transferee.

Foreign Hire. Multinationals occasionally recruit candidates in one country to work jobs overseas. As some examples, recruiting on global websites attracts candidates in different countries. Construction contractors in the Middle East constantly recruit laborers and carpenters from Indonesia, the Philippines, and other developing Asian countries. Silicon Valley technology companies frequently recruit graduates from top universities in India for jobs in California. American multinationals often recruit American security guards for jobs in the Middle East and American technicians for jobs at oil fields in Africa. All these employees are foreign hires, not business expatriates, because they work for their employer in just one country. They might be emigrants. They might need visas. Some of them might qualify for company expatriate benefit packages (paid housing and drivers, for example). But foreign hires are not business expatriates because they work for their employer in just one country. Their border-crossing status relates to recruitment, not employment. Avoid structuring foreign hires as expatriates.

Business Traveler. Some short-term global mobility assignments get staffed by business travelers who are not true expats. A business traveler remains employed and on the payroll of the home country employer entity, with a place of employment that remains the home country throughout the overseas assignment. Everyone recognizes that someone working overseas for just a few days or a couple of weeks is simply on an international business trip; but sometimes even a longer (yet still short-term) global assignment might also appropriately get structured as a business trip—even where the employer and assignee refer to the trip as an international “assignment” or foreign “posting,” even where the employer provides expatriate benefits, and even where the host country requires a visa or work permit. Structure a short-term international assignment as a business trip whenever the home country will remain the assignee’s place of employment during the posting.

Stealth/Accidental Expat. When a business traveler stays abroad too long, as a matter of host country law the place of employment at some point may shift to the host country and the would-be business traveler risks becoming a so-called “stealth” or “accidental” expatriate. Another stealth/accidental expatriate scenario is the internationally mobile telecommuter: An employer lets an employee telecommute from home locally, and at some point the telecommuter slips away (moving abroad and continuing to telecommute from a new country). Stealth/accidental expat status is an internal misclassification that can trigger legal problems under host country immigration, payroll, employment and "permanent establishment" laws. As soon as a business traveler’s or telecommuter’s place of employment shifts abroad, consider reclassifying the employee as an expatriate.

What Are Ways to Spot a False Business Expatriate?

Place of Employment. The concepts of business traveler and stealth or accidental expat turn on “place of employment.” Under the law of most countries, each employee has a single “place of employment” at a time with each employer (“place of employment” is a legal concept or status, analogous to “residence” and “domicile”). But ascertaining a given expat’s place of employment can be difficult.

The inevitable question that gets asked in the mobile employee contest is: How long can we post a business traveler abroad before the host country becomes the “place of employment”? There is no easy answer because “place of employment” is a construct of more than just time—in sharp contrast to the completely separate legal concept of tax residence, which usually gets triggered at 183 days worked in a country in a single tax year. Unlike tax residence, place of employment can attach in a matter of minutes: A new hire almost always acquires an in-country place of employment on the first morning on the job, and a transferee usually acquires an in-country place of employment on the first morning after the reassignment. The place of employment of a mobile employee moving from a home country to a new host country is a question not only of time worked in the host country, but also visa status, intended future repatriation date, place of payroll, and link between tasks worked and the local market. This said, after a mobile employee has worked in a host country for more than several months, that country might plausibly take the position it has become the place of employment, if only temporarily.

Synonymous legal concepts. Having said that “place of employment” is a discrete legal concept or status, this concept varies in some jurisdictions. Where European law applies, the Rome I Regulation 3 on choice-of-law controls; instead of “place of employment,” Rome I looks to where an employee “habitually carries out his work.” See EU Regulation 593/2008. United Kingdom case law in certain contexts looks to an employee’s “connection” to the place of work or the “nature” of where the job is based. For our purposes here, principles like these are roughly synonymous with “place of employment.”

In structuring a short-term global mobility assignment, decide whether the employer can plausibly maintain that the home country will remain the place of employment throughout the posting. When structuring a short-term assignee as a business traveler, guard against the stealth or accidental expat scenario.

In-house expat benefits program. An expatriate benefits program is an organization’s package of paid global mobility extras, such as moving expenses, housing allowance, tax equalization, international tax preparation, spousal support, children’s tuition, car and driver, social club membership, hardship pay, flights home, expat medical insurance, repatriation costs, and immigration services. Not all business expatriates get to participate in expat benefits programs (think of telecommuters moving abroad for personal reasons). And not everyone who receives expat benefits is a true business expatriate (think of foreign hires recruited to work in “hardship” locations).

Many multinationals use the term "expatriate" to mean participant in their in-house expat benefits program (e.g., "Tiffany is transferring to our London office for a year, but she asked for the posting herself and we’re accommodating her request—so she won’t be an expat"). This usage lulls employers into misclassifying false expats who happen to be eligible for expat benefits and can lead to stealth or accidental expats who happen to be ineligible for expat benefits. It is best to avoid this dangerous usage. Instead, distinguish "structural expats" from "expat-benefits-eligible assignees."

Global employment company. Some multinationals employ corps of “career expats” who migrate from one posting to the next, spending little or no time working in any home country or headquarters place of employment. Sometimes these multinationals incorporate—often in a tax-advantageous jurisdiction like Switzerland or the Cayman Islands—a so-called “global employment company” (GEC) subsidiary with the raison ďêtre of employing and administering benefits for career business expats. GECs offer logistical advantages, particularly as to pension administration. Contrary to a widespread misperception, though, GECs are not expat structures unto themselves. (And a GEC cannot stop the mandatory application of host country employment protection laws.) The arrangements for an expat employee of a GEC ultimately must be structured just as any other expat.

What Are Common Expatriate Structures?

Once an employer understands which globally mobile employees are and are not actual business expatriates, the next task is to slot each actual expat into the most appropriate expat category, that is, select the most appropriate expat structure. Expatriate structures take different forms at different multinationals, but ultimately all business expats fit into or among four broad categories: foreign correspondent, secondee, temporary transferee/localized, and co-/dual-/joint-employee.

Foreign Correspondent. A “foreign correspondent” expatriate remains employed by and on the payroll of the home country employer entity while working abroad, rendering services from afar for the home country entity (not for some local host country affiliate or business partner). Foreign correspondent postings are easy to set up because nothing changes other than the place of employment (if other than that the expat might start receiving expat benefits). The challenge is that foreign correspondent postings risk violating host country immigration and payroll laws. A foreign correspondent may need a visa sponsored by some host country employer, and host country payroll laws may require the employer to provide reports and to make deductions, withholdings, and contributions to host country tax and social security agencies that the home country employer entity is not set up to make without a host country taxpayer identification number (even an outsourced payroll provider needs its customer’s local taxpayer number).

One tool here is “shadow payroll,” also called “zero payroll” and “mirror payroll.” Some cooperating host country entity reports the foreign correspondent expat’s income to local tax and social security authorities as if it were the payrolling employer, and then that entity and the employer do an inter-company reconciliation each payroll period, behind the scenes, perhaps with the employer paying for the shadow payroll service.

Secondee. “Secondment” means “employee loan.” A seconded expatriate remains an employee only of the home country employer entity but gets lent out to work for a host country entity, usually an affiliate or business partner of the employer. The secondee might get payrolled by either the home or host country employer (or both, via a “split payroll”). Usually the host country employer—which we might call the “beneficial employer”—reimburses wages and payroll costs to the home country “nominal employer.” Some secondees stay on the home country payroll while the host country entity issues a shadow payroll 6 to comply with local payroll laws. But a true secondee is not a co-/dual-/joint employee, because a true secondee never gets privity of employment contract with the host country employer.

Temporary Transferee/Localized. An expatriate transferee or “localized” expat resigns from the home country employer, moves abroad, and gets hired and payrolled by a new (host country) employer, often an affiliate or joint venture partner of the original employer but sometimes a host country services company like a local office of Globalization Partners, Adecco, Manpower, or Kelly Services (or the expat might even become an independent contractor in the host country). The new host country employer usually extends retroactive service/seniority credit for past service with the home country employer and sometimes also pays some extra expat benefits—a so-called “local-plus” assignment.

While working in the new host country place of employment, a localized transferee expat renders services only for the new host country employer and does not retain privity of employment contract with the home country employer—other than perhaps an informal side letter or e-mail outlining post-assignment repatriation expectations. The home country employer is not a co-/dual-/joint-employer because the expat formally resigned.

Of course, an expat transferee localization is only temporary. (A transferee who does not expect to repatriate is a “permanent transferee,” not a business expatriate.) A localized expat (as opposed to a permanent transferee) expects someday to repatriate and re-localize back to the original home country location. A side-letter (or e-mail) between the expat and the home country employer entity might memorialize this.

In practice, an employer intending to localize an expat should account for the risk that the would-be localized expat could be argued to a co-/dual-/joint-employee simultaneously employed by both the current host-country employer and the former home-country employer.

Co-/Dual-/Joint-Employee. A co-/dual-/joint-employee expatriate is an expat simultaneously employed by two masters, the home and host country employer entities, essentially on a moonlighting basis. The employee works for two employers simultaneously or works a host country job actively while formally retaining status as "on leave" from the home country employer entity, with the home country employment arrangement suspended or "hibernating"—but not terminated. A co-/dual-/joint-employee expat may be payrolled by either the home or host country employer (or both, on a "split payroll") or may be on a "shadow payroll" actually paid by the home country employer while the host country employer complies with its jurisdiction’s payroll laws.

  • Intended co-/dual-/joint-employment

Ideally every co-/dual-/joint-employee expat arrangement gets structured overtly, with the expat either actively structured as an employee of both home and host country entities or else with the expat expressly on leave from the home country employer, leaving that employment relationship expressly “hibernating” but not severed. Sometimes the home and host country employers decide to use the co-/dual-/joint-employee structure to keep the expat enrolled in home country benefits programs or home country social security (e.g., under a social security totalization agreement certificate of coverage).

  • Unintended co-/dual-/joint-employment

Too many co-/dual-/joint-employment expatriate arrangements get structured accidentally, either when an expat assignment is meant to be a secondment but the expat somehow enters an employment relationship with the host country employer or when an expat assignment is meant to be a temporary transfer (localization), but the parties fail to extinguish the home country employment relationship. A dismissed expat who ultimately wins the argument that he had served as an unintended co-/dual-/joint-employee could seek reinstatement or severance pay from the home or host country employer. These situations often get complex and expensive.

In practice, an employer intending to structure a secondment should account for the risk that the would-be secondee could be argued to a co-/dual-/joint-employee employee simultaneously employed by both the nominal employer and the beneficial employer.

How to Select the Best Expatriate Structure

Answering this depends on nuances of the particular expat’s given situation and on the employer’s strategic needs. Even within one multinational employer, different expats may get structured differently. Therefore, in drafting a given expat’s assignment package, avoid reflexively copying the last expat’s assignment package (unless the ideal structure for the current expat posting happens to coincide with what was the ideal structure last time). If, for example, the last expat was a secondee while this expat needs to be temporarily localized, then the secondee’s assignment package is the wrong model for documenting this assignment.


All countries impose immigration laws. An expat who does not happen to be a citizen or legal resident of the host country almost certainly needs a visa or work permit to work in-country. The visa and work permit process often requires an in-country employer visa sponsor. The foreign correspondent and secondee expat structures may not work because they do not include any host country employer to sponsor the visa. (In a secondment, the host country beneficial employer may be willing to sponsor the visa, but, because it does not actually employ the expat, in some cases it will be ineligible to sponsor.) Also think through expat family visa issues. For example, some countries will not issue a spouse visa for a same-sex partner.

Payroll Laws

Most countries impose what we have been calling “payroll laws”—analogues to U.S. reporting, withholding, and contribution mandates as to employee income tax (federal and state), social security, state workers’ compensation insurance, state unemployment insurance, and federal unemployment tax. Even oil-rich countries like Qatar that did not used to impose payroll laws now do.

The headquarters team structuring a global mobility assignment that keeps an expat on home country payroll might be more focused on complying with home country payroll mandates than on host country payroll laws. But actually, host country payroll compliance may be more vital, because during the assignment the host country is the place of employment—the expat lives and works in the host country using its roads, sewers, garbage pick-up and other services and is probably liable personally for host country income tax.

Imagine, for example, the employer of a foreign correspondent assigned from Rome to a temporary place of employment in Raleigh. The home-country Italian employer should comply with U.S. and North Carolina payroll laws and so should not illegally payroll its expat on an offshore Italian payroll that fails to report income to the IRS and other U.S. federal and state agencies. An employer based in Raleigh will face reciprocal compliance challenges when assigning someone to work in Rome.

Violating host country payroll laws by illegally paying an expat offshore can be a crime—indeed, it can be a felony in the United States under 26 U.S.C. § 7202.

This is usually true even where the employer gets a certificate of coverage under a social security totalization agreement, because those certificates do not address income tax withholding and reporting.

In structuring expatriate payroll, consider vehicles like “split payroll” and “shadow payroll” that facilitate compliant payrolling. In many countries, structuring an expat as a foreign correspondent or secondee without a “shadow payroll” is effectively illegal because it violates host country payroll laws—but not always. Some countries’ payroll laws obligingly exempt foreign employers that do not transact business locally—Guatemala, Ivory Coast, the United Kingdom, and Thailand are examples. Still other countries—France and Estonia, for example—offer special expat payroll registration procedures that let foreign employers comply with local payroll laws without otherwise registering to do business locally.

Permanent Establishment

A third vital legal issue in structuring expatriate assignments is avoiding an unwanted host country corporate and tax presence for a home country employer entity. “Permanent establishment” (PE) is a corporate tax presence that host country law imposes on a foreign entity held to be “doing business” locally in the host country.

The expat structure challenge is where host country law might deem a home country entity employing an expat working in the host country to be “doing business” in the host country because of the work the expat performs. The expat’s in-country activities on behalf of the home country employer are said to trigger a PE. Even if the home country employer has a local sister entity registered to do business in the host country, an expat who is a foreign correspondent, secondee, or co-/dual-/joint employee might trigger a separate PE for the home country employer affiliate.

Imagine, for example, a Berlin-headquartered organization that directly employs a full-time highly compensated expat in Chicago but otherwise does little or no business stateside. If the German expat telecommutes, contributing to German matters, in German, from an apartment on Lake Shore Drive—making phone calls, receiving mail, occasionally meeting with traveling colleagues—might the U.S. IRS and Illinois secretary of state take the position the German company now “does business” in Illinois and so must register with the Illinois secretary of state and file U.S. federal and state tax returns? If so, the German company would be said to have a U.S. PE. Its unlicensed U.S. operation might trigger fines and taxes. The reciprocal issue could arise in the outbound scenario—imagine, for example, a Chicago organization employing a full-time highly compensated expat in Berlin.

The U.S. Social Security Administration provides information online about U.S. International Social Security Agreements.

Documenting the Expat Assignment

This article provided the overview of who is and who is not a business expatriate, the common expatriate structures, and tips on how to select the best structure for an international assignment. In selecting among the four expat structures in structuring any given expatriate assignment, think through practicalities of the particular posting, like whether the expat will serve a home or host country entity, and which employer affiliate will fund compensation. Then factor in three legal issues: immigration, payroll laws, and permanent establishment. How these three issues play out for a given expat should point to the most appropriate of the four expat structures.

After factoring in the issues and selecting among the four expatriate structures, the next step will be to document the expat assignment to reflect the selected structure. My article in the next edition of International Law News will help you with that next step of properly documenting an expat assignment to ensure the selected expat structure is legitimate.

Donald C. Dowling, Jr.

Donald C. Dowling, Jr. is a Shareholder at Littler Mendelson PC in New York City. He is a former Programs Officer of the Section of International Law and past Chair of the International Employment Law Committee.