Building a Successful Global Education Strategy: Key Issues for International Online Education and Global Employment
Kegler Brown Global Business News July 16, 2020
- Some foreign jurisdictions impose intense regulatory burdens and some may not even recognize a degree from your university.
- University leaders must be aware of income taxes, VATs, and e-commerce/digital service taxes that apply in foreign jurisdictions.
- Local hires and expats will always be subject to the employment laws of the host country and a violation can be expensive, cause damage to your reputation, and carry civil and criminal penalties.
- If a university is collecting, using, transferring or disclosing the personal data of student-citizens in their home countries, those institutions would likely be considered data controllers.
Delivering a quality educational experience abroad is the primary goal of U.S. colleges and universities exploring and improving their online educational offerings. And with many of these institutions closing campuses and restricting in-person learning globally, online offerings have become more strategically important than ever. Any institution considering launching or expanding its remote learning platform internationally should carefully consider four key aspects of their strategy before its implementation.
The Efficacy of the Online Program
One consideration to that end is how effectively an online program will benefit the potential students in those foreign jurisdictions, which is often determined by two key aspects.
Compliance in Foreign Jurisdictions
Institutions must consider the many regulatory hurdles that exist en route to delivering services effectively in the students’ home countries (i.e. the foreign countries in which an institution is offering an online program). For example, many countries – including Taiwan, India, Vietnam and Thailand – do not regulate the operation of online education or distance learning, as long as the online education is provided from outside of the country, and there is no presence of the university in that foreign jurisdiction. The definition of a “presence,” however, is complicated and varies between jurisdictions, but can even include anything from the simple marketing of the program in the country to more formal collaborations with the country’s existing universities.
Further, some countries do not recognize U.S.-based online education at all. For example, in China, American colleges are not prohibited from providing cross-border online education to Chinese students in China directly, but the provision of online education in China must be done in cooperation with a qualified Chinese university. Malaysia, as another example, requires any institution providing remote learning to be established and registered as a private higher educational institution under their educational laws, which brings other complications.
American institutions should also consider whether the degrees obtained by students through their online education programs will even be recognized in their home countries. Some countries, including India, Taiwan, Vietnam, Indonesia and South Korea, explicitly dictate that degrees awarded by a foreign country are not eligible for assessment and recognition. And other countries, including recruitment destinations like China, recognize the degrees as long as they are certified by the appropriate authorities in the home country, which often requires that the certification include the fulfillment of certain criteria.
The Potential Tax Burdens
In addition to the general costs of providing the online educational services, many institutions overlook the tax consequences that can be triggered both domestically and in the foreign jurisdictions by the fees paid by students.
In most countries, tax obligations can be broken down into three components: (i) income tax; (ii) VAT/service Tax; and (iii) e-commerce and digital service taxes. While the first two are relatively straight-forward, the digital service taxes in places like India, Mexico, Taiwan, Malaysia, and Thailand (still in draft form) are often broadly defined. There is still some uncertainty with respect to whether online education services can be considered as ‘digital services’ that trigger the levy of the digital tax. For an example, I’ve written previously about this tax as it applies to programs offered in India.
The Global Employment Issues
With any online education planning, a human capital strategy must be a primary consideration. Related issues are common across the foreign countries targeted in a strategy, including local labor law compliance, immigration issues (i.e. hiring U.S. citizens/nationals vs. non-US citizens/local nationals), and the related tax implications of those decisions for both the university and the employee.
Some complicated employment issues that institutional leadership teams must consider include aligning home-country vs. host-country payroll, permanent establishment and whether it can be mitigated by a secondment, and the implications of social security totalization agreements. U.S. laws, including the Americans with Disabilities Act and the Age Discrimination in Employment Act, do have extraterritorial reach and may apply to any U.S. expatriates working abroad.
Of course, the most common models of employment include either employing a foreign national overseas or a U.S. employee who will be working abroad, both of which can be further divided between student employees and faculty /non-student employees.
Students who receive TA/RA scholarships may not be considered as employees of the university, depending upon the scope of the work/terms of scholarship, and their employment status is a controversial issue not only in the U.S., but globally.
So, even if the university is operating with limited resources, it could undertake a limited analysis to first determine whether this kind of arrangement is considered employment, thereby triggering the labor law compliance considerations in the foreign countries in which it aims to operate. Through a country-by-country analysis, it is possible that an argument could be made for some countries under their labor laws that this arrangement is not a typical employer-employee relationship, and may fit more appropriately in another category, such as scholarship or apprenticeship.
Still another option could be to temporarily suspend any graduate assistantship with monetary benefits to students and, in lieu of that suspension, consider other monetary benefits for the temporary period, like tuition credits, boarding discounts, etc.
For non-student employees, there are a number of other considerations for which compliance must be considered. For example, in some countries, labor law compliance is only triggered after a certain period of time (e.g. after the employee has been in that country for 182-183 days).
For institutions looking to circumvent the complications inherent in an employer-employee relationship, there are other structural questions to consider as part of a more comprehensive country-by-country analysis:
- Can the employment structure be converted to an independent contractor arrangement?
- Can the faculty be instead put on a sabbatical, during which he or she is not providing any services from the home country?
- Can the institution leverage a professional employer organization (PEO), which can be expensive but may make sense depending on the number of employees in a particular country?
- Is secondment, in which an employee is transferred to a partner or collaborating organization in the host country, an option?
In general, this is the golden rule when it comes to your employment strategy:
Local hires and expats will always be subject to the employment laws of the host country and a violation can be expensive, cause damage to your reputation, and carry civil and criminal penalties.
The Data Protection Laws
It should come as no surprise to college and university leaders that the vast majority of countries that serve as destinations for remote learning recruitment have their own nuanced data protection laws, akin to the GDPR. So, if a university is collecting, using, transferring or disclosing the personal data of student-citizens in their home countries, those institutions would likely be considered data controller and would accordingly be responsible for compliance under the specific data protection laws of that country.
This becomes even more important in the context of collecting the data of U.S. students when they are abroad (i.e. delivering educations services), or of employees who are abroad. Unfortunately, there is no universally compliant approach to data protection. My best advice in this regard is often to select the five countries most important to your global education strategy, or those in which you will likely have the most employees, and begin your analysis from there in order to maximize limited resources.
Vinita Mehra is a director and chair of Kegler Brown’s Global Education practice where she works closely with in-house counsel and other college and university leaders in devising, evaluating and implementing education strategies that build revenue and expand instit