Implementing a Payroll Process for Globally Mobile Employees: … · Implementation Timeline JAN...
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SESSION 1.1 Implementing a Payroll Process for Globally Mobile Employees: General Electric Case Study Theodore Sadlouskos Michael Bussa Tax Lead, GE Partner, Ernst & Young LLP [email protected] [email protected] Ann Glackin Amit Banker Exec. Comp. Team, GE Senior Manager, Ernst & Young LLP [email protected] [email protected]
Transcript of Implementing a Payroll Process for Globally Mobile Employees: … · Implementation Timeline JAN...
SESSION 1.1
Implementing a Payroll Process for Globally Mobile Employees: General Electric Case Study
Theodore Sadlouskos Michael Bussa Tax Lead, GE Partner, Ernst & Young LLP [email protected] [email protected]
Ann Glackin Amit Banker Exec. Comp. Team, GE Senior Manager, Ernst & Young LLP [email protected] [email protected]
Theodore Sadlouskos Michael Bussa Tax Lead, GE Partner, Ernst & Young LLP [email protected] [email protected]
Ann Glackin Amit Banker Exec. Comp. Team, GE Senior Manager, Ernst & Young LLP [email protected] [email protected]
SESSION 1.5 Implementing a Payroll Process for Globally
Mobile Employees: General Electric Case Study
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Discussion
Overview of Global Equity Issues for Cross-border Employees GE Equity Programs Key Considerations Designing and implementing a process to achieve global payroll
compliance Stakeholders, Team Resources Implementation Timeline Data Challenges and Approach Tax Technical Issues Communication – Global Payroll and Employees Automated Process
Lessons learned Current/Future State Initiatives Questions
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Overview of Global Equity Issues for Cross-border Employees: Current Tax and Regulatory Environment
Significant factors ► Sarbanes-Oxley
► ASC 718 (Formerly FAS 123(R))
► Taxing authorities increased focus on equity compensation
► OECD initiatives
► Depressed equity markets
► Troubled Asset Relief Program
► Government intervention and oversight of executive compensation
Organizational risk ► Tax compliance risk to
organizations and their employees
► Significant consequences for non-compliance; fines, penalties, interest, imprisonment
► Reputational risk
► Increased tax and operational costs
► Possible negative impact on employee morale
Implications ► Increased corporate
governance and transparency ► Equity plan design changes ► Stock option expensing under
US GAAP ► Renewed focus on corporate
tax minimization strategies (e.g., cross-charges to non-US subsidiaries; deferred tax asset optimization)
► Increased payroll compliance requirements around equity compensation for cross-border employees
► Increased taxing authority audits and payroll examinations
► Increased equity program administration
There has been a convergence of significant factors and developments which have resulted in increased risk to organizations and their equity program participants.
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Overview of Global Equity Issues for Cross-border Employees: Potential Tax and Payroll Implications
Potential tax implications Determining taxable income attributable to multiple jurisdictions Income sourcing practices/requirements Potential double taxation and
relief available (e.g., income tax treaties, foreign tax credits, tax concessions)
Effect of company’s intercompany cross-charge process
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Overview of Global Equity Issues for Cross-border Employees: Potential Tax and Payroll Implications
Potential payroll implications Identifying payroll reporting and tax withholding requirements associated with equity compensation
Interface/considerations of ASC 718 (formerly FAS 123(R)) and accounting in general
Selecting appropriate tax withholding rates
Additional, reporting/disclosure required specific to equity compensation at grant and/or vesting of RSUs
Payroll reporting and tax withholding for former employees
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Overview of Global Equity Issues for Cross-border Employees: Challenges in Managing Tax Withholding
Identification of tax implications and compliance requirements
International assignment policy considerations
Company data tracking requirements and capabilities
► Timing and amount subject to tax in multiple countries
► Income sourcing between jurisdictions
► Multiple country payroll reporting and tax withholding compliance requirements
► Plan qualification application for cross-border employees
► Impact of corporate tax position
► Departure taxes ► Trailing tax liabilities ► Data privacy
► Tax equalization/ protection/other
► Limits on tax equalized/protected income?
► Collection of estimated hypothetical tax on equity awards
► Ongoing accruals for tax equalization expense
► Special considerations for post assignment vesting/exercises
► Effect of recharge process
► Identifying information to be tracked
► Applicable periods for tracking
► Cross border movement
► Identifying former expatriates, direct localizations
► Local payroll information required at HQ to complete a tax withholding calculation
► Sources of information
► Data integrity/quality
► Does a company require advance notice of pending exercise?
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GE Equity Programs
Equity awards in over 70 countries and thousands of participants Stock Options RSUs
Globally Mobile Employees (GMEs) Current expatriates Former expatriates
Cross-border employees (non-expatriates) Approximately 10% of all equity holders have mobility
in their demographic history
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Key Considerations
GE goal to be globally tax compliant Need for centralized and consistent approach Data requirements and need for quick large
volume processing Increased complexity and focus on trailing tax
liabilities RSUs vesting events
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Stakeholders, Team Resources
Stakeholders buy in is critical!
HR Advisors
Independent
Auditors Tax Advisors
Payroll Vendors
Stock
Administrator
Legal Counsel
Equity Compensation
Expatriate Administration HR
Accounting
General Counsel
Tax
Payroll
IT
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Stakeholders, Team Resources (cont’d)
GE Core Team (Full Time) 1 Project Manager 1 Tax Manager 1-2 Executive Compensation Managers 1 IT Manager (Peaked at over 20 IT resources)
GE Internal Support Team Global Mobility Team Equity Team Corporate Tax PeopleSoft Team State Tax In-country Payroll Contacts
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Implementation Timeline
JAN 2008
October 2008
Implementation and Continuation of Existing Process With Manual Calculations Automated Process
NOV 2007
Project Kickoff
Jan 2008: Implementation and Manual Calculations
Jan-December 2008 Identify initial population; audit of payroll processing
Modifications to support PeopleSoft output requirements
JAN 2009 Jan-June Testing
Jan 2009 Data scrubbing; Identify/ train pilot countries
APR 2009 APR – JUL Go Live
JUL 2009 JUL + Ongoing Automated Process
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Data Challenges and Approach
Sources of data to prepare a tax calculation Identify employees subject to multiple jurisdictional
tax consequences Availability of historical data, accuracy Employee mobility Equity awards and transaction information PeopleSoft (real time year to date) information
Single source of combined data Identification of new moves, update process Process to address incorrect data
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Data Challenges and Approach (cont’d)
Other country information Regional allocation and move information
Integration of calculation result Distribution of information
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Expat database
Oracle database
Peoplesoft
EOWin
Data repository
Demographic/ Payroll Data
Transactional Data
Accounting/ Finance
Local Payrolls
Equity Administrator
EY Global Tax
Calculator
Data Challenges and Approach (cont’d)
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Tax Technical Issues
International assignment policy considerations Corporate recharge position Country specific tax treatment Calculation of composite gross-up as part of
tax calculations Regional allocations (state to state, other) US Payroll processing requirements
(PeopleSoft) and Year-to-date income In-country payroll processing
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Communication – Global Payroll and Employees
Global payroll training sessions Data flow In-country payroll processing Gross-up and reconciliation
Communication Tax return preparation assistance for post
assignment transactions Any assistance to non-expat population?
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Automated Process
Employee vests/makes trade
(through broker)
GE
Employee
Update participant tax information and
distribute net proceeds
EOWin
Expat, PES Oracle
Trade, mobility & payroll data for all transactions
Finalized calculations
EY EY Global Tax
Calculator
Vest Date/Trade Date +2
Vest Date/Trade Date +1
Employee receives net proceeds
GE In-Country Payrolls
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Automated Process (cont’d)
Vesting and exercises are handled through the same process
Turnaround is targeted for T+3 and US remittance
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Lessons Learned
Secure senior leadership support of project early on Perform high level risk quantification analysis Build project team and budget accordingly
Internal and external sources Time allotted
Communicate Amongst the many disciplines Globally (payrolls, etc.) To impacted individuals (new process and answer questions)
Determine Risk adversity Perfect process vs. serviceable approach
Challenges of non-integrated payrolls outside of US
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Lessons Learned (cont’d)
Data drives the calculations and results Assumptions are needed if data is not available Need for in-country payroll process and reconciliation
Testing Build adequate time for end to end testing Testing challenges - accounting for every scenario when the
majority of the scenarios are unique Settlement of taxes for RSUs - challenges of STC vs WTC Multiple generational approach
Pilot high risk populations and jurisdictions Flexibility in approach and systems
Build a sustainable process in a dynamic international tax environment
Update and maintain process
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Current/Future State Initiatives
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Questions
