In this globalized world and increasingly internationalized economy, it is becoming more common for companies to have expat workers on their staff. The appreciation of talent, personal desire for improvement and new experiences, and the needs of companies themselves have increased labour expatriation in recent years.
For both the worker and the company, it can be a great opportunity. However, it also involves facing significant challenges or hurdles that both parties must assume for mutual satisfaction…
Key Challenges and Opportunities Generated by Labour Expatriation for Companies
Labour expatriation presents a series of challenges for companies that decide to send workers to another country. Additionally, the expatriation process involves a significant investment in terms of financial and human resources:
- Administrative procedures: The difficulty is greater in some destinations.
- Negotiations and proposals: When it comes to exporting or importing human talent, not just any standard contract will suffice. In the case of highly qualified workers, the presentation of the project and conditions is often individualized. Even if negotiation is not possible, presenting the plan and making it appealing to the employee is important.
- Decision-making: Important and often difficult decisions, such as deciding where to locate the employee.
Although labour expatriation presents some challenges, it also provides a series of opportunities for companies:
- Retaining human talent and placing it where it is most profitable and beneficial for the company.
- Better adaptability to changes.
- More engaged and aligned personnel. In many cases, expatriation is seen as an opportunity for professional growth and new experiences, which is highly positive for both parties.
- Cost savings.
Lifecycle of Expatriation: Phases and Assistance for Expatriates in Spain
- Preparation: Selection, communication, advice, compensation. This phase includes making the decision to relocate, considering its implications, and organizing the change. In some cases, it involves handling procedures and negotiations with the company regarding contract conditions. Sometimes the company itself offers solutions to ensure a certain level of organization in the destination country, while in other cases, it is a task that the employee must carry out independently.
- Development: Adaptation, achievement, personal expectations, professional development, company recognition. This phase involves challenges such as cultural shock and opportunities such as new experiences and the career and personal possibilities that arise in the destination country.
- Repatriation: Readjustment to the home country, post-benefits, opportunity for promotion within the company. Returning involves new changes in work and personal life.
Assistance that Companies Could Provide to Expatriates During the Process Phases
- Pre-departure information about the destination.
- Information about the position.
- Assistance provided by the company to the workers, if applicable.
- Tax advice.
- Assistance for adaptation to the new position and destination country.
Expatriate Workers: What You Need to Know
When considering the possibility of working in a country different from your own, it is natural to have many questions.
Concept of an expatriate worker: Relocated or seconded?
From a legal standpoint, the difference between being relocated and being an expatriate is relevant. It is not a simple linguistic matter; it involves significant differences, such as the time spent in one country or another, where expatriates or seconded workers contribute and pay taxes.
To determine this, it is necessary to consider the legislation of both the home country and the country where the work is performed:
- Expatriate workers: Those who have nationality and residence in one country but carry out their functions in another country for a period exceeding six months and less than five years.
- Seconded workers: This refers to an employee who is registered and contributes to social security in one country but temporarily carries out their work in a different country.
Labour legislation: Which law applies to the employment relationship of expatriate workers?
When negotiating the employment conditions for expatriates, it is common to determine and specify in the contract which regulations will apply. However, when it comes to expatriate contracts in Spain, the legislation ensures that expatriates will not be deprived of any rights considered non-waivable by Spanish law. If the placements occur between countries within the EU, the applicable regulations are those of the host country.
Contributions of expatriates:
Another point that raises many questions and depends on the country to which the worker is being relocated is social security contributions. There is no room for confusion between countries within the EU and countries that have signed agreements, but complications may arise in other cases.
- Placements between countries within the EU: Contributions are made in the host country. If you are relocated from Spain for a period of less than two years, you can remain covered by the Spanish Social Security system.
- Placement in a non-EU country with an international agreement signed with Spain: The expatriate’s contributions will continue to be made in Spain.
- Placement in a non-EU country without an international agreement signed with Spain: This would result in a situation similar to being registered as active in Spain. However, it should be noted that companies are required to contribute in Spain for all contingencies not covered by the Social Security system of the worker’s destination country
Taxation of expatriate workers:
And what about taxation? For employees becoming expatriates or relocating temporarily, there can be different situations. It is important to be aware of these options to provide the relevant information to support them during this transition.
- Option 1: Become a tax resident in the destination country and pay taxes there.
- Option 2: Continue to be a tax resident in Spain if you will spend 183 days or more per year in the country and the rest in the destination country or in multiple countries.
- Option 3: In the case of entering a destination country without an agreement with Spain to avoid double taxation, as a worker, you would be required to pay taxes in both countries. In other words, you would pay taxes in Spain and in the country where you provide labour services.
Today, it is common for large companies to send their key employees to different countries to meet the growing demand for highly skilled professionals required due to globalization. This phenomenon has led companies to expand their operations into new markets abroad, seeking internationalization.
At Eres Relocation, we provide support to many companies that decide to take this step and hire our services to manage the entire expatriation process from start to finish. Our professionals will provide you with all the necessary information and knowledge to successfully handle this process.