Secondment or Expatriation: How to Decide?

In an increasingly globalized world of work, French companies frequently send employees abroad on assignments. Whether for a temporary expansion, prospecting or a specific project, a crucial question arises: should you opt for secondment or expatriation? Although these two statuses may appear similar, they have notable differences in terms of the employment contract, taxation, social protection and costs. Based on insights from international mobility experts such as Sandra Thiry, partner at Kopper, this article guides you in making the right choice, particularly for assignments from France to another country.

Understanding Secondment: A Simple and Temporary Solution

Secondment involves keeping the French employment contract active during the international assignment. The employee simply signs an amendment defining the conditions of their mobility, such as the duration, working arrangements and compensation. They continue to be paid by their original employer through standard French payroll, including French social security contributions. For social protection, international insurance supplements the basic coverage, since the employee remains affiliated with the French system.

From a tax perspective, bilateral treaties between France and most countries determine the applicable rules. In general, for short assignments of less than 6 months, income tax continues to be withheld in France, often avoiding double taxation. This status is ideal when the employee works on behalf of the French company, although the salary may be recharged to the foreign entity as part of a personnel assignment.

The advantages of secondment are clear: it is affordable and easy to implement. There is no major change for the employee, who remains familiar with the French system. However, it is not without drawbacks. French social security contributions, among the highest in Europe, increase costs. In addition, behind this simplicity lie administrative complexities: local formalities, compliance with the host country's rules, and potential tax risks such as the creation of a permanent establishment abroad. For these reasons, it is often recommended to use specialized external providers.

Expatriation: A More Structured and Cost-Effective Approach

By contrast, expatriation involves suspending the French employment contract for the duration of the assignment and replacing it with a local contract in the host country. The employee is then paid by the foreign entity, with social security contributions and taxes withheld locally. Appropriate social coverage is arranged, often including the Caisse des Français de l'Étranger (CFE) for social security, unemployment insurance, international insurance, and possibly a pension plan or supplementary retirement plan. Under French law, only coverage against loss of employment is mandatory for assignments outside the EU.

This status protects the employee on several fronts: facilitated repatriation, automatic reinstatement at the end of the assignment, and a secure employment relationship since the original contract is merely suspended. Economically, expatriation is often more advantageous, especially in countries where social security contributions are lower than in France, such as Spain or the United States. It transfers contract management to the local entity, which manages the rules concerning working hours, compensation and legal obligations.

Nevertheless, this arrangement is more specialized and takes time - approximately 3 months to set up fully. It requires close coordination with the host entity, an analysis of compensation packages to ensure an equivalent take-home pay, and clear communication to reassure the employee about their social coverage.

Key Factors for Choosing Between the Two

The choice between secondment and expatriation is not made at random; several factors come into play. First, immigration: for countries outside the EU, check visa requirements. Some require a local contract, making secondment impossible, although ad hoc solutions may sometimes exist.

Next, the existence of a local entity is crucial. Without one, secondment can serve as a temporary solution, followed by a transition to expatriation once the establishment is complete. Work with the finance department to assess tax risks, such as a permanent establishment that could trigger tax obligations in the host country.

The duration of the assignment is a major factor: secondment is suitable for short assignments of less than 12 months, when the benefits of expatriation do not justify the complexity. For longer periods, expatriation is preferable for budgetary reasons. Also consider the overall budget, the employee's personal circumstances, including family and frequent trips back to France, and the operational reality: who gives instructions and supervises the work? In principle, the entity benefiting from the assignment should be the employer, but international pragmatism allows adjustments, provided the risks of unlawful labor lending are properly managed.

Administrative complexity may also tip the balance. Finally, remember that secondment is easier for the employee to understand and accept, whereas expatriation requires more explanation.

Practical Examples for Better Understanding

Let's consider some concrete examples. For a 5-month assignment in Spain, opt for secondment: there is no need to change social coverage for such a short period. However, for 24 months in the same country, expatriation is the obvious choice because Spanish contributions are significantly lower than French contributions, generating substantial savings.

In the United States, expatriation is preferable for a 3-year assignment. If the company has not yet established a presence there during the prospecting phase, start with secondment and then switch once the local entity is operational. Inform the employee from the outset to avoid surprises.

Conclusion: A Strategic Choice for Successful Mobility

In summary, secondment is preferred for its simplicity and controlled short-term costs, while expatriation stands out for its cost-effectiveness and long-term protection. The final decision depends on immigration, the local entity, tax risks, duration, budget and personal considerations. Always consult an international mobility expert to adapt these options to your specific circumstances. This will allow you to optimize not only your costs, but also the satisfaction of your employees on assignment abroad.