If you are new to conducting business globally, as a US government contractor, you will likely encounter a type of contract known as a Status of Forces Agreement (SOFA).
Essentially, a SOFA outlines the rules of engagement for defense personnel in a host country. The agreement defines many terms like carrying a weapon, paying local taxes and fees, using a US driver’s license in a host country, wearing a uniform, and, most commonly, which governments can exercise criminal jurisdiction over US personnel.
SOFA protection is normally reserved for those in uniformed services but can occasionally include contractors who support the US military overseas. In addition, some SOFAs can also define the rules for the spouses of protected personnel and how they are covered in the specific country.
One of the first SOFAs was established between the US and South Korea just after World War II. Today, there are more than 100 of these agreements, with each varying from country to country. SOFAs are often amended and updated to reflect the current relationship and needs between the two countries. Most SOFAs are public information, but there are certain countries where the documents are classified.
With so many unique SOFAs, it can be difficult to understand and follow them. For example, a certified fitness trainer supporting a military base in Germany may be under SOFA protection from paying local taxes. Yet, that same role and person in the UK is not under SOFA protection. This complexity makes it challenging for HR and compliance teams to understand which rules they need to follow.
If an employee’s spouse is covered by SOFA and decides to earn an income overseas, through a local job, their SOFA protection may be retracted. Following Covid-19, many people have opted to work from home or have even moved abroad – are these same people liable for foreign taxes, or does SOFA protect them too?
While the agreement intends to protect US personnel overseas, the reality is that it can often cause more confusion, especially for the teams that manage the process. Finding a resource that knows the country-specific SOFA rules can be challenging and often means one individual is left to navigate complex research.
Here are three tips on how to navigate SOFA rules:
- Work with the corresponding contracting officer to find a legal resource within the government agency to help define the rules.
- Retain an outside legal or HR consultancy familiar with the country in question to help navigate the rules.
- Retain an Employer of Record (EOR) solution that specializes in supporting government contracts and personnel and is familiar with the country in question.
It is easy to get caught in the SOFA vortex and chase updates while deciphering long, legal documents. If you plan to bid on an international government contract, then start with one country if you can. Maintain a good working relationship with your contracting officer, who can be a useful resource for you.
Also, look at the long-term benefits and impact on your business of working overseas and decide how to minimize your time and burn rate.
Does it make better sense to partner with providers in the region or use internal resources? This may introduce more questions into the equation, but the key point is creating awareness and helping you make informed decisions for your organization’s global growth.
You may struggle to navigate all of these because things get complex when considering expansion, onboarding, employee management and payroll in a new country. This includes aligning with the various regulatory compliances in your new market too.
However, with a direct EOR, like Elements, we take on all the tedious tasks listed above, so that you can focus on your business growth. We set you up for global success because we understand the unique needs of global expansion. We provide tailored payroll, benefits, HR compliance and global mobility solutions that work just for you. Let us answer all your questions and help you simplify global expansion in over 160 countries.
To learn how Elements can support your government contractor needs, contact us.
About Elements Global Services
Elements Global Services is a global tech firm, focused on software built to go beyond country borders and simplify a company’s ability to expand their business, onboard employees, manage compliance and pay globally. Headquartered in Chicago, Elements offers customers 100% direct Employer of Record services in over 160 countries, powered by proprietary HR technology that simplifies everything from payroll, benefits and human capital management to HR outsourcing, local compliance, and visa & mobility.