How can universities make the most of international opportunities?

29 June 2017

Internationalisation is a hot topic on the agenda of many universities. With increasing revenues coming from overseas students, the need to offer diverse programmes run by top academic talent and the highly competitive nature of obtaining research funding, more universities have employees working internationally than ever before. Indeed, many universities now have an internationalisation policy and a team dedicated to driving international opportunities.

As is the way for many companies expanding their operations overseas, international workers often create a headache for higher education institutions (HEIs) - for staff dealing with the payroll, tax, Permanent Establishment and other compliance implications the amount of time spent dealing with this population far exceeds the time spent on similar tasks for domestic employees. Latest PwC benchmarking data suggest the average organisation requires 1 full time employee to manage every 38 employees working internationally.  On the one hand it’s incredibly valuable for employees to gain experience overseas, and it can be essential to a HEI for generating revenue, but on the other ensuring worldwide compliance for the university is time consuming, costly, and an issue which is all too often ignored.  All this is leading to an increased number of “war stories” from the sector.

Immigration and visas, tax and social security, creation of permanent establishments, VAT are all complex issues that require thought and planning to get right. But universities are large and often divisional institutions which means this is not easy to achieve.

With more and more stories emerging of universities having overseas presence, worldwide tax authorities are taking much more of an interest in their tax affairs, particularly in India and China where they are especially “hot” on increasing tax revenues from universities.  An example being the recent case of one HEI being fined a record £1mn for failing to understand their personal tax compliance requirements around a JV they had in China.

There are a number of areas that universities can focus on to help make this easier:

  1. Training. Ensuring  faculty decision makers are aware of the things to consider when sending someone abroad is key. HR and finance often aren’t in the room when decisions are made so having eyes and ears who are aware of and can explain the actions required is essential.  A number of HEI have for example found themselves liable to social security in a number of overseas territories as a result of Faculties agreeing to their UK employees working at home where home is outside the UK;
  2. Communication: Keeping lines of communication open between those “on the ground” as it were and those dealing with the fallout is incredibly useful. Knowing that HR and Finance teams need to  be involved with any international moves helps ensure that there are fewer surprises later down the line.  For example the case of one HEI which found it had created a corporate tax presence in Asia as a result of having a UK employee working there  which other than a few members of the faculty no one knew about ;
  3. Policy and process : Having a clear assignment policy and processes to support this helps to ensure that international moves are offered a consistently thought out deal and avoids reinventing the wheel. There are a whole host of different packages being offered to employees working abroad and having a clear frame of reference is invaluable in minimising costs and ensuring fairness; and
  4. Feedback: If you know where your people are and what has been agreed, you can plan for the next steps. Not knowing incurs risk and cost which is expensive and stressful for everyone involved.

Many universities are reactive when dealing with these challenges instead of being proactive in developing a people strategy and framework which is effective for the university. With increased focus on where money is earned and tax is paid and with the digital tax system moving forward, it will be universities who act upon these issues who emerge triumphant from this new age.

Marie Green | Director
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