David Spencer: Handling complexity at Deloitte GMC David Spencer: Handling complexity at Deloitte GMC

David Spencer: Handling complexity at Deloitte GMC
31 May 2015

After implementing two global payrolls, David Spencer, has turned his sights to expat compensation as a director in Deloitte’s global mobility compensation (GMC) team.

He talks to Dawn Gay about the complexity of global payroll, tax equalisation and his involvement with the Global Payroll Association.

Please could you explain a bit more about what GMC means and what your work entails?

GMC is a unique team within Deloitte that has a number of service offerings that are primarily focused on the management of compensation for expatriates. We work with clients to understand the various elements of an expat’s compensation package and where the information is held, for example, HR systems, third party vendors etc.

Once we understand this, we then begin to build data feeds to allow us to collect this information and store it in a centralised database that ultimately allows us to produce payroll instructions to both the home and host locations to ensure compliance. 

Your profile describes you as having ‘a unique insight into global payroll models’. What does that mean?

I have experience with implementing global payroll solutions from both a vendor and client standpoint as well as managing them from a business as usual (BAU) perspective. I have worked in both practice and industry and have therefore experienced the challenges from both sides.

Why do you know a lot about this?

When working in industry, I implemented and managed global payrolls for two organisations. The first was for a large US Investment bank where we chose Budapest for our centralised payroll service centre.

The second implementation was at a leading information and technology company, which chose London as its payroll service centre - unusual, as it is quite expensive from both an office and employment cost perspective. If organisations are looking to setup a centralised payroll service centre in Europe then locations such as Budapest, Prague and - in the last few years - various locations across Poland, for example, Krakow and Gdynia, have become increasingly popular. As companies have already started using these locations there is an established workforce there.

You must have learnt so much from the challenges of setting up these global payroll services?

Most definitely. In addition to the sheer scale of some of the projects I have worked on you also have to deal with the complexity of some of the individual country payrolls where the legislation is so different.

It says on LinkedIn that you have been in Deloitte three years and seven months – has your role changed much during that time?

The team structure and size is very different now to what it was when I originally joined just over three years ago. We have expanded significantly the range of services that we are able to deliver to our clients. In addition to working with clients to outsource expatriate compensation management we are increasingly delivering consulting projects to help companies resolve particular challenges or problems.

We have had a lot of success in the marketplace, which has led to a threefold increase in the number of professionals in the team.

What service line at Deloitte do you come under?

The team ultimately aligns to ‘tax’ although our direct reporting line is into global employment services.

How are you involved with relocating expats?

I have very little involvement with the physical relocation of individuals. Clients who have global mobility programmes will generally have vendors who are contracted to deal with the physical movement of assignees.

The work the team here undertakes is very much focused on the production of payroll instructions for both the assignee’s home and host locations. We ensure that the client operates compliant payrolls and that the assignee is paid and taxed correctly. 

A lot of the mobility policies that have been developed by clients are based on tax equalisation.

The term ‘tax equalisation’ means that an individual will be no better or worse off from a tax perspective, regardless of where a company sends them in the world. For example, if you are in the UK and the company wants to send you to Sweden,which is a higher tax country, the company will reduce your gross salary (and any bonus) by the tax you would have paid in the UK and in return pay your Swedish tax on a grossed-up basis.

Interestingly, because relocation and education support is taxable in some locations but not others, we do need to acquire that data in GMC. Typically, the client will advise us of all their service providers and we’ll reach out to them to collect the data. We have specialist software that Deloitte has developed that stores the information centrally. In this way it allows global reporting as well as the issue of the payroll instructions that I mentioned earlier. 

Who uses your expat services?

It’s generally global companies that have over 100 assignees as a minimum for our full service model, although we have additional services that we can provide to clients with smaller mobility programmes.

Consequently, you do not suffer any direct impact. Tax equalisation can bring cost benefits to the company where taxes in the assignment location are lower.

As well as setting out a company’s position on tax equalisation the policy will also generally detail what allowances an assignee will be entitled to whilst on assignment. For example, the level of relocation support that will be provided or the amount of Cost Of Living Allowance (COLA) that will be payable etc. 

Are there any specific cultural challenges you have found working on the expat side? I have certainly found that in some companies and countries the culture is not terribly vocal and people will not necessarily like to ask questions. You are sometimes left unsure if they have really taken everything in and have fully understood what they must do. It is only when they acquire responsibilities as part of a process that you generally find out their level of understanding.

How are you involved with the Global Payroll Association?

I am on the advisory board that helps define strategy and tries to tackle the question ‘what would we want from the association as a member?’ The board has a number of individuals who can bring their experience to the table to help formulate ideas and move the association forward.

I believe that an association of this type is long overdue in the market. To have such an organisation that understands the needs of members is invaluable in forming a mutually supportive payroll community.

 

 

After implementing two global payrolls, David Spencer, has turned his sights to expat compensation as a director in Deloitte’s global mobility compensation (GMC) team.

He talks to Dawn Gay about the complexity of global payroll, tax equalisation and his involvement with the Global Payroll Association.

Please could you explain a bit more about what GMC means and what your work entails?

GMC is a unique team within Deloitte that has a number of service offerings that are primarily focused on the management of compensation for expatriates. We work with clients to understand the various elements of an expat’s compensation package and where the information is held, for example, HR systems, third party vendors etc.

Once we understand this, we then begin to build data feeds to allow us to collect this information and store it in a centralised database that ultimately allows us to produce payroll instructions to both the home and host locations to ensure compliance. 

Your profile describes you as having ‘a unique insight into global payroll models’. What does that mean?

I have experience with implementing global payroll solutions from both a vendor and client standpoint as well as managing them from a business as usual (BAU) perspective. I have worked in both practice and industry and have therefore experienced the challenges from both sides.

Why do you know a lot about this?

When working in industry, I implemented and managed global payrolls for two organisations. The first was for a large US Investment bank where we chose Budapest for our centralised payroll service centre.

The second implementation was at a leading information and technology company, which chose London as its payroll service centre - unusual, as it is quite expensive from both an office and employment cost perspective. If organisations are looking to setup a centralised payroll service centre in Europe then locations such as Budapest, Prague and - in the last few years - various locations across Poland, for example, Krakow and Gdynia, have become increasingly popular. As companies have already started using these locations there is an established workforce there.

You must have learnt so much from the challenges of setting up these global payroll services?

Most definitely. In addition to the sheer scale of some of the projects I have worked on you also have to deal with the complexity of some of the individual country payrolls where the legislation is so different.

It says on LinkedIn that you have been in Deloitte three years and seven months – has your role changed much during that time?

The team structure and size is very different now to what it was when I originally joined just over three years ago. We have expanded significantly the range of services that we are able to deliver to our clients. In addition to working with clients to outsource expatriate compensation management we are increasingly delivering consulting projects to help companies resolve particular challenges or problems.

We have had a lot of success in the marketplace, which has led to a threefold increase in the number of professionals in the team.

What service line at Deloitte do you come under?

The team ultimately aligns to ‘tax’ although our direct reporting line is into global employment services.

How are you involved with relocating expats?

I have very little involvement with the physical relocation of individuals. Clients who have global mobility programmes will generally have vendors who are contracted to deal with the physical movement of assignees.

The work the team here undertakes is very much focused on the production of payroll instructions for both the assignee’s home and host locations. We ensure that the client operates compliant payrolls and that the assignee is paid and taxed correctly. 

A lot of the mobility policies that have been developed by clients are based on tax equalisation.

The term ‘tax equalisation’ means that an individual will be no better or worse off from a tax perspective, regardless of where a company sends them in the world. For example, if you are in the UK and the company wants to send you to Sweden,which is a higher tax country, the company will reduce your gross salary (and any bonus) by the tax you would have paid in the UK and in return pay your Swedish tax on a grossed-up basis.

Interestingly, because relocation and education support is taxable in some locations but not others, we do need to acquire that data in GMC. Typically, the client will advise us of all their service providers and we’ll reach out to them to collect the data. We have specialist software that Deloitte has developed that stores the information centrally. In this way it allows global reporting as well as the issue of the payroll instructions that I mentioned earlier. 

Who uses your expat services?

It’s generally global companies that have over 100 assignees as a minimum for our full service model, although we have additional services that we can provide to clients with smaller mobility programmes.

Consequently, you do not suffer any direct impact. Tax equalisation can bring cost benefits to the company where taxes in the assignment location are lower.

As well as setting out a company’s position on tax equalisation the policy will also generally detail what allowances an assignee will be entitled to whilst on assignment. For example, the level of relocation support that will be provided or the amount of Cost Of Living Allowance (COLA) that will be payable etc. 

Are there any specific cultural challenges you have found working on the expat side? I have certainly found that in some companies and countries the culture is not terribly vocal and people will not necessarily like to ask questions. You are sometimes left unsure if they have really taken everything in and have fully understood what they must do. It is only when they acquire responsibilities as part of a process that you generally find out their level of understanding.

How are you involved with the Global Payroll Association?

I am on the advisory board that helps define strategy and tries to tackle the question ‘what would we want from the association as a member?’ The board has a number of individuals who can bring their experience to the table to help formulate ideas and move the association forward.

I believe that an association of this type is long overdue in the market. To have such an organisation that understands the needs of members is invaluable in forming a mutually supportive payroll community.