Australians are well known for their enjoyment of international travel. They are also generally sought after in most countries for their skills, honesty and positive work ethic. This has led to a vast number of Australian working in many countries scattered around the globe. These Australians are often specialists in their field, or soon become invaluable to the companies they serve, and end up working internationally for extended periods of time. This phenomenon is likely to grow as the world economies bottom out and stabilize.
In today’s tight economy, especially in the project driven IT arena, flexible workforces and controllable costs are every corporation’s ideal. Permanent staff appears to be a lower cost option on the surface, until the redundancies and long service leave pay-outs are added, not to mention payroll tax, insurances, health care, superannuation/pensions, annual leave and other salary on-costs.
Today, many corporations and employment agencies are favouring a flexible contract based workforce, but most individuals do not understand the pitfalls, or how to take advantage of the tax benefits available to contractors. The IR35 legislation in UK and the new Alienation of Personal Services Income (APSI) laws in Australia, the so called 80/20 rules, has caused extensive confusion, and the tax authorities’ reporting requirements has scared off 30% of the contracting workforce. Every country has its own anomalies in law and tax.
Against this background, there has been a need for a new global understanding of taxation and labour laws. To cater for his service, a new breed of “Management Company” has emerged, which specializes in facilitating the global movement of intellectual capital from country to country. Commonly known as “contractor management companies”, these organisations serve the needs of a global flexible workforce by providing tax guidance and structures to operate in all major countries. Whist salary packaging specialization is an integral part of the service, these organizations do not simply visit HR managers and suggest a few simple principles for effective salary packaging then leave the payroll department with the burden of implementation; they actually run the payroll and administer the all detail, answer the questions and even take existing employees off corporation books if required.
The services typically include payroll administration, salary packaging and tax guidance, legal structures for the payment of contractors and staff, global movement of specialists including facilitation of visas and international payments. With an increase in the need for a flexible global workforce, these services are increasingly becoming essential. In most countries, the services of management companies is invaluable to the contractors, and in countries like China where foreign corporations have great difficulty and costs establishing themselves, these services are almost essential.
In most countries, such management companies can benefit corporations as well as contractors. For these management companies, running payroll is a profit centre, rather than the cost centre that it represents in most corporations. The management companies recover their fees from tax savings, hence most individuals end up with more cash in hand, and are at least cost neutral to the corporation. In many cases, there are significant salary on-cost savings to be had by the corporation.
These arrangements benefit both contractors and corporations. Contractors are able to expense business related items (e.g. motor vehicles, computer hardware, computer software, mobiles, work related training and travel, insurance, voluntary superannuation etc.) from pre-tax dollars, resulting in increased net remuneration and lifestyle benefits.
Corporations have a reduction in administration as well as the on-costs generally incurred through employment, (eg. Public Liability, Employers Liability, Payroll Taxes, long service and sick leave, benefits package). There is also less risk of litigation for the corporation, as they are not seen as the “employer” under common law if the contractors are independent. Interesting enough, there is an improved contractor/corporation loyalty through enhancement of net benefits to these independent contractors. It is a win for all concerned.
Australia has been exporting Australian intellect for many years. These range from gold prospectors, through accountants, medical staff, IT specialists, to aeronautical and oil rig engineers in countries from Australia/New Zealand, throughout Indonesia, Asia, Europe, Africa and the United States. Australians truly lead the way in a global and flexible workforce.
All future indicators suggest that this is the way of all future workforces, and Australia has a strong representation globally. In particular, Australians are favoured in Asian countries, as we are seen as part of Australasia, and far less political than some other western countries. We lead the way in many Asian countries in providing training and skills transfer to the local populations.
If an organization identifies an opportunity to provide services into any country but feels daunted by the onerous establishment costs and/or red tape, it may well be worth investigating the services of global management companies. Bear in mind that these companies do not generally provide recruitment skills, nor do they identify the commercial opportunities. They primarily facilitate the movement of people that may be required on the ground, and provide the infrastructure to enable an organization to operate until such time as they choose to set up your own infrastructure.
About the author
Dave Thomas is the founder and Chairman of CXC Global Group , a global IT contractor management company. He started his career in accounting and was seconded to the Information Technology area where he spent the next 30 years as a contractor, and entrepreneur. He is also founder Softpac and JobNet.com.au, a member of the Australian Computer Society (ACS) founding member of Australian Contract Professions Management Association (ACPMA), Associate member of the Information Technology Contract Recruiters Association (ITCRA)