Canadian Employee Relocation Council (CERC) Cross Border Payroll and Benefits Survey

Transcription

1 Canadian Employee Relocation Council (CERC) Cross Border Payroll and Benefits Survey September, 2012 Cross Border Payroll and Benefits Survey 2012

2 Summary This survey was developed to gain an understanding of how companies manage payroll and benefits coverage for employees who are on assignment between Canada and the United States. The survey report is presented in two sections. In Section A the management practices for Canadian employees working in the U.S. are highlighted. Section B reports on the management practices for U.S. employees working in Canada. The survey was conducted on-line in September 2012 and 32 organizations responded. A wide range of industries was represented in the survey, the largest response being from the natural resources sector at 29 per cent. Seven in ten companies (72 %) offer some level of benefits to employees transferring between the U.S. and Canada to cover differences in costs between the home and host locations. Approximately 25 per cent provide a Flexible Budget Spend. Almost 40 per cent of transfers from the U.S. to Canada, and 31 per cent of transfers from Canada to the U.S. provide a Miscellaneous Expense Account. Cost Of Living Allowances are provided by 35 per cent of companies for transfers between the two countries. In 28 per cent of the companies, none of these benefits are provided and companies report offering lump sum allowances, per diems allowances and other assignment benefits, such as monthly living allowances to compensate for cost differences. While the provision of benefits is very similar for transfers between the two countries, it appears that payroll management is different for employees transferred from the U.S. to Canada. In those instances employers seem more likely to maintain the U.S employee on the U.S. home payroll, particularly for assignments under 36 months in duration. Similarly for the provision of supplemental, private health and dental care benefits, the U.S. based employee is more likely to remain on the U.S payroll. CERC 2012 Cross Border Payroll and Benefits Survey Page 2

3 Acknowledgements CERC acknowledges the generous support of Suncor Energy in sponsoring this survey. About the Canadian Employee Relocation Council The Canadian Employee Relocation Council (CERC) is a not-for-profit organization dedicated to removing barriers that restrict mobility and deployment of human capital, which are vitally important to Canada s future prosperity. Established in 1982, the Council represents the interests of its members on workforce mobility matters. Many of the Council s members are listed in Canada s Financial Post Top 500. Copyright This document or any part there of, may not be reproduced, stored in a retrieval system or transmitted in any form or by any means without the express prior written consent of the Canadian Employee Relocation Council Canadian Employee Relocation Council (CERC). All rights reserved. Canadian Employee Relocation Council 180 Dundas Street West Suite 1506 Toronto, ON M5G 1Z CERC (2372) Leadership for Workforce Mobility CERC 2012 Cross Border Payroll and Benefits Survey Page 3

4 Participating organizations Agrium Air Liquide Canada AltaGas Utilities Inc. AMEC Bombardier Capital Power Corporation Cenovus Energy Inc. Cisco Systems, Inc. Deloitte & Touche LLP Domtar Enbridge Inc. exp Services inc. Fluor Canada Ltd. Great Canadian Gaming Corporation LANXESS Inc. lululemon athletica Magna International MDA Systems Ltd. Methanex Corporation Nestle Canada Inc. Newmont Mining Corporation PCL family of companies Research In Motion Resolute Forest Products Royal Bank of Canada Sanjel Corporation Sierra Systems Suncor Energy Talisman Energy TransCanada Vermilion Energy Wal-Mart Stores Inc. CERC 2012 Cross Border Payroll and Benefits Survey Page 4

5 Corporate Profile A total of 32 organizations participated in the survey; participants self-selected the industry category most closely matching the organization s primary business activity. Industry Category Agriculture 6% Manufacturing 14% Finance 3% Natural Resources (Oil & Gas, Utilities, Mining, Forestry) 29% Retail/Wholesale Services 9% Technology 14% Pharmaceutical (bio tech, ) 3% Services (Accounting, Legal, consulting etc) 6% Construction / Engineering 5% Other 11% Section A - Canada to U.S. Assignments and Transfers At total of 31 participating organizations transfer employees from Canada to the United States for both long and short term assignments. 1. The following benefits are provided to employees transferred from Canada to the U.S. Flexible Budget Spending (FBS) 30% Miscellaneous Expense Account (MEA) 33% Cost of Living Allowance (COLA) 37% None of the above 27% The provision of these benefits is, in some instances, determined by the nature of the assignment or transfer. For short term assignments these benefits may be provided CERC 2012 Cross Border Payroll and Benefits Survey Page 5

6 in accordance with the company s assignment policy, but for permanent transfers they may not be offered. Some companies report using their domestic policy to determine the level of these benefits for permanent moves. Verbatim comments We call it a Flexible Relocation Fund and if applicable we provide Location Differential Assistance. Our policies provide them with company benefits as well as assignment incentives (including per diems or monthly living allowance). Sometimes we provide an initial lump sum payment grossed up to cover miscellaneous expenses at the start and end of the assignment, with the remaining costs being stipulated. 2. For employees on an assignment in the U.S., the management of the payroll is largely determined by the duration of the assignment. Please indicate how payroll is managed for employees on assignment from Canada to the U.S. in your organization. Remain on Localize to Canadian Payroll U.S. Payroll Assignments less than 12 months duration Assignments months duration Assignments months duration 74% 26% 45% 47% 36% 58% Assignments over 36 months duration 19% 71% Several companies noted that in the case of permanent moves and long term assignments, employees are generally placed on U.S. payrolls. In certain situations contracts may stipulate that employees must be placed on the U.S. payroll. Verbatim comments I wouldn't say "localized" to US payroll unless it is a permanent move. If LTA, a balance sheet(s) is prepared and the employee can have a split pay. Employees for any assignment lengths to the US are put on a US payroll. CERC 2012 Cross Border Payroll and Benefits Survey Page 6

7 3. Companies were asked to identify which of the following benefits are included under the Canadian home payroll and which benefits are included under the U.S. localised payroll Which of the following benefit items are included in your Canadian home, or U.S. localized payroll for employees on assignment. For the purposes of this question: Short term assignments are those up to 24 months in duration. Canadian Home Payroll Government health insurance 81% Supplemental hospital medical 74% coverage U.S. Localized Payroll 48% 63% Private health care coverage Dental care Education assistance Group life / AD&D Short/long term disability coverage Group RRSP contributions Stock options 70% 52% 78% 63% 56% 48% 81% 52% 81% 56% 81% 33% 59% 18% In the majority of cases, government health insurance, together with life and disability insurance coverage are maintained on Canadian home payroll for assignments of 24 months or less. In some circumstances this is despite the payroll arrangements for both short term and long term assignments. CERC 2012 Cross Border Payroll and Benefits Survey Page 7

8 Verbatim comments: We seek to obtain as similar as possible coverage to what the employee would have received in Canada. For example, we will reimburse employees for copays, and allow them to participate in our company matching RRSP program if they remain tax resident of Canada. Also allow them to continue with CPP if a temporary assignment with the intent for them to return to Canada at the end of assignment. While temporarily paid on the USA based payroll system, certain employee benefit programs (life, AD&D, Disability, Group RRSP Contributions) are maintained for the assignee in Canada, and the cost of same are transferred to the receiving USA entity. 4. Companies were asked to identify how income tax withholding and remittance is managed for both long and short term assignments to the U.S. The most common method for short term assignments is tax equalization at 42 per cent of respondents. For long term assignments responses were evenly split between tax equalization and the requirement on the employee for all tax reporting and remittance of tax payments. Which of the following policies do you use to manage income tax withholding and remittance? Short Term Assignments Long Term Assignments Tax equalization 42% 32% Tax protection 29% 16% Assignee responsible for all tax reporting and remittance 16% 32% Other 3% 13% Several companies indicated that employees are provided with the services of a tax consultant to assist in preparation and filing of taxes, with the employee being responsible for the remittance. CERC 2012 Cross Border Payroll and Benefits Survey Page 8

9 Verbatim comments If a repetitive business traveller to the US, taxes are advanced and paid to US authorities on a quarterly basis and employee refunds company when foreign tax credit is received on Canadian return. We put people on local payroll, and tax withholding is done through the local payroll. All assignees are tax equalized and protected when placed on assignment. Assignees provided with assistance for tax filing. 5. For the management of home country social security and provincial / state benefit contributions, the majority of companies require the employee to pay the employee portion of the contribution amount for both short term and long term assignments. Who is responsible for home country social security and state benefit contributions? Employee pays employee portion of contribution Short term assignment 75 % Employer pays employee and employer portions of contributions 25% Long term assignment 64% 36% CERC 2012 Cross Border Payroll and Benefits Survey Page 9

10 Section B - U.S. to Canada Assignments and Transfers A total of 27 participating organizations transfer employees to Canada from the United States for both long and short term assignments. 1. The following benefits are provided to employees transferred from the U.S. to Canada For employees transferred from the U.S.to Canada do you provide any of the following benefits? Flexible Budget Spending (FSB) 25% Miscellaneous Expense Account (MEA) 39% Cost of Living Allowance (COLA) 35% None of the above 28% These responses are, for the most part, consistent with those received in Section A: Canada to U.S. transfers and assignments. Verbatim comments: COLA is also expanded to include a Housing Allowance fully localized from day one COLA is factored into the offer calculation. No additional allowance is payable, localized from day one. CERC 2012 Cross Border Payroll and Benefits Survey Page 10

11 2. For employees on an assignment in Canada, the management of the payroll is largely determined by the duration of the assignment. Please indicate how payroll is managed for employees on assignment in your organization. Remain on U.S. Payroll Localize to Canadian Payroll Assignments less than 12 months duration Assignments months duration Assignments months duration Assignments over 36 months duration 84% 16% 60% 40% 44% 56% 32% 68% CERC 2012 Cross Border Payroll and Benefits Survey Page 11

12 3. Companies were asked to identify which of the following benefits are included under the U.S. home payroll and which benefits are included under the Canadian localized payroll. Please indicate which of the following benefit items are included in your U.S. or Canadian localized payroll for employees on assignment. Vertical/Horizontal Titles U.S. Home Payroll Canadian Localized Payroll Government health insurance 71% 38% Supplemental hospital medical coverage 81% 38% Private health care coverage Dental care Education assistance Group life / AD&D 81% 33% 81% 38% 66% 29% 85% 33% Short/long term disability coverage 85% Group Pension contributions 67% 33% 28% Stock options 43% 14% In comparison to Section A results (transferring employees from Canada to the U.S.) it would appear that a greater number of companies maintain employees on the U.S. home payroll as opposed to the localized Canadian payroll for certain benefits when transferring employees from the U.S. to Canada. CERC 2012 Cross Border Payroll and Benefits Survey Page 12

13 4. Companies were asked to identify how income tax withholding and remittance is managed for both long term and short term assignments to Canada. Which of the following policies do you use to manage income tax withholding and remittance? Short Term Assignments Long Term Assignments Tax equalization 36% 36% Tax protection 32% 18% Assignee responsible for all tax reporting and remittance 11% 39% Other 0% 11% Tax withholding and remittance practices appear to be consistent for both U.S. and Canadian assignments. Responses also indicate that professional assistance is provided for preparing returns and calculating tax remittances. 5. Management of home country social security and provincial / state benefit contributions. The majority of companies require the employee to pay the employee portion of the contribution amount for both short term and long term assignments. There is no measurable difference observed between U.S. to Canada transfers or Canada to U.S. transfers. Who is responsible for home country social security and provincial / state benefit contributions? Employer pays Employee pays employee and employer portions employee portion of contribution of contributions Short term assignment 76 % 24% Long term assignment 64% 36% CERC 2012 Cross Border Payroll and Benefits Survey Page 13