A Guide to Compensation Collection & Reporting for International Assignments

Compensation collection for international assignments comes with many moving parts, and payroll and mobility teams often run into the same core questions. From coordinating global data to navigating split payroll, per diems, and year-end reporting, each step has its own requirements and potential pitfalls.

To simplify the process, this article highlights the top 10 questions we hear most often, paired with straightforward explanations drawn from our Compensation Collection eBook. Whether you manage a small mobile population or a large global program, these insights will help you build clarity, reduce risk, and stay on track throughout the year.

How should payroll and mobility teams share information during an international assignment?

The payroll process for international assignees is often significantly more complex than for domestic employees. International workers receive additional allowances, typically in the form of cash or benefits in kind, which are likely to be delivered in the assignee’s Host country.

Payments for moving expenses and lease arrangements can come from various sources, such as the Home or Host country accounts payable department or a relocation management company (RMC). While the Home country payroll may not be aware of all these transactions, the program administrator is responsible for keeping track of them.

The program administrator typically collects and reviews worldwide compensation data from the Host country on a regular basis so payroll can accurately update employee W-2 forms. This data comes from Host country payroll, finance, human resources, and RMC sources. This collaboration is essential because accurate reporting depends on understanding the specifics of each assignment, such as assignment length, corporate recharge policies, and how costs are delivered. These factors directly influence withholding and reporting requirements, and coordinated communication helps reduce compliance risks for both the organization and the assignee.

When should foreign allowances be reported for compliance purposes?

It’s a common misconception that foreign allowances and assignment-related payments can simply be reported as income at year-end. In reality, reporting only at year-end can create timing issues for withholding, introduce compliance risks, and increase the likelihood of errors. There are multiple reasons why collecting and reporting these amounts throughout the year is a more effective approach.

• Payroll compliance: Income paid to or on behalf of an employee is required to be reported in the period that the item is paid. This reporting is necessary so the employee and the employer pay their required income and social taxes at the correct time.
• Clear responsibilities: Collecting foreign allowance information more frequently allows for early resolution of misunderstandings regarding which expenses the company is responsible for versus the assignee. Addressing these issues sooner reduces potential conflicts and enhances clarity around financial responsibilities.
• Efficient year-end processing: Regular collection of foreign allowance data reduces year-end workload and facilitates the resolution of discrepancies. It is easier to track payments from recent months than to sift through records from a year ago. With non-US locations potentially having different fiscal year-ends and reporting requirements, more frequent reviews help meet those foreign reporting and withholding needs.

Companies must weigh the risks associated with their reporting decisions and consult with their corporate tax department and mobility tax provider to manage compliance.

What is the most effective way to collect compensation data from around the world?

There is no single best way to collect compensation data for international assignees – what works well for one organization may not be the right fit for another. The key is establishing a process that aligns with the size of your mobile population, your internal resources, and the level of accuracy your program requires.

For larger programs, technology platforms and automated tools can help streamline data collection, reduce manual work, and support consistent reporting. However, these tools can be costly, and not all organizations will find automation practical or necessary.

For smaller programs, standard spreadsheets or structured templates, often delivered through secure portals, can provide a reliable and cost-effective approach. Some companies also choose to outsource the collection process to an RMC or their mobility tax provider, particularly if benefits are delivered through multiple departments or countries.

Regardless of the method used, the data you collect should include:

• Currency indication: Clearly specify the currency used in spreadsheets to facilitate necessary exchange rate conversions for tax reporting.
• Compensation categorization: Categorize benefits by compensation component, including assignment location taxes, housing, automobiles, and education.
• “Other” payments section: Include a section for "other" payments with detailed descriptions for a comprehensive review of taxability, as regulations may differ between Home and Host countries.

Can we use an earlier cutoff date for year-end compensation reporting?

Collecting worldwide compensation information by December 31 can be challenging, especially when assignment-related benefits are delivered through multiple sources. As a result, many organizations ask whether an earlier cutoff date can be used for certain non-cash items paid outside regular payroll.

A cutoff date refers to the deadline for including items in annual compensation reporting. While December 31 is the standard year-end date, US rules do allow earlier cutoffs for specific non-cash fringe benefits when applied consistently year over year and supported by compliant processes. Some companies also establish internal cutoffs, such as October 31 or November 30, during which they pause reimbursements for assignment benefits until the start of the new year. This pause gives payroll teams time to gather, review, and process year-end reporting in a controlled manner.

It’s important to note that this concept applies to non-cash assignment benefits paid through accounts payable or other non-payroll channels. These items are often harder to track at year-end, particularly for organizations that outsource payroll. Payroll providers typically set a final date by which they will stop processing new payment or reimbursement requests so they can finalize employee wage records for the year.

When evaluating an earlier cutoff date, the key is alignment. A cutoff should be supported either by IRS rules for specific benefit types or by an internal reimbursement pause that creates a clean, complete set of payments for year-end reporting. Arbitrary cutoffs that do not reflect actual payment timing may create inconsistencies or withholding risks. For this reason, organizations should work closely with payroll and tax departments before adopting a cutoff date different from December 31.

How does split payroll work, and why do companies use it?

A split payroll arrangement may be used when an employee goes on international assignment while remaining employed by, and paid through, their Home country entity. Under this approach, part of the employee’s compensation continues to be delivered through the Home country payroll (often for obligations such as mortgages, retirement contributions, or other home-based costs), while another portion is delivered locally in the Host country currency to support day-to-day living expenses.

Companies may use a split payroll for several reasons, depending on the design of their mobility program and local requirements:

Home country administrative needs: Some companies use split payroll when compensation must continue to flow through the Home country for administrative purposes, such as maintaining retirement or social security contributions.

Host country regulatory requirements: In certain locations, immigration or labor rules require that a portion of pay be delivered locally. A split payroll allows the company to meet these obligations while still routing the remaining compensation through the Home country.

Currency considerations: Delivering part of the compensation in the Host country currency helps employees meet local living costs without needing to make repeated international transfers. In lieu of a split payroll, banks may offer “expat accounts” that can allow for easy transfers of money in different currencies. If not required for other reasons, companies may consider reimbursing certain bank fees rather than dealing with the compliance complexities from managing a split payroll.

Tax-related considerations: In some cases, splitting compensation can support the timing or allocation of certain allowances. For example, if a housing allowance is taxable only in the Host country, delivering it locally can simplify the Host country payroll reporting process. This is highly dependent on local tax rules, and not all allowances benefit from local delivery.

Even when there are reasons to use a split payroll, it is important to recognize that it can introduce added complexity. For example, if the split does not align with how taxable wages must be reported in the Host and/or Home locations, payroll teams may still need to run one or more shadow payrolls or make adjustments through the tax provider. Companies also need clear policies and coordinated processes to track Host-paid allowances for Home country reporting.

For these reasons, split payroll is not always the most efficient approach unless it is required by local rules or clearly aligned with a company’s assignment policies. It can be helpful in certain situations, but many organizations also consider alternatives, such as centralized delivery through a shadow payroll, depending on their compliance needs and administrative resources.

Which non-cash benefits and per diems count as taxable income?

Imputed income refers to non-cash benefits provided to international assignees, such as personal use of a company vehicle, rent-free accommodations, and employer-provided services. These benefits are generally taxable to the individual as income.

Per diem allowances are often issued to reimburse employees for expenses incurred while temporarily away from home for work assignments lasting one year or less. From a US perspective, whether these per diem payments are reported as income on Form W-2 depends on several factors:

• The employee's status as temporarily away from their tax home, as defined by IRS requirements.
• Expenses must have a business connection—that is, the employee must have paid or incurred deductible expenses while performing services as an employee of the employer (IRS Pub. 463).
• If the employee adequately accounts for these expenses within a reasonable timeframe (within 60 days after the expense was paid or incurred).
• If any excess reimbursements are returned to the employer within a reasonable period (usually within 120 days after the expense was paid or incurred).

If all conditions are met, the employer may exclude per diem amounts from the employee’s wages. If not, the per diem must be included in the wages and is subject to income and social tax withholding. For employers, expenses qualifying for exclusion can be claimed as business deductions under travel and meal expense rules, while non-qualifying expenses fall under employee compensation deductions.

What should we review at year-end to confirm payroll accuracy for assignees?

At year-end, payroll data from both the Home and Host locations should be reviewed for long-term international assignees. This includes reconciling compensation items delivered through payroll and accounts payable, confirming that all assignment-related payments have been captured, and identifying any discrepancies that may affect wage reporting or tax calculations.

Special attention should be given to state reporting for US-based assignees, particularly when an individual has broken state residency during the assignment. In these cases, compensation and benefits must be reviewed for both federal and state purposes, as the timing and sourcing rules may differ.

In coordination with the Home country payroll team, a compensation summary should be prepared for each assignee. This typically includes base salary, assignment allowances, hypothetical tax, and any tax equalization or tax reimbursement amounts. Reviewing this information together helps confirm the accuracy of year-end wage reporting and supports downstream tax filings.

Additional consideration is needed when the Host country operates on a fiscal year-end that differs from the US calendar year. Companies should clarify who is responsible for providing compensation details to the Host payroll and how differing tax treatments of benefits should be handled. Written procedures, shared in advance with Home and Host payroll teams, HR, and the mobility tax provider, help maintain consistency.

It is also important to track any company-paid tax amounts, such as Host country withholding paid on behalf of the employee, so they can be evaluated for potential compensation inclusion and incorporated into year-end tax reimbursement or equalization calculations.

What questions should we ask to evaluate our foreign national program before year-end?

A year-end review helps confirm that compensation, payroll, and reporting requirements for foreign nationals have been handled correctly throughout the year. Even if your mobility population is small, asking the right questions can highlight potential gaps, uncover missing information, and reduce surprises during the year-end payroll cycle.

Here are key questions to help evaluate the status of your foreign national program:

1. Are all I-9 forms and employment authorization records up to date?
2. Have we reviewed payroll considerations for foreign nationals who remain on their Home country payroll?
3. Has the Home country payroll team provided all relevant data for the year, including compensation items and any information that affects taxability (e.g., travel/workday details, residency changes, taxable benefits)?
4. Has each Host country payroll team provided the same information for the periods they supported the employee?
5. If applicable, has US payroll received all information needed to calculate federal, state, and FICA withholding?
6. Do we need to clarify US payroll requirements to the Home or Host payroll teams and provide written guidance for next year?
7. Have we captured taxable items that may have been processed outside payroll, such as reimbursements or payments made through accounts payable?
8. Were any payments made by the Home country employer (e.g., residual bonuses, retirement fund contributions) that need to be reviewed for US reporting?
9. For employees covered by a totalization agreement, do both payroll teams have the applicable certificates of coverage?
10. Do we need to plan the timing of assignment endings to support tax cost management or payroll reporting considerations?

Proactively reviewing these areas can help identify missing data, clarify reporting responsibilities, and reduce last-minute challenges during the year-end payroll process.

What are foreign nationals most concerned about during year-end payroll?

Foreign nationals often ask fewer questions about US year-end payroll and Form W-2 than US expatriates, mostly because the process is unfamiliar and they may not fully understand how US tax reporting works. It is helpful to encourage them to review their Form W-2 carefully, highlight what information they will need for their US tax return, and remind them of their responsibilities in gathering the documents needed to complete their filing.

Most of the year-end questions from inbound foreign nationals tend to center on net pay, withholding differences, and why their US pay may not reflect what they are used to in their Home country. These conversations often involve explaining how the US system handles federal, state, and FICA withholding, and clarifying why certain benefits or allowances may appear differently in their wages.

For companies with tax equalization programs, it can also be helpful to walk through how hypothetical tax interacts with bonuses, stock vesting, or other year-end payments. Proactively addressing these questions, whether related to net pay, wage reporting, or hypothetical tax, helps support a smoother year-end experience and reduces follow-up questions once employees receive their Forms W-2.

When should we involve a mobility tax provider for support?

Accurate compensation collection and reporting require coordination across payroll, HR, finance, and global mobility teams, especially when payments originate from multiple locations or systems. A mobility tax provider can help validate your wage reporting, identify gaps in documentation, and support both Home and Host country requirements so your program stays compliant.

If your team is navigating new assignment types, increased cross-border movement, or uncertainty around how various benefits should be handled, an external review can bring clarity. GTN can assess your current payroll reporting approach, highlight areas of risk, and recommend practical updates that align with your internal processes.

If you’re looking for additional guidance, our full Compensation Collection eBook provides deeper insights and a more detailed framework for evaluating your program.

Have questions or want to discuss your payroll reporting process? We’re here to help. Schedule a call to get clarity, reduce complexity, and feel confident heading into year-end.