SAIL sees the common mistakes companies make when sending their employees between the UK and South Africa.
What starts out as an adventure for the employee can often become a nightmare because of the admin involved in dealing with taxes in different countries. The last thing you need as an employer is your employee hating their assignment and telling everyone it is not worth doing.
We highly recommend you get the necessary support so your employee feels looked after and, even better, feel they have benefited financially and would be keen to support future assignments.
Below are ten of the most common mistakes companies make when sending employees between the UK and South Africa. This is not an exhaustive list but gives you some idea of the things to look out for.
1. Assuming Short-term Assignments Have No Tax Consequences
Many companies assume that if an employee is only travelling for a few months there will be no tax impact. Be careful, there are always potential consequences. And, what we tend to see is that something that was meant to only be for a short period of time, gets extended, without any thought for the consequences.
In addition, the 183-day rule is more complex than most people realise, and there are additional conditions that must be satisfied. If those conditions are not met, local payroll taxes may apply even for relatively short assignments.
2. Not Considering Employer Payroll Obligations Early Enough
When an employee performs work in another country, the employer may be required to register as an employer and operate payroll withholding in that jurisdiction.
Companies often discover this requirement too late, creating retrospective payroll obligations and potential penalties.
3. Ignoring Permanent Establishment Risk
Sending employees into another country can sometimes create a taxable presence for the company itself.
For example, if an employee is negotiating contracts, generating revenue, or working in the host country for an extended period, this could trigger corporate tax exposure.
In Germany, for example, there was a permanent establishment created by just having a luggage locker available for the company to us. This is a big potential risk for the employer.
4. Not Structuring the Assignment Package Properly
International assignments frequently involve additional benefits such as housing, schooling, travel and cost of living allowances:
If these benefits are not structured properly, employees may face unexpected tax liabilities and the employer may incur higher costs than anticipated.
5. Misunderstanding Tax Residency Rules
Employees can sometimes unintentionally become tax resident in the host country, depending on the amount of time spent there and other connecting factors.
At the same time, they may continue to remain tax resident in their home country. This can result in dual tax residency and complex tax reporting requirements.
6. Forgetting About Social Security or National Insurance Obligations
In addition to income tax, companies must also consider social security contributions, such as:
- UK National Insurance
- South African UIF or other local contributions
Failing to address these obligations early can create unexpected payroll liabilities.
7. Assuming Employees Will Manage their own Tax Compliance
Many companies assume employees will deal with their own personal tax filings.
However, cross-border assignments often require tax filings in both countries, and without proper guidance employees can easily miss deadlines or make errors. Employees tend to focus on their jobs and are in a new country so tax tends to be the last thing they think about.
This can create risks for both the employee and the employer.
8. Not Documenting the Assignment Properly
Assignments should be supported by a formal assignment agreement that clearly outlines:
- Duration of the assignment
- Compensation arrangements
- Allowances and benefits
- Tax equalisation or tax protection arrangements
- Repatriation terms
9. Not Considering Fringe Benefit Taxes
We often see employers entering into unusual arrangements to help the employee.
For example: Paying for the employee’s tax in that country, or paying for specific personal expenses (moving etc.).
The problem is the employer often forgets about the tax consequences – these are often treated as taxable benefits and should be taxed.
10. Trying to Manage Everything Internally
Many organisations attempt to manage international assignments internally without specialist advice. Or they often arrange secondments in operations and only include HR as a last step making it very difficult for a lot of the key risks to be addressed.
Given the interaction between tax law, payroll rules, employment law and immigration requirements, this approach often leads to avoidable compliance problems.
Engaging experienced advisors early can save significant time and cost.
Conclusion
International assignments between the United Kingdom and South Africa can create valuable opportunities for businesses and employees. However, they require careful planning to ensure that tax, payroll and regulatory obligations are properly managed.
SAIL International specialises in helping businesses manage international assignments between South Africa, the United Kingdom and other jurisdictions.
We assist companies with:
- Global mobility planning
- Cross-border payroll and employer structuring
- ‘Employer of Record’ solutions
- Employee tax planning and compliance