Companies with a growing globalized workforce may be incurring significant risks in the operation of their compensation programs. Taxing authorities around the world are looking for additional sources of tax revenues by way of underpaid employment taxes, underpaid withholdings, incorrect payroll deductions, and more.  As a result, companies are being scrutinized more than ever creating substantial legal and financial risk.   Join us for an exclusive presentation from the world's leading compensation planning & tax experts, Ernst & Young, as they share inside strategies and best practices they have used to help companies around the world save millions in fines, penalties and judgments.   In this exclusive webinar you will learn: ○ How to minimize employment and labor law risks exposing employers to potential underpaid employment taxes, litigation and related settlement costs; ○ How to identify possible underpaid withholding and employer social security taxes, penalties and fines due to payroll non-compliance; ○ How to avoid payroll reporting errors due to mis-alignment with corporate income tax deduction policy for compensation costs. Restructuring global compensation pay strategies that ignore regional norms and fail in key emerging markets;  

1. TalentTakeaways
webinar & podcast series
Revealing the Risks
Associated with Global
Compensation Programs

2. Revealing the Risks Associated with Global Compensation Programs
Global Compensation Risks
2
Legal &Financial Risks
Labor Laws
Employment Taxes
Payroll Reporting
Corporate Income Tax

3. Revealing the Risks Associated with Global Compensation Programs
Michael Bussa
Partner – Human Capital Practice, Ernst & Young
Special Guest Presenter
3
Revealing the Risks Associated with
Global Compensation Programs

4. Revealing the Risks Associated with Global Compensation Programs
Circular 230 and Financial Statement Disclosure
Any US tax advice contained herein was not intended or
written to be used, and cannot be used, for the purpose of
avoiding penalties that may be imposed under the Internal
Revenue Code or applicable state or local tax law provisions
These slides are for educational purposes only and are not
intended, and should not be relied upon, as accounting
advice
4

5. Revealing the Risks Associated with Global Compensation Programs
Today’s Discussion
1. Challenges to mitigating payroll risks
2. Overview of the current tax and regulatory landscape
3. Mitigating the risks of payroll non-compliance globally
4. Aligning global corporate income tax deduction and
payroll reporting policies
5. Minimizing employment and labor law risks emanating
from under reported compensation income
5

6. Revealing the Risks Associated with Global Compensation Programs
Challenges to Mitigating Payroll Risks
6
Need for
coordinated
approach amongst
functional groups
Constant IT
releases
Evolving data
requirements and
dependencies
Tax and
regulatory
developments
Tax and
regulatory
authorities
enforcement
efforts
Increasing number
of legal
entities/businesses
to manage
globally
Expanded
employee types –
cross border/
frequent business
travelers

7. Revealing the Risks Associated with Global Compensation Programs
Challenges to Mitigating Payroll Risks (continued)
7
Over the last several years, EY has
identified over 600 significant
payroll/compensation-related
announcements from tax and regulatory
bodies around the world aimed at
employers and their employees!
Need for
coordinated
approach amongst
functional groups
Constant IT
releases
Evolving data
requirements and
dependencies
Tax and
regulatory
developments
Tax and
regulatory
authorities
enforcement
efforts
Increasing
number of legal
entities/
businesses to
manage
globallyExpanded
employee types –
cross border/
frequent business
travelers

8. Revealing the Risks Associated with Global Compensation Programs
Current Tax and Regulatory Landscape
Announcements are issued in a wide variety of forms and from numerous
authoritative bodies
Announcements address changes to tax, immigration, and foreign exchange
laws, regulations, interpretations and practices
Certain procedural announcements issued indicate that taxing authorities will
review compliance with tax law changes in upcoming audit cycles
Continued and increasing enforcement of applicable laws and regulations to
drive…….”the Great Revenue Grab”!
Harmonization amongst regulatory bodies and countries to identify employees
potentially subject to taxation in their jurisdictions. For example:
- Taxing authorities using immigration, travel and workplace data
- Exchange of information between countries regarding income and assets
8

9. Revealing the Risks Associated with Global Compensation Programs
Current Tax and Regulatory Landscape (continued)
9
Africa:
Tax – 20
Immigration- 13
Asia_Pac:
Tax – 135
Immigration- 26
Fx – 7
Europe:
Tax – 292
Immigration- 77
Fx – 4
Americas:
Tax – 29
Immigration- 3
Fx – 1
Middle East:
Immigration- 5

10. Revealing the Risks Associated with Global Compensation Programs
Current Tax and Regulatory Landscape (continued)
10
Types of Announcements
Subject areas addressed in relation
to compensation/ payroll Impacted Employee Types
Proposed/final law/regulations Individual taxation Local nationals
Rulings Payroll reporting/tax withholding Cross-border/permanent transfers
Court decisions Social security/employment taxes Seconded on international work
assignment
Procedural/administrative
guidance
Taxation of compensation income Frequent business travelers
Voluntary disclosures/abatements Corporate income tax deductibility “C suite” executives
Visa quotas Cross-border tax implications
FX limits/restrictions Pension payments/contributions
Income tax treaties Immigration quota limits/exemptions
Totalization agreements Cross-border income apportionment
Sanctions Currency transfers

11. Revealing the Risks Associated with Global Compensation Programs
Mitigating the Risks of Payroll Non-Compliance Globally
11
Challenge – Ongoing Tax and Regulatory Developments
Ongoing validation that changes
are implemented and operating
as instructed
Stay abreast of tax and
regulatory developments
Assess impact of tax and
regulatory changes to
organization and employees
Identify stakeholders; secure
buy-in and assign
responsibilities
Develop action plan for
implementing changes

12. Revealing the Risks Associated with Global Compensation Programs
Mitigating the Risks of Payroll Non-Compliance Globally
(continued)
12
Meeting the Challenge of ongoing Tax and Regulatory Developments
Stay abreast of tax and regulatory developments
• Adopt robust process to timely identify applicable tax
and regulatory changes
• Monitor authorities’ communication channels for
announcements, releases, guidance, etc.
• Consider assistance from 3rd party providers

13. Revealing the Risks Associated with Global Compensation Programs
Mitigating the Risks of Payroll Non-Compliance Globally
(continued)
13
Meeting the Challenge of Ongoing Tax and Regulatory Developments
Assess impact of tax and regulatory changes to
organization and employees
Determine specific tax or regulatory implications taking
into account:
• Proposed/final laws and regulations
• Organizations’ risk posture
• Existing rulings/agreements with authorities
• Payroll/HR/IT system capabilities and limitations
• Market practice
• Cross-border/mobile employees
• Tax and regulatory issues specific to equity, incentive
and non-cash compensation
• Financial/economic impact to organization and
employees

14. Revealing the Risks Associated with Global Compensation Programs
Mitigating the Risks of Payroll Non-Compliance Globally
(continued)
14
Develop action plan for implementing changes
• Adopt positions to be taken
• Identify relevant functional areas of the organization
required to be involved
• Assess data requirements
• Determine if significant gaps exist requiring corrective
and/or remedial action
Meeting the Challenge of Ongoing Tax and Regulatory Developments

15. Revealing the Risks Associated with Global Compensation Programs
Mitigating the Risks of Payroll Non-Compliance Globally
(continued)
15
Identify stakeholders; secure buy-in and assign
responsibilities
• Identify stakeholders across functional areas such as;
payroll, HR, tax, accounting, executive
compensation, mobility, general counsel’s office, and
IT.
• Adopt and implement action plan and
accountability matrix
• Perform testing and adjust where needed
• Provide training to payroll teams and other functional
areas
Meeting the Challenge of Ongoing Tax and Regulatory Developments

16. Revealing the Risks Associated with Global Compensation Programs
Mitigating the Risks of Payroll Non-Compliance Globally
(continued)
16
Ongoing validation that changes are implemented and
operating as instructed
Implement processes and controls/variance analysis to
proactively validate payrolls are operating as instructed,
with support from relevant functional groups. Special
attention should be given to:
• Align payrolls coming on line for first time(e.g., where
payroll reporting/w/h not previously required and
triggered by law/regulatory change
• Special reporting/disclosure requirements
• Timely remittance of withholding and employer taxes
• Cross-border/mobile employees
• Equity, incentive and non-cash compensation
Meeting the Challenge of Ongoing Tax and Regulatory Developments

17. Revealing the Risks Associated with Global Compensation Programs
Aligning Global Corporate Income Tax Deduction
and Payroll Reporting Policies
17
Company
X
Employee
$100K Cash
Compensation
Corporate Income Tax
Considerations Payroll Considerations
• Corporate income tax
deduction ordinarily
would be available to
Company X for
compensation paid,
provided:
• Cost of compensation
is borne by Company
X; and,
• Employee performs
services for the benefit
of Company X
• Corporate income tax
deduction could be
subject to disallowance if
applicable payroll
reporting/withholding are
not carried out
• Most countries would
require payroll reporting
and possibly, tax
withholding on the
compensation paid
Performs services
Base case illustration

18. Revealing the Risks Associated with Global Compensation Programs18
Parent
Company
X
Employee
of Parent
Co. X
$100K Cash
Compensation
Corporate Income Tax
Considerations Payroll Considerations
• Corporate income tax
deduction ordinarily would be
available to Subsidiary X for
cash compensation paid by
Parent Company X, provided:
• Cost of compensation is
borne by Subsidiary X; and,
• Employee performs services
for the benefit of Subsidiary X
• Deduction ordinarily available
to Subsidiary X for locally paid
allowances and B-I-K
• Corporate income tax
deduction could be subject to
disallowance if applicable
payroll reporting/withholding
are not carried out for cash
compensation, allowances and
B-I-K
• Processes must be in placed to
capture:
• Recharges from Parent
company
• Provide corporate tax with
visibility to locally paid
allowances/B-I-K (some
potentially non-
cash/imputed)
• Most countries would
require payroll reporting
and possibly, tax
withholding on the
compensation paid by
Parent Company X and
allowances/B-I-K paid by
subsidiary X
• In certain cases, a
corporate income tax
deduction will trigger
payroll reporting/tax
withholding which would
otherwise not exist.
• Processes must be in place
to capture:
• Locally paid
allowances/B-I-K (some
potentially non-
cash/imputed
• Provide payroll with
visibility to recharges
from Parent company.
Subsidiary
X
Secondment/Performs services
Locally paid allowances/B-I-K
Recharge for $100k cash compensation
Payment for recharge of $100K
Secondment illustration
Aligning Global Corporate Income Tax Deduction
and Payroll Reporting Policies (continued)

19. Revealing the Risks Associated with Global Compensation Programs19
Parent
Company
X
Employee
of Sub X
$100K stock
award
Corporate Income Tax
Considerations Payroll Considerations
• Corporate income tax
deduction ordinarily
would be available to
Subsidiary X for stock
award delivered by
Parent Company X,
provided:
• Cost of award is
borne by Subsidiary X;
and,
• Employee performs
services for the
benefit of Subsidiary X
• Corporate income tax
deduction could be
subject to disallowance if
applicable payroll
reporting/withholding are
not carried out for stock
award
• Processes must be in
place to capture
recharges from Parent
company.
• Most countries would
require payroll
reporting and possibly,
tax withholding on the
stock award delivered
by Parent Company X
• In certain cases, a
corporate income tax
deduction will trigger
payroll reporting/tax
withholding which
would otherwise not
exist.
• Processes must be in
place to:
• Capture stock
award details
• Provide payroll with
visibility to
recharges from
Parent company.
Subsidiary
XPerforms services
Recharge for $100k stock
compensation
Payment for recharge of $100K
Equity compensation illustration
Aligning Global Corporate Income Tax Deduction
and Payroll Reporting Policies (continued)

20. Revealing the Risks Associated with Global Compensation Programs20
Parent
Company
X
Employee
of Parent
Co. X
$100K
stock
award
Corporate Income Tax
Considerations Payroll Considerations
• Corporate income tax
deductions ordinarily would
be available to Parent Co. X
and Subsidiary X for stock
award delivered by Parent
Company X.
• Deduction limited to award
expense attributable to
respective employment
service periods, provided:
• Respective costs of
award are borne by
Parent X/ Subsidiary X;
and,
• Employee performs
services for the benefit of
Parent X/Subsidiary X
• Corporate income tax
deduction could be subject
to disallowance if applicable
payroll reporting/withholding
are not carried out for stock
award
• Processes must be in place
to:
• Apportion recharges
• Capture recharges from
Parent company.
• Most countries would
require payroll reporting
and possibly, tax
withholding on the stock
award delivered by Parent
Company X at both the
Parent and Subsidiary X
levels.
• In certain cases, a
corporate income tax
deduction will trigger
payroll reporting/tax
withholding which would
otherwise not exist.
• Processes must be in place
to:
• Apportion stock award
income
• Capture stock award
details
• Provide payroll with
visibility to recharges
from Parent company.
Subsidiary
XPerformed services G-V, 70%,
while previously employed
with Sub X
Recharge for $70k stock compensation
Payment for recharge of $70K
Performed services over G-V
period=30%, while employed by
Parent Co. X (current employer)
Multiple jurisdiction equity compensation illustration
Aligning Global Corporate Income Tax Deduction
and Payroll Reporting Policies (continued)

21. Revealing the Risks Associated with Global Compensation Programs21
Parent
Company
X
Employee
of Parent
Co. X
$100K
deferred
cash
bonus
Corporate Income Tax
Considerations Payroll Considerations
• Corporate income tax
deductions ordinarily would be
available to Parent Co. X and
Subsidiary X for deferred cash
bonus paid by Parent
Company X.
• Deduction limited to bonus
expense attributable to
respective employment
service periods, provided:
• Respective costs of bonus
are borne by Parent X/
Subsidiary X; and,
• Employee performs services
for the benefit of Parent
X/Subsidiary X
• Corporate income tax
deduction could be subject to
disallowance if applicable
payroll reporting/withholding
are not carried out for bonus
• Processes must be in place to:
• Apportion recharges
• Capture recharges from
Parent company.
• Most countries would
require payroll reporting
and possibly, tax
withholding on the deferred
cash bonus paid by Parent
Company X at both the
Parent and Subsidiary X
levels.
• In certain cases, a
corporate income tax
deduction will trigger payroll
reporting/tax withholding
which would otherwise not
exist.
• Processes must be in place
to:
• Apportion bonus income
• Capture bonus details
• Provide payroll with
visibility to recharges
from Parent company.
Subsidiary
X
Performed services over
performance period= 70%, while
previously employed with Sub X
Recharge for $70k deferred cash bonus
Payment for recharge of $70K
Performed services over performance
period= 30%, while employed by
Parent Co. X (current employer)
Note: Alternatively, Parent Co. and Subsidiary can each pay their
respective portions of the deferred cash bonus (i.e., 30/70); however, this
could give rise to complexities around cash delivery to employees and
possibly getting employees re-instated/re-registered on the prior employing
company’s payroll.
Multiple jurisdiction deferred cash bonus illustration

22. Revealing the Risks Associated with Global Compensation Programs
Minimizing Employment and Labor Law Risks Emanating
from Under Reported Compensation Income
Risks arise primarily as a result of failure to:
– Pay employer social or applicable employment taxes
– Withhold applicable social taxes from employees
– Include compensation income in statutory benefit formulas for determining
pension payments, termination payments, and other entitlements
Types of risks include:
– Penalties assessed by taxing authorities for failure to pay/withhold
applicable taxes
– Fines imposed by relevant authorities for failure to administer
compensation programs in accordance with applicable laws
– Litigation from impacted employees for claims relating to:
• Underpaid pension payments, termination payments, and other
entitlements
• Underpaid/under withheld taxes
• Damages
22

23. Revealing the Risks Associated with Global Compensation Programs
Types of compensation which predominantly give rise to failure to pay applicable
taxes/include in statutory benefit formulas:
– Equity-based compensation
– Deferred cash bonuses
– Non-cash benefits-in-kind
– Profit sharing arrangements
Highest risk for non-inclusion occurs when the compensation income is
paid/delivered by parent company or third-party vendor
To minimize risks, implement processes and procedures to:
– Identify compensation income subject to tax/statutory benefits
– Identify payments not paid/delivered directly by employing company for
inclusion in
• Payroll
• Statutory benefit calculations
23
Minimizing Employment and Labor Law Risks Emanating
from Under Reported Compensation Income (continued)

24. Revealing the Risks Associated with Global Compensation Programs
Recap
24
Mitigating Payroll Risks
Tax & Regulatory Landscape
Global Payroll Compliance
Tax & Payroll Reporting Policies
Minimizing Employment Lawsuits

25. Revealing the Risks Associated with Global Compensation Programs
Compensation Resources & Support
25
COMPview™ | Compensation Planning Software

26. Revealing the Risks Associated with Global Compensation Programs
Compensation Resources & Support
26
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27. TalentTakeaways
webinar & podcast series
Revealing the Risks
Associated with Global
Compensation Programs