NEWSLETTER

BRINGING EMPLOYMENT MATTERS TO YOU

We see it as our duty to keep you informed, which is why our new quarterly report will provide updates on all the employment issues and trends that are impacting our clients all over the world.

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EMPLOYMENT MATTERS

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October 2017

TAXING ISSUES

TAXING ISSUES

In the last issue of 2017 we provide:

Potential consequences of the UK Brexit
Main income tax changes in the Netherlands
Finland 2018 budget
South Africa's foreign employment income tax exemption
Norway and Mexico country profile
Mercer World Cost of Living study for 2017

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GLOSSARY

EMPLOYMENT TERMINOLOGY DEFINED

Whether you are a contractor looking to find out more about a Limited Company or you are a recruiter exploring PEO services, the Capital GES glossary has you covered.

We know that nothing stands still for long when it comes to global employment, so our team ensure that our glossary is updated regularly so that you always get the most up-to-date information.

If there is a term you cannot find in our list that you want to find out more about, or you have any questions regarding any of the terms and services we mention, contact the Capital GES team today.

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See Administrative Services Outsourcing (ASO). A service wherein the client company outsources all elements of their employees’ payroll, insurance provision and other employment matters, but retains the role of legal employer (as opposed to Professional Employment Outsourcing where the legal employment is shared, or Global Employment Outsourcing where the legal employment is outsourced entirely).

aka ASO. A service wherein the client company outsources all elements of their employees’ payroll, insurance provision and other employment matters, but retains the role of legal employer (as opposed to Professional Employment Outsourcingwhere the legal employment is shared, or Global Employment Outsourcing where the legal employment is outsourced entirely).

A term used for any staffing firm that provides temporary or permanent hire solutions.

Term that refers to any temporary employees provided by a staffing firm/agency.

UK legal term for an individual engaged by a staffing firm/agency to perform labour for one or more of the firm/agency’s clients.

An amount paid to a worker in addition to their regular remuneration, usually in recognition of an anticipated expense. Allowances are sometimes treated differently from regular salary and other incomes, so advance research is advisable.

aka AÜG. The German labour leasing licence and the stringent regulations that surround it concerning how to contract with clients and workers.

Refers to a task or duty that is performed by a contingent worker.

See Arbeitnehmerüberlassung.

The demographic group born during the post–World War II baby boom, approximately between the years 1946 and 1964.

UK term for Public Holiday.

The planned use of direct-hire staff and contingent workers to meet the strategic and tactical workforce needs of a business.

See Business Processes Outsourcing.

A service sector dedicated to the specialist outsourcing of a client’s entire business unit. This may be carried out for cost purposes (when overseas, see also Offshoring) or to allow specialist tasks to be managed by a subject matter expert (see also Human Resources Outsourcing).

Contrat à Durée Détérminée (CDD). French term for a fixed-term contract. As is the case in many countries, France has very specific rules covering fixed-term contracts.

Contrat à Durée Indétérminée (CDI). French term for an open-ended contract.

Often used to describe the relationship among two or more organisations that apply a level of control over the same worker or group of workers. Co-employers often share a degree of liability for shared employees. Additionally, see Professional Employment Outsourcing.

A set of regulations enforced for a particular sector, industry, union or other subset of workers. Collective agreements usually grant workers more rights, benefits or remuneration in exchange for added flexibility on working time, dangerous conditions, or other factors that other workers would not be exposed to.

See Collective agreement.

See Collective agreement.

A term used, principally in the US, to describe non-technical temporary staffing such as office/clerical and similar sectors. In contrast with professional staffing.

Contingent work is usually used to describe any form of work that is not full-time direct employment. This workforce may be internal (fixed-term employees and temps) or external (contractors, agency workers, PEO employees).

A person who undertakes working arrangements that differ from permanent, direct wage and salaried employment, usually for an agreed or limited period of time.

A worker, internal or external, brought in to carry out a specific task or set of tasks. Usually used for specific subject-matter expertise relevant to a project. See also Independent contractor.

French term for a fixed-term contract. As is the case in many countries, France has very specific rules covering fixed-term contracts.

French term for an open-ended contract.

A term used to describe the outsourcing of a task to a community rather than an individual. Wikipedia.org is perhaps the best-known example of a crowdsourced knowledge platform.

An Independent Contractor whose remuneration is based purely on an all-inclusive daily/hourly rate. Days/hours not worked are not remunerated. See also Independent Contractor.

A term used to describe situations where an external worker is deemed by the local authorities to be in a comparable role to an internal employee and therefore due the same rights and advantages as an internal employee despite the lack of a direct employment contract.

A direct employment relationship between a worker and an employer, with no third-party broker or co-employer involved.

A written agreement, usually provided by the local tax authority, allowing an employer to treat a certain amount or category of income as non-taxable without providing further evidence of the incurred expense.

See Double Taxation Avoidance Treaty.

An agreement between two countries on how to tax individuals with tax liabilities in both countries so as to avoid the individual paying tax twice on the same income. In practice, this often dictates an order of priority for each type of income to determine which country may tax the individual first, with the other country then allowed to charge “top-up” rates in cases where their tax rates would prove higher.

A draw is in many ways similar to a loan to an employee, often used to pay a commission to a new employee in their first month, then earned back over time as the employee builds their commission. Caution must be used when implementing these internationally as many countries won’t allow the employer to recuperate any unearned funds previously paid to the employee at the end of the employment relationship.

Double Taxation Avoidance Treaty (DTT). An agreement between two countries on how to tax individuals with tax liabilities in both countries so as to avoid the individual paying tax twice on the same income. In practice, this often dictates an order of priority for each type of income to determine which country may tax the individual first, with the other country then allowed to charge “top-up” rates in cases where their tax rates would prove higher.

An individual who works directly for an organisation in a job with no specific end date.

Social charges imposed by the local authorities on employees. Usually used to fund national and/or local social programmes and calculated as a percentage of the employee’s earnings.

Often used interchangeably with Employer Social Security, employer costs is a broader term and is used to refer to all the costs relating to employment (salary, employer social security, additional statutory remuneration, etc.).

aka EOR. The company or department that is responsible for paying wages, tax, social security, etc.. Also used to describe a service, provided internationally, wherein the client company fully outsources the employment relationship (and associated risks) with all or some of their international employees. This service is often used to quickly explore a new market or territory without incorporating in-country right away. Also known as GEO and as International PEO.

Social charges imposed by the local authorities on employers. Usually used to fund national and/or local social programmes and often calculated as a percentage of the employee’s earnings.

See Employer Social Security.

Employer of Record (EOR).The company or department that is responsible for paying wages, tax, social security, etc.. Also used to describe a service, provided internationally, wherein the client company fully outsources the employment relationship (and associated risks) with all or some of their international employees. This service is often used to quickly explore a new market or territory without incorporating in-country right away. Also known as GEO and as International PEO.

See Employer Social Security.

See Employee Social Security.

See Dispensation.

A contract that has been concluded for a specific duration. In many countries this type of contract comes with specific requirements surrounding termination, notice, renewal, etc.

A worker that is not affiliated with any single client, employer or agency, and is responsible for finding their own work and managing their own income. Although now often used interchangeably with Contractor, freelancers are more typically found in very short-term independent engagements such as graphic design, journalism and others.

Online platform where businesses and independent professionals can connect and collaborate, such as Upwork.

See Fixed-term contract.

Full-time Employee.

Global Employment Outsourcing (GEO). See Employer of Record (EOR).

A term used to describe a small, self-contained piece of work (a “gig”) and the ecosystem of companies, websites and workers that have grown up around it. Good examples include upwork.com, etsy.com, etc.

Those around the world who are working on a temporary basis for organisations without becoming an employee.

See Holiday remuneration.

See Holiday remuneration.

In many countries it is statutory or customary to pay workers additional remuneration either when they take Paid Time Off or every year in early summer, or both. In different countries such additional remuneration is variously termed Holiday allowance, Holiday pay, Holiday remuneration or Holiday bonus, and is distinct from the usual salary payment associated with Paid Time Off.

See Human Resources Outsourcing (HRO).

A type of Business Process Outsourcing specifically concerned with the outsourcing of the Human Resources function of an organisation either by engaging a vendor to manage HR operations or by allowing a vendor’s staff to be present at the client’s site to manage matters locally.

Independent Contractor Compliance (IO Compliance). Independent Contractor Compliance testing has arisen out of the need for tax and social authorities to distinguish reliably between true Independent Contractors and workers who claim the status only to benefit from the attractive rates it may come with. Each country has different tests in place, but most follow the logic of “command and control”, which dictates that a true Independent Contractor determines his own means and method whereas an employee will be told what to do and how by a superior.

An external worker brought in by a client under contract to provide services, usually billed on a time-related basis. Independent contractors are expected to work under their own supervision and in the manner they consider best, as opposed to a managed employee. Such contractors often benefit from beneficial and/or different tax and social security treatment, which has led to abuse and to authorities’ ever-increasing appetites for Independent Contractor Compliance testing. Contrast with Statement of Work consultant.

Independent Contractor Compliance testing has arisen out of the need for tax and social authorities to distinguish reliably between true Independent Contractors and workers who claim the status only to benefit from the attractive rates it may come with. Each country has different tests in place, but most follow the logic of “command and control”, which dictates that a true Independent Contractor determines his own means and method whereas an employee will be told what to do and how by a superior.

A type of contract where an intermediary is brought in solely to invoice the client and make payment to the worker. While this type of structure is often used to remain “at one step removed” from an independent worker or to pay a worker in a non-compliant manner, it is also legally used particularly where company policy prevents a client from making payments to a correctly-registered remote worker.

A term used in different ways in different countries. In the US more related with “laborers” such as agricultural and construction workers. In Europe Labour Leasing applies to most agencies who provide staffing services to a client.

A licence granted by an in-country authority to carry out Labour leasing services.

In the UK, a one-man Limited company, aka a Personal Service Company or simply a Limited Company, is a single-person company commonly used by contractors as a tax-efficient invoicing vehicle for their contracting revenue.

See One-man Limited Company.

A company that manages a client’s entire contingent workforce programme. Will often also manage the associated supply chain and provide consolidated reporting, billing, etc.. Most of these will offer a VMS platform to their clients to facilitate the relationship.

The demographic cohort that follows the Baby Boomer generation. Although there are no precise dates for when the Millennial generation starts or ends, demographers and researchers typically state birth years from the early 1980s to the early 2000s.

See Managed Service Provider.

The amount of time that one party must give another to terminate a contract or agreement. Notice periods in employment contracts are usually heavily regulated or restricted.

An optional, usually private, pension scheme which is put in place by the employer for the benefit of the employees. Employees may elect to pay additional contributions to the scheme, which the employer may match to a certain level.

The relocation of part of a client’s business, often finance or customer service, to a foreign market, usually for cost purposes. Note that offshoring does not necessarily mean the use of a foreign supplier; offshoring may be accomplished by the client opening a new office in a less costly location.

A contract that has been concluded for an indefinite amount of time. Such contracts can only be terminated by giving appropriate notice and abiding by local laws and regulations governing termination.

Time worked in addition to the agreed contractual hours. In many jurisdictions, and particularly for blue-collar workers, overtime is strictly defined and must be remunerated, often at a higher rate of pay and/or with time off in lieu.

See Paid time off.

Time off that is remunerated, usually at the same rate as time worked. In some countries additional remuneration is statutory or customary: see Holiday remuneration.

The UK payroll system, based on the employer making all deductions at source and paying directly to the relevant authorities without the employee’s involvement.

In the first weeks or months of an employment contract, the employer and the employee may agree to a test or probation period with different terms from the remainder of the contract. Typically these differences include a shorter notice period and may include a slightly different remuneration structure.

A pension scheme which usually selected by the employee, who will also make most of the contributions. Such schemes are often completely independent of the source of the income and can be a very useful means of tax-efficiency for individuals for whom cash flow is not an immediate concern.

See Purchase order.

See Personal Income Tax.

People employed by an organisation or engaged in an organised undertaking.

See Limited company.

The tax paid by an individual relating to his/her earnings and other income. Common usage may also include tax paid on fortune/wealth.

The bringing together of a job seeker and a prospective employer for the purpose of effecting a traditional employment
relationship.

aka PE; a fixed place of business or deemed presence which generally gives rise to income tax or value-added tax liability in a particular jurisdiction.

An amount paid to a worker in addition to their regular remuneration, usually in recognition of a hardship or an anticipated expense. Workers required to travel for work purposes may receive a per diem to cover their food and laundry costs, for example. While rules exist in many countries for the treatment of such income, the simple fact of calling an amount a per diem does not render the amount non-taxable: research into local rules and practices is always advisable (or call us!).

Professional Employment Outsourcing (PEO). A service, provided principally in the US, wherein the client company shares the employment relationship with an external employment company. This co-employment of the employee means that the PEO company takes on all the employment risks and bargaining power while the client company retains command and control of the employee.

See Permanent Establishment.

A payment which takes place if the allocated holiday period has not been taken during the corresponding period, usually the end of a holiday counting period or the end of a contractual relationship. Note that Payment in lieu of holiday is illegal in employment relationships in many jurisdictions, where the employee must take the allotted amount of holiday.

See Pay As You Earn.

aka PEO. A service, provided principally in the US, wherein the client company shares the employment relationship with an external employment company. This co-employment of the employee means that the PEO company takes on all the employment risks and bargaining power while the client company retains command and control of the employee.

A term used, principally in the US, to describe technical temporary staffing such as IT, engineering, finance and similar sectors. In contrast with Commercial staffing.

See Limited company.

See Paid time off.

A day which, at a local or national level, has been given similar status to a Sunday. Work on such days is therefore restricted and often subject to special conditions in terms of duration and remuneration.

A document issued to a supplier confirming the scope of work, timeframes and costs of a set piece of work.

The process that involves finding and screening candidates for an employer as part of a search assignment.

A type of Business Process Outsourcing which makes use of a third-party company to replace the client company’s internal recruitment function, process and supply chain management completely.

The act of minimising, monitoring and controlling the probability and/or impact of negative events or losses. Risks from contingent employment can include the legal aspects of co-employment, resource risk, as well as the safety of human and physical resources.

See Recruitment Process Outsourcing.

See Purchase order.

A term used broadly (at times interchangeably with the Gig economy) to describe a service based on the sharing of a resource. Examples include Uber, Lyft, AirBnB and others. Typically very technology-driven and with very low barriers to entry, very useful for those seeking short-term stopgap income.

Remuneration due to an employee when absent due to illness or accident. In most countries employees’ entitlements are set by law, regulation or Collective convention, though employers may choose to be more generous.

See Statement of Work.

See Statement of Work consultant.

A pension scheme which is usually run or regulated by the state. Often such schemes draw their contributions from the social security contributions, and the amount received after retirement may be disproportionate to the amount contributed.

aka SOW. A document that determines the activities, deliverables and timeframes for a specific piece of work.

aka SOW consultant. Used to describe an external worker providing services under a Statement of Work. In contrast with an Independent contractor providing services, the SOW contractor usually works to a specific goal or deliverable.

A pension fund which is mandatory for a category of workers, usually employees. See also State pension and Private pension, either of these may be statutory in nature.

Tax that is withheld by the employer from the employee’s payslip, and paid directly to the relevant tax authorities. See also Pay As You Earn.

Common abbreviation for a Temporary worker.  In Europe, Temp carries the connotation of secretarial or unskilled office work.

aka Temp. A worker who is brought in to provide services on a limited-time basis.

A company providing an “umbrella of employment” for day-rate contractors, particularly in the UK; taking the daily rate and putting it through PAYE to provide employment-like social advantages and legitimacy.

See Collective agreement.

aka VMS. A technology platform used by clients or their MSPs to manage and procure staffing services, and the related contracts, POs, invoices and other documents.

An accreditation delivered by a country to an individual confirming the individual’s right to enter, visit or reside in the country. A Visa does not automatically confer the right to work in the country. See also Work permit.

See Vendor Management System.

An accreditation delivered by a country to an individual confirming the individual’s right to work in the country under certain conditions. A Work permit does not automatically confer the right to reside or remain in the country, and an appropriate Visa is often required to gain access to and reside the country.

US term used to denote Independent Contractors.

US term used to denote Employees.

In the first weeks or months of an employment contract, the employer and the employee may agree to a test or probation period with different terms from the remainder of the contract. Typically these differences include a shorter notice period and may include a slightly different remuneration structure.

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