A good letter of assignment is essential - without one, misunderstandings about position titles, starting salaries and reporting relationships are common. It also helps to manage the expectations of both employee and company. And well-written formal offer letters in many countries serve as employment contracts.

A letter of assignment (LOA) addresses the terms and conditions of the assignment and is tailored to the specific individual. It is intended to supplement, not replace, an international assignment policy.

Before handing over the letter

Before a LOA is ever presented to an employee, organisations should have a well-defined international assignment approval process. While this step might seem obvious, it is often overlooked.

For example, it is not unusual for HR to receive a 'push back' from line managers after a LOA has been presented to an employee covering who will pay for all of the costs of the assignment. For this reason, it is critical to be clear up-front, and establish realistic cost projections, with those who will be paying for the assignment, before the employee is offered the job.

In tandem with this advance approval process is determining which manager can and should sign the LOA.

Contents of the LOA

1. Position details
Title, position level, major responsibilities, and length of assignment should be clearly delineated. The more specific, the better. HR professionals involved in the process can add significant value here by asking lots of questions and requiring that the scope of the assignment be well thought out and documented.

2. Basic information
Information including the home and host location of the assignment and the number of family members that will accompany the employee, should be recorded.

3. Base compensation
The letter of assignment should specify the base salary for the position, how pay will be delivered (in what currency and by what means), and how changes in base salary will be made for the duration of the assignment.

The international assignment policy should be referenced at this point, as it should provide more details regarding the company's approach to compensation (eg: is the programme governed by the home country, host country, headquarters, etc).

4. Incentive compensation:
Information about incentive compensation, if eligible, and how such programmes will be impacted as a result of the assignment, should be included or at least referenced as appearing in the policy.

5. Cost-of-living allowances
An estimate of cost-of-living differentials and allowances to be provided to the employee should be included. And it should be communicated that the numbers are estimates only!

Cost-of-living differences and exchange rates can and will change between the time a LOA is presented and the assignment actually begins.

It should also be explained and reinforced that allowance information will be updated throughout the assignment to reflect current inflation and exchange rates and in accordance with the international assignment policy.

6. Other assignment premiums/incentives
Any additional compensation commitments unique to the location and/or individual should be specified and may include: hardship premiums, danger pay and mobility and completion bonuses.

7. Transportation
The LOA should reference the international assignment policy for details regarding how vehicle disposal will be handled in the home location and any standard transportation assistance to be provided in the host location. Any special transportation provisions should be noted separately.

8. Housing
Provisions for housing assistance within the home and host location that are unique to the individual should be noted separately. Otherwise, the organisation's international assignment policy should be referenced to describe the housing support and benefits an expatriate will receive.

9. Relocation assistance (allowances, shipping and storage, etc)
The LOA should reference the international assignment policy for a full description of all relocation assistance. Any assistance unique to the individual or location can be separately listed in the LOA.

10. End of assignment arrangements
The international assignment policy should specify what will happen should an assignment end early.

11. Tax compliance acceptance and agreement to continued participation
The letter should stress the expatriate's commitment to comply with all tax obligations during and after the assignment. It is also helpful to specify for how long participation in the tax programme will continue after the assignment.

The template for this section should be carefully reviewed by your tax adviser and then updated periodically.

12. Benefits including 'time off' provisions
Any commitments unique to the expatriate should be noted here (eg special vacation provisions, rest and relaxation time). Decisions such as whether an assignee will remain on the home country pension plan should be dictated by the international assignment policy, which should also be referenced.

13. Immigration
Employees who accept an international assignment must understand that while the company will most likely provide assistance and cover the costs associated with obtaining all necessary legal documents, the assignment is contingent upon the employee obtaining the documents and staying eligible to live and work in a country.

The LOA should remind the employee that they are responsible for maintaining their passports, abiding by all of the rules and regulations of the host country, and providing all of the necessary documentation to retain a legal right to live in a country.

14. Disclaimers/company rights
When establishing standard disclaimer language to be included in a LOA, legal counsel should always be consulted. As an example, stating that the company reserves the right to modify the terms and conditions of their IAS programme as well as individual commitments outlined in the LOA are common, but again, HR practitioners should always consult their legal advisors at least once every two years to be certain any language stays current and appropriate.

15. Signatures
The LOA should be signed by the manager who has the authority to approve the assignment and a space should be included for the employee to sign as well. Two separate copies should be signed, with the company retaining one set and employee another for future reference and confirmation of commitments.

The pitfalls

Too much detail

This causes confusion and makes it difficult for the expatriate to understand which document he/she should reference . . . the policy or the LOA?

The LOA should emphasise commitments that are unique to the individual. It should never replace an international assignment policy, which outlines all of the company's commitments far more comprehensively.

Expert review
Obtaining sample documents from outside sources is fine, but never do so at the expense of having standard LOA templates reviewed periodically by legal and tax experts, who are in the best position to ensure the contents are accurate and appropriate.v Crafting a LOA is an essential part of the expatriate management process. Like an employment offer letter, it serves as a valuable communication tool, both for the employee and the organisation.