Top HR challenge in emerging markets lack of local, skilled talent

Many employers refining HR policies for local nationals, expatriates: Mercer
|hrreporter.com|Last Updated: 02/17/2012

Given the rapid rate and scope of globalization, organizations continue to face significant challenges related to staffing in emerging markets, according to Mercer’s HR & Mobility Challenges of Emerging Markets Survey.

More than one-half (59 per cent) of participating organizations cite scarcity of local employees with the required technical skills as the most critical human resources challenge in emerging markets. This is followed by difficulties of dealing with complex labour laws and establishing appropriate salary structures (53 per cent and 51 per cent, respectively), found the survey of more than 150 organizations in Canada and the United States.

“In addition to the lack of local talent in most emerging markets, attracting and incenting expatriates that can provide the needed technical and managerial skills is a big issue for companies trying to staff operations in often difficult locations,” said Roger Herod, a principal in Mercer’s global mobility consulting business.

While nearly three-quarters (73 per cent) of employers are in the process of developing business in new and emerging markets, three countries in particular pose the greatest challenge, according to more than one-third of responding organizations: China (52 per cent), India (36 per cent) and Brazil (35 per cent).

“Besides the common difficulties of finding skilled talent and establishing competitive salary structures for local employees, regional complexities around employment laws, local benefits and tax regulations can be particularly troublesome to overcome when operating in these countries,” said Herod.

In addition to the challenges organizations face with local nationals when doing business in emerging markets, they encounter issues with their expatriates in these markets as well. The top three challenges, reported by more than one-third of participating organizations, are establishing competitive policies for attraction and retention (38 per cent), attracting the right candidates (34 per cent) and addressing equity issues between expatriates and local nationals (33 per cent).

Less common challenges are those associated with housing assistance and establishing pension or health insurance coverage, found Mercer.

“International assignments to developing countries can be very costly because of shortages of suitable housing for expatriates, high cost of goods and services, and often high taxes. Additionally, assignments are frequently ‘hardship’ locations,” said Herod. “As a result, companies must implement policies that will attract employees to take assignments at an affordable cost.”

While most employers are satisfied with the HR policies established for their local nationals and expatriates in emerging markets, about two-thirds are in the process of fine-tuning their policies. And more than one-third (35 per cent) are still trying to put appropriate HR policies in place for local nationals while one-quarter (25 per cent) are establishing the right policies for their expatriates.

Critical HR challenges in emerging markets for local nationals

Availability of talent with required technical skills

59%

Dealing with local labour laws

53%

Establishing appropriate salary structures

51%

Availability of talent with required managerial or people skills

43%

Establishing appropriate benefit plans

28%

Competing with larger local or governmental agencies for resources

26%

Critical HR challenges in emerging markets for expatriates

Establishing competitive policies to attract, retain expatriates

38%

Attracting the right candidates

34%

Addressing equity issues between expatriates, local nationals

33%

Determining incentives such as premiums, hardship

29%

Assisting with tax compliance

28%

Assisting with work permits

24%

Determining appropriate mix of expatriates, local nationals

21%

Assisting with housing

17%

Establishing pension, health insurance coverage

14%

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