For decades, companies have relied on traditional, long-term expatriate assignments to help meet global business objectives. But economic challenges are forcing companies to use new strategies and, at the same time, a new generation of global assignee is emerging.
Today, more employees have spouses with careers and they have dual incomes they don’t want to disrupt. Companies also need speed and dexterity to take advantage of global opportunities and they need more fluid, cost-efficient ways to move global talent across borders.
While the best and brightest will always require special attention, in most cases, companies no longer need to engage in extensive negotiations with potential assignees — they understand the value of international experience.
In the midst of all this change, a range of program and policy variations have emerged:
Short-term assignments typically last from six to 12 months (even 18 months), are often offered to single employees with no children and usually revolve around one specific project.
Short-term assignments are increasing at a faster rate than long-term ones as they help companies react more nimbly to global opportunities and the needs of business units. Approvals tend to be quicker and acceptance rates are often higher as they don’t typically involve moving an entire family.
But some companies feel short-term assignments aren’t as easy to manage or as cost-effective. That may be because employers tend to relocate more employees more frequently for short-term assignments.
There can also be unexpected tax consequences if these moves aren’t executed properly or they morph into long-term assignments. More significantly, short-term assignments don’t always result in full cultural assimilation, which is key to developing global leaders and a big part of the return on investment (ROI).
One way companies can avoid those costs is by allowing an employee to commute to work in the host location, maintaining residency at home.
Commuter assignments are typically quicker and easier to approve, with employees paid in expense reimbursements or per diems rather than cost-of-living differentials or other such benefits.
However, the number of days commuters work in the host location can impact the type of work visa and permits they need, as well as when they become taxable, so their days away need to be closely tracked and monitored.
‘Local plus’ and ‘expat lite’
A “host” or local payroll and benefits package is used to integrate assignees into a local market structure by paying them what their peers in the host country earn for a similar job. Because of the challenges in aligning global salaries — and in trying to convince highly valued candidates to accept a move — sometimes additional allowances and support are needed: A “local plus” approach.
The additional benefits typically include household goods, tax assistance, cost-of-living adjustment, home leave allowance and perhaps a housing adjustment in the form of transitional payments that will be phased out over time. Local plus policies are used mostly for longer-term assignments.
An “expat lite” policy is based on home country salary and benefits. In the basic sense, it’s a policy through which certain benefits are only partially given, if at all. For example, a mobility premium may not be paid, housing allowances may be downsized and airfare may be scaled back.
This makes expat lite suitable for developmental assignments, where global experience and international business acumen are the priority — perfect for newer employees. Since these employees are typically single and have fewer ties to their home location than a traditional expat, offering a less robust package not only saves money but is often readily accepted by the candidate. And the employee remains highly mobile and can quickly take on a subsequent assignment.
In the 1980s and 1990s, employers sought to make assignees “whole” to their home country positions and salaries as a way to convince them to take a move by minimizing disruptions and ensuring consistency. But that has changed — companies are expecting employees to be globally mobile, especially those on the leadership track, so employers don’t feel they have to jump through hoops to entice people to relocate.
Also, business units don’t want to be tied to any specific policy — they want flexibility. Their HR and talent management issues are different and they want the choice of what to provide to better control costs.
Flexpat policies enable companies to give greater control to local HR and business units. They include a core set of benefits — such as tax equalization or cost-of-living allowance — given to every assignee. There is then a secondary tier of benefits — such as mobility allowances or language and cultural training — the business unit or host country operations can decide to give to the assignee, depending largely on her needs, local practice or the assignment objectives.
While cost-containment has always been a concern of corporate mobility managers, it is now an even higher priority. In some cases, the pressure comes from the executive suite — 55 per cent of CEOs plan to change their companies’ approaches to global mobility as a result of economic uncertainty, according to Pricewaterhouse-Coopers’ Talent Mobility 2020 survey.
To that end, the variation in program and assignment types that has emerged will remain the norm for the foreseeable future as companies are increasingly creative in balancing cost control with securing and retaining a knowledgeable, flexible base of globally mobile employees. The challenge for corporate HR managers will be to ensure their companies’ relocation programs continue to evolve as a critical piece of the overall talent management strategy.
Tim McCarney is the Boston-based manager of marketing communications at Weichert Relocation Resources, one of Canada’s largest global workforce mobility management companies with locations in Calgary and Toronto. He can be reached at email@example.com or visit www.wrri.com/blog for more information.