Will transforming your mobility function take your organization to new heights? Will transforming your mobility function take your organization to new heights?

By Dr. Joost Smits

EY Global People Advisory Services Mobility Leader

Experienced people advisory leader who strives to align corporate objectives to enhance mobility ecosystems. Loves cycling, sports and his family.

Contributors
19 minute read 9 Oct 2020
Related topics Workforce Tax

Global business travel will be reimagined in the wake of the COVID-19 pandemic.

In brief
  • The pandemic has forever altered the course and trajectory of business travel.
  • We recommend leaders transform their mobility function.

The toll that COVID-19 pandemic has taken around the world has been painfully evident on many levels. For businesses in particular, the impact has been profound. The environment has been complex and multilayered, with many organizations originally transitioning people to home-working then subsequently having to develop a strategy to return them to the physical workplace in a COVID-safe manner.

Running parallel to these (and other) critical issues have been challenges around international business mobility and travel. On a basic level, the closing of national borders and an effective ban on international flights meant that employees weren’t able travel for business. And the impact of COVID-19 was staggering, with 98% of companies cancelling or suspending all international business travel in light of the pandemic.¹ Further, forecasts from the travel industry indicate a 2-3 year timeline to recover and operate at pre COVID-19 levels.²

The bigger picture, however, is far more complicated. In many instances, employees have found themselves unable to commute across borders, stranded in countries beyond their permitted time or working outside their country of tax residence, creating all manner of immigration and compliance issues.

Businesses have had to think in ways like never before. And while dealing with the immediate challenges, they are trying to come to grips with exactly what business mobility and travel are going to look like in the months and years ahead.

Yet despite the mobility environment being even more complex than it already was, businesses have also been provided with the opportunity to transform mobility for the future. To ensure that this happens in an optimal manner, businesses will need to adopt a strategy of active management and focus on a number of key areas and drivers, including employee safety and tracking; willingness to travel; compliance; economic factors; broader health and safety issues; virtual technology; sustainability; and the mobility impact related to supply chain changes (onshoring vs. offshoring vs. nearshoring).

Meeting the immediate challenges

As countries went into lockdown, the scale of the mobility challenge became very clear, very quickly. “Things moved at dizzying speed,” explains Seema Farazi, EY Global Immigration Leader and EY EMEIA COVID-19 PAS Response Leader. “In a matter of weeks, if not days, we reached a point where 90% of borders were closed, quarantines for arrivals were put in place, and social distancing rules were implemented.”

Perhaps more significantly, the fast-moving situation exposed vulnerabilities and flaws in businesses’ mobility programs, especially in the area of real-time data and sharing of information across functions. “In many cases, the key risk was in data silos,” says Farazi. “Did businesses know where their people actually were, what kind of immigration permissions did they have, could they be repatriated, or at the very least how could they be safeguarded? Being able to wrap your arms around your workforce in times of crisis is critical and that depends on knowing who and where they all are. Organizations scrambling to identify and locate those that were in greatest need of protection exposes both the business and those individuals to risk,” Farazi adds.

Communications gaps and an inability to contact the mobile workforce also became evident in many cases – at a time when keeping employees up to date was absolutely vital.

Being able to wrap your arms around your workforce in times of crisis is critical and that depends on knowing who and where they all are. Organizations scrambling to identify and locate those that were in greatest need of protection exposes both the business and those individuals to risk.
Seema Farazi
EY EMEIA COVID-19 Response Leader

There were also perception problems that presented challenges. As someone based in Singapore, Sarah Lane, EY Asia-Pacific People Advisory Services Mobility Leader, points to a peculiarity in largely Western attitudes. “There were businesses who clearly thought that COVID-19 pandemic was only going to be a problem in Asia, so they would deal with their people in that region alone. Many businesses outside of Asia didn't take the time to scenario plan how it might play out more extensively – and days, as we have seen, can make a difference.”

Another issue that became evident in the immediate wake of the pandemic was that certain people were effectively flying under the radar – they should have fallen under a business’s mobility program but weren’t categorized as such. Often the people in view of the mobility function are those on designated assignments for whatever length, and those on premeditated business travel. Yet there may be many people working in different locations or remotely who aren’t officially on the program, which creates more of a global workforce issue than just a mobility issue. Getting visibility of where those people were proved to be a challenge.

As with any crisis or  “black swan” event such as COVID-19, different businesses were at different levels of preparedness and had varying crisis management plans they could put into place. According to the Now, Next and Beyond: Global Mobility’s Response to COVID-19 report, conducted by EY and The RES Forum and published in June 2020, only 49% of respondents had a major incident response policy in place that they were able to deploy.

In-place crisis response plans

49%

Of surveyed organizations had a crisis response plan for a major crisis.

The situation around “stranded” workers and overstayers was alleviated somewhat by the fact that many governments put measures in place quite quickly to protect them with regards to work permits and immigration status. However, any leniency will be removed at some point, if it hasn’t been already. And this is just one factor that businesses will need to consider as part of a return to business mobility and travel.

As such, there are five key considerations for businesses with regard to not only moving forward in the near-term, but also in transforming the mobility function more comprehensively and optimally.

1. Border controls and their wider implications 

As borders closed down, so they have begun to open again, but the picture is complex and fast-changing, and businesses need to monitor it carefully. Where borders are open, some countries have quarantine periods, which may affect mobility in-country. In some instances, quarantine applies only to arrivals from countries on a “blacklist” – and these can be implemented at very short notice as was witnessed in July with the UK suddenly adding Spain to its quarantine list.

The development of travel corridors, bubbles and airbridges has helped give some clarity, but again these are subject to change. As such, the situation with borders will be central to any mobility program and needs to be tracked continuously.

As Farazi explains: “As restrictions start to lift, the risks increase because you're putting your workforce into a system where there are a lot of unknowns. A cyclical risk remains as countries open borders, because there is a chance of imported infections and the imposition of quarantine measures.”

She points to a whole set of questions that businesses should be asking themselves and factors that they need to be keeping track of. “If the border is open at the point of departure, what if it closes at the point of arrival? What happens if there is some supervening event?” she asks. “What if an employee has visited, or transited through, a country deemed high-risk, even though they have all of the necessary immigration permissions, and are turned back at the border? Is health certification required on arrival? The questions are endless.”

The challenges and complexities around simply getting into another country – irrespective of whether for short-term travel or for longer assignments – require businesses to take a step back and fully assess the implications. A starting point is for businesses to establish what their risk tolerance is, under what circumstances are they willing to allow employees to travel – and how they will react if employees aren’t willing to travel. And this begins by actually gaining a comprehensive understanding of what the risks actually are.

Pivotal to taking this forward is putting a policy (or policies) in place, communicating with all the right corporate personas who are making decisions and who may not be alert to the risks in the same way a head of immigration or a head of mobility might be.

While the opening of borders – and the associated health and safety and quarantine issues – plays to issues of travel feasibility, that needs to link with broader business requirements. If travel is actually feasible, is there a critical business need and do businesses want their people to go to a particular destination? And if so, how is that going to be monitored?

The reality is, however, that global businesses have strategies and objectives to execute – this is even more so the case as they try to navigate this period of economic disruption. Deploying people across the organization in various forms comes with the territory. Ensuring that the proper policies and processes are in place is, therefore, absolutely critical.

2. Changes around visas and permits

As indicated above, countries have largely been understanding with regard to visas and permits, most notably around renewals and applications. While approaches have varied on a country-by-country basis, 57 countries took swift action, ripped up the red tape and granted automatic extensions for migrant workers and landed business travelers, to protect them from becoming overstayers.

“The initial challenge was just understanding where people were, what their status was and their right to be in the country,” says Lane. “There were also issues around where people wanted to go and would they be accommodated if they wanted to evacuate? Or if someone was stranded, what is their right to be in that country? Gathering all that data was the hard part – especially if it wasn’t readily available.”

Lane’s sense is that this is now largely under control and that governments seem to be working very well with businesses with regard to individual circumstances and scenarios. However, any leniency towards visa and permits will eventually fade and businesses will have to ensure they remain current with shifting rules.

Indeed, authorities may well do things differently to how they have in the past. So, while businesses have had to adapt to the way authorities are operating now, they need to be mindful that new procedures may be implemented in the not-so-distant future. In this regard, it could be easy to overlook a change.

Monitoring visas and permits, therefore, is critical, as failure to have the appropriate paperwork may lead to possible deportation and restrictions on working in or travelling to other jurisdictions.

Lane also highlights a particular incident that might not even register with businesses or employees, but which could have serious implications from a visa perspective. “In Singapore, a number of foreign visa holders were taken to court for flouting social distancing laws – as a result, they were fined, had their visas cancelled and have been banned from entering Singapore again. It’s critical that while in-country, people respect the rules of that country, otherwise it could well impact their immigration status.”

3. Tax compliance and potential triggers

As has already been addressed, many employees have found themselves stranded during the pandemic – either stuck in a country beyond the expiry of their contract or visa, or locked down somewhere that isn’t their place of residence because they travelled there for safety or to support their families and simply haven’t been able to leave. And many are still performing work for their employers, triggering complexity, uncertainty and the possibility of tax penalties.

On the whole, as with visas and permits, countries have been understanding of the situation. This was assisted by the OECD issuing guidance in April around what member countries should be doing across a whole scope of issues, including income tax, social security and permanent establishment.

However, this was simply guidance as opposed to clear direction and clear recommendations. What has happened in practice is that many countries have had to rely on bilateral agreements and updates they are receiving from local tax administrations.

Permanent establishment, a mechanism of judging a country’s entitlement to tax income from a foreign company, is a key tax risk. Identifying permanent establishment used to be clear-cut – the country could simply point to a foreign-owned factory on its soil to back up its tax claim. In the mobile and digital age, however, a stranded executive may trigger permanent establishment simply by continuing to work from their temporary location.

The challenge for any company is to determine whether there actually is a permanent establishment. The second is to determine whether that triggers a corporate tax filing obligation. There could be very significant penalties for failure to file or for mistakes in filing, especially where the executive is senior and the company doesn't have a lot of substance overseas. A sizeable taxable presence can be created very quickly.

The environment is going to become more challenging as borders open and countries reinstate regulations, yet companies still want people to stay at home and aren't pushing seconded national experts (SNEs) to return to their “home” location. This may require policy changes on the behalf of businesses and the implementation of, for instance, virtual assignment policies to mitigate risk.

“The true level of exposure and tax risk will only manifest itself when businesses start filing tax returns for the 2020 tax year,” says Lane. “When businesses have to declare how long somebody has been in a country. Therefore, it’s essential to monitor the situation as much as possible and take measures to offset risk”.

In order to manage the broader tax compliance environment, businesses need real-time visibility to what agreements have been put in place between certain countries and then plan accordingly. Central to this will be technology and ensuring they have the right data points.

4. In-country considerations

Once borders open, and the picture around visas, work permits and taxation becomes clear, and business travel and mobility effectively “reboot”, another set of challenges comes to the fore – practical matters arising from being in any given country.

Concerns around health and safety are going to be uppermost – for instance, will health insurance be available for migrant workers and, if so, will there be any exclusions. 

Critically, does the country have rules in place around social distancing, group gatherings and travelling on public transport, for instance, and what are the penalties for non-adherence? As demonstrated by the previous Singapore example, these can be significant.

And it’s important to note that any in-country rules may change on a regular basis and will need to be tracked and communicated to ensure that people are adequately safeguarded. This may actually impact business travelers more than SNEs. “The shorter a time someone is going to be in a country at a time of crisis, the more exposed they are,” says Farazi. “That’s because things are going to change. If new rules are introduced overnight, travelers may be caught out. Those who are there long-term won’t be as adversely affected.”

There are multiple other considerations that may well shape the decision-making process regarding a mobility program. Again, businesses will need to stay on top of these and ensure they are communicated clearly and regularly with employees.

For example, does the country have “track and trace” technology in place? If so, then people need to be aware of this, because failure to have an appropriate app could result in penalties, such as restrictions on travel. For longer-term assignments, where whole families move, are there issues around schooling that could have an impact? That said, it may well be expected that new assignments of that type may be considerably reduced for the foreseeable future.

Similarly, decisions will need to be made around accommodations – should people be put into company apartments rather than hotels when on an extended stay, because of the reduced interaction with other people.

Monitoring every single change in every country is a considerable challenge, and one that most companies would struggle to implement. As such, Ernst and Young LLP has entered an alliance with WorldAware, a leading provider of intelligence-driven integrated risk management solutions. This enables the delivery of critical trip data, alerts and regulations so that business travelers are safeguarded and organizations understand travel-related compliance during and after the pandemic.

5. The opportunity to transform the global mobility program

It is widely accepted that business travel and mobility will never look the same again post-pandemic. The results from the Now, Next and Beyond: Global Mobility’s Response to COVID-19 report show how significantly the landscape is expected to shift.

Crucially, more than four in five respondents (82%) anticipate a moderate to significant increase in the use of virtual work, where assignees don’t physically relocate but complete the objectives of the foreign assignment for the host location from their country of employment.

Reduction in business travel

72%

Of surveyed organizations believe business travel will reduce.

Furthermore, 72% believe that business travel will reduce; 52% that short-term assignments will decrease, and 58% that long-term assignments will be less frequent. The report stated: “These effects seem to be driven by a better capability and willingness to work virtually, by cost drivers that are likely to become more important and by risk management considerations. Ultimately, they may affect the mindset of organizations and are likely to lead to a rethinking of global work, its costs, risks and benefits.”

Indeed, this paints a radically new picture for global mobility and presents the opportunity for businesses to totally reimagine their programs. But exactly what does that transformation look like?

“First and foremost, there is a shift on the employee level, the human level,” says Farazi. “People know they can do their work remotely and don't need to be travelling excessively, and employees now want to see that in transformed ways of working. Employees are going to want more flexibility and businesses are being compared against each other in how flexible they going to be.”

Sustainability will also likely play a major factor in future mobility. Many businesses have shown they can continue to work without business travel and will likely continue to drive towards a reduced carbon footprint. According to research from Climate Group, a potential average decline in international business trips of up to 40% could conservatively cut 28 million tons of CO₂ a year.

On top of the environmental impact, Climate Group claims this could save businesses over $500 billion, if this trend were to be reflected globally across both international and domestic business travel.³

“More virtual working also creates the potential to enable more inclusivity and diversity,” says Farazi. “The reduced need for people to be at a physical location means that the talent pool is wider and open to those who would have issues around accessibility. It can level the playing field where travel may previously have been mandatory.”

As the figures above indicate, businesses will need to rethink assignments more broadly. While, no doubt, long-term assignments will continue, they may look different, potentially in a hybrid form. Employees may travel to a location for a matter of months to establish an operation, for example, and then return home, travelling out to that location on shorter trips and doing the remainder virtually.

On a fundamental level, this will require the implementation of new policies and processes – indeed, it may lead to a segmentation of policies. As opposed to having traditional short-term or long-term policies, businesses can move towards a more purpose-based approach, such as in talent development. Young talent policies may include more self-service and more automation, whereas top executives might have a more high-touch model.

Despite the opportunity to transform, this doesn’t signal the end of mobility, rather the creation of a more considered, leaner mobility program. “There are many reasons for people to live and work and move across borders. Not only will it support a talent agenda, there are simply times when meeting clients face-to-face or being physically present in a location is critical,” says Lane.

There are many reasons for people to live and work and move across borders. Not only will it support a talent agenda, there are simply times when meeting clients face-to-face or being physically present in a location is critical.
Sarah Lane
EY Asia-Pacific People Advisory Services Mobility Leader

It will be incumbent on the mobility function and the HR team more broadly to be more closely aligned to the business. Any cross-border activity will need to be intrinsically linked to the business objectives of the organization. There will be a need to be specific as to the purpose of a business trip or move, and an explanation of the ROI on the activity. Ultimately, what is the definition of “business critical” in the context of the organization?

Central to any mobility transformation will be decisions made around sourcing strategies. There will likely be cost pressures and the need to streamline and this may be achieved, for example, through technology solutions or outsourcing to a shared service center. Similarly, with the level of monitoring and tracking across potentially dozens of countries, partnering with an external provider may well be the most efficient option.

And there is no escaping the role that technology will play in mobility transformation, not least from a data gathering perspective. It will be crucial for businesses to have an established and robust ecosystem where all the vendors involved in the international mobility space are “wired together.” The importance of those vendors and partners interacting in one seamless and fluid end-to-end process will be critical.

The pandemic has also created the opportunity for the mobility function to demonstrate its value to the wider enterprise and to society as a whole. “I think this has really brought mobility to the forefront and made it much more visible to businesses,” says Lane. “Businesses have now become critically aware of how much expertise they have in their own mobility function and how technical and challenging the business of moving people around the world for work actually is.” In terms of how a mobility transformation can support a better working world, a marked reduction in CO2 emissions is an astute observation.

If the global transformation of mobility can save 28 million tons of CO2 a year, the crisis will have been used to build a better world post COVID-19.    

Time and again during the pandemic, the maxim, “Never let a good crisis go to waste” has been quoted. In the case of transforming the global mobility function, it rings very true.

Summary

The impact on of COVID-19 on the mobility market can be analyzed through eight drivers of change: willingness to travel; employee safety and tracking; economic factors; complexity of regulations such as health and safety; adoption and accessibility of virtual technology; a demographic shift; sustainability; and the impact of supply chain changes. All of these will be woven into the fabric of any mobility transformation.

About this article

By Dr. Joost Smits

EY Global People Advisory Services Mobility Leader

Experienced people advisory leader who strives to align corporate objectives to enhance mobility ecosystems. Loves cycling, sports and his family.

Contributors
Related topics Workforce Tax