How HR can manage moving tax liabilities for an offshore workforce

Managing Vessels and people on the move can make tax issues pretty complicated.

It’s not so bad if they move around the UK, but when critical offshore staff, such as engineers or oil workers are on moving vessels, the logistics alone can be challenging – never mind the tax complications.

The first challenge is of course to deploy the highly qualified staff to the right place at the right time, safely and cost-effectively whilst delivering successful engineering projects on time and on budget. Then, quietly behind the scenes, someone has to ensure staff are paid promptly and paid correctly.

These highly paid individuals have critical skills which are in high demand but often in short supply. Get their tax wrong and you risk losing them – with talent shortages, they’ll be gone before you’ve finished your apology.

Lee Clarke is the Regional Director – Northern Hemisphere at Dynama, who specialise in workforce software solutions for the maritime and defence industry.  Lee explains the challenges that employers in these sectors often face:

“I’m often asked why paying offshore workers is always so difficult – but it all comes down to tax. Let’s consider the average offshore organization’s day-to-day business, and the challenges that have huge tax ramifications for organizations.”

Lee gives two examples:

1. Different waters, different tax jurisdictions – the reality is that large, complex engineering projects often take place in various territorial waters.  This means that the crew manning the vessels, oil rigs and remotely operated vehicles (ROVs) are also moving around.   For example, laying an undersea oil pipe in the North Sea will typically involve going from the Norwegian sector to the UK sector, and vice versa, with relevant tax implications. Therefore, it is important for organizations operating in this area to track when and where their employees are working for tax purposes.

2. Inter-country tax agreements – the main issue faced by many offshore workers is the potential to pay tax twice because they might be resident in one country but have to pay tax to another country depending on their location at any given time. To overcome this scenario, many countries operating in the offshore industry have collaborated to form specific tax agreements. For example, the UK has set up ‘double taxation’ agreements (i) with other countries that are designed to help determine which tax territory has the priority to claim tax on the workers’ income.

Lee explains that automated solutions can help by managing the data needed to calculate complex tax issues:

“The latest workforce management (WFM) solutions are designed to give offshore organizations the data they need to simplify managing tax for large, constantly moving teams.”

Automated WFM allows managers to:

• Track the exact location of staff and how long they have worked on specific vessels for any given period in time. This information can then be tagged to staff timesheets and sent off to payroll

• Integrate your workforce deployment system with important business systems belonging to the accounts department to ensure payroll always has the most up-to-date timesheets and can make accurate tax calculations and deductions quickly and efficiently

• Assign specific tax sectors to selected vessels and allow masters of the vessel to determine when borders have been crossed to keep an accurate record of the exact number of days crew have spent in different countries. This data can then be passed to payroll to reconcile staff timesheets and tax codes and ensure individuals pay the correct amount of tax in the right country

• Save time and money – high levels of automation streamline processes and reduce the costs and delays associated with double data entry and data entry errors commonly found in non-integrated systems.

The latest workforce management solutions do not calculate tax.  However, they do make it easier to track vessels and people, record this information dynamically and then transfer it automatically to the tax experts within your organization – which gives them the information they need to perform the complex tax calculations.

Lee says:

“Your most important asset is your staff.  Automation can ultimately help make the complex area of tax in the offshore industry clearer – and save money at the same time.”