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Mapping Assignment Policies to Assignment Objectives15 April 2017 Mapping Assignment Policies to Assignment Objectives ECA International Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Agenda Types of assignment policies Changing workforce demographics15 April 2017 Agenda Types of assignment policies Changing workforce demographics Drivers for assignments Mapping assignment policies to assignment objectives Summary Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Types of assignment policies15 April 2017 Types of assignment policies Historically policies tended to be based on duration Short-term Long-term Permanent Local business unit Group level Employee Companies have traditionally based their policies on duration, so they would have a long-term policy, if required they would have a short-term policy, and perhaps a permanent transfer policy. But just having policies differ according to duration has not always met the needs and requirement of the different stakeholders involved, with each party thinking about mobility from a different angle. The local business unit is primarily looking to fill a skills gap. It doesn’t matter which particular assignee fills the role, as long as they have the necessary skills for the job at hand. They are not perhaps going to have the same concerns as corporate or group level HR, who may take a more holisitic view of mobility and want to link it to career development and any talent management programmes. They want to ensure that the right type of employee is being assigned, so not just anyone who has the right technical skills but specific employees who have been identified as high potential and earmarked as future leaders as well as high performers. Meanwhile the employee will be thinking about how an assignment will impact their career but they will have their own personal issues to consider before accepting an assignment. What will be the impact on their partner’s career? What will be the impact on their children’s education? Is the host location environment even suitable for a family, are there suitable schools and are there safety concerns? Or perhaps the employee has none of these concerns at all, because they don’t have a family or their children are grown-up. Whatever the specific needs of each stakeholder, companies have had to strike a balance between these drivers. Toni/Jacqueline additional notes Over the years we have seen a bigger move to SIAs and there are a couple of reasons for this.. Travel costs so much lower today than 20years ago, the world is so more connected. More project work – get the job done and out again. Long Term have generally been seen to be more expensive and short term cheaper. With short term you generally have less expat benefits, typically single person but not always true but this is the general perception. Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Variety in types of international assignments15 April 2017 Variety in types of international assignments This slide just confirms what we have mentioned in the previous slide that SIAs are growing Source: ECA’s Managing Variety in International Mobility Survey 2014 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2010
Increasing diversity of assignee populations27 September 2012 Increasing diversity of assignee populations History – International - One country outbound Globalisation – everywhere to everywhere Mapping Assignment Policies to Assignment Objectives
Change in age group profile of international assignees15 April 2017 Change in age group profile of international assignees Average proportion of assignee workforce Like an onion every time you peel off a layer you have another layer of complexity. A couple of issues here: Talent Management you have a number of people facing that retirement cliff Lack of talent fewer in the 26 to 50 age group With respect to overcoming the challenges of recruitment another important long term development among employers has been an overall trend towards a greater proportion of assignees being either younger or older than the traditional age group for expatriates of 35 to 50 years. This reflects an increasing readiness for younger people to work abroad and there is also generally an aging working population. Older people still have skills and experience and less restricted by dependent children and aged parents. Both developments have assisted in: Increasing the availability or pool of staff with sufficient qualifications, skills and personal qualities to be able to successfully work and live in a different environment and culture; Overcoming barriers to mobility such as the dual career issue and concerns regarding dependent children's education, both of which are more likely to be associated with the 35 to 50 age group. Source: ECA’s Managing Mobility Survey 2012 & ECA’s Managing Variety in International Mobility Survey 2014 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2010
Assignment motivation:15 April 2017 Changing workforce demographics Profile: Children grown up Property owners Retirement on the horizon Assignment motivation: Financial package Location Opportunity Profile: School-age children Property owners Planning for retirement Assignment motivation: Career opportunity Educational opportunities for children Baby Boomers 1946 to 1964 Generation X 1960s to 1980s Generation Y 1980 to 2000 Profile: Single, no children Rent or living with parents Retirement not an immediate concern Assignment motivation: Begin career outside home country Seek well paid opportunities Successive assignments Baby boomers: this group will have achieved most of its career goals but—due to increased life expectancy—will be keen to work longer to bolster finances to see them through retirement. The motivation for a Baby Boomer to accept an assignment will be based on financial package, location, or opportunity. For these individuals, ECA would expect the more traditional long-term international assignment package to continue to be the norm. Generation X: They may be concerned about building and maintaining pension entitlements, and still having to fund costs of their children’s education. They will be at or near the top of the career ladder so they may be selective about international assignments. They will look for seniority-based roles which may include a traditional long-term assignment and accompanying benefits and allowance or they will be looking for creative, flexible commuter arrangements to balance their personal and work life. Gen Y: This group will increasingly view companies and the world—without boundaries. They will happily begin their careers outside their home countries if the employment or role prospects are greater abroad. They will continue to follow well-paid opportunities internationally while spending spells in their home countries, but just as likely to shift industries, roles, without the need to return to their home country until perhaps later in their careers. Their focus is on interest and opportunity, not necessarily monetary rewards. Toni/JOR notes Baby Boomers really were the golden generation with the good company pensions, Partner tended to be happy to go on assignment career wasn’t an issue. BB had this social contract with the company Gen X This is the generation that is much more dual career focused which is an obstacle, hardest group to move with dual career being an issue, family and the most costly. Gen Y – grew up with travel e.g. it was quite typical to go on foreign holidays not an issued whereas in my case we never did go on holidays travel was so expensive (presenter - put in your own experience here to make the point) Therefore it is not an issue for them to travel they are more flexible and tend to be single. NO Job for life Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2010
Demographic changes from 1970 to 202015 April 2017 Demographic changes from 1970 to 2020 Source: Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Business objectives for different assignment types15 April 2017 Business objectives for different assignment types What is the business reason for the assignment/transfer? What is the minimum timeframe needed to accomplish this objective? Can the objectives be modified to accommodate the needs of an employee if flexibility is required to meet the need? Is the assignment or transfer employee-initiated? What is the most likely next step for the employee at the end of the assignment/transfer? So when considering what assignment type will be most appropriate for the drivers behind the assignment, there are a number of points to look at: What is the primary reason for the assignment or transfer and how high is the business or development value to the company? How long will it take to meet the objective? It’s important to be realistic about how much time is needed to fulfil the purpose of the assignment. If you need to bring stability and corporate control to the company in the host location and you want to send in a senior manager from headquarters, you’re going to be looking at a long-term assignment at least. But if it is a more operational assignment based on technical knowledge, does the role need to be filled by one person for a two year period, or can the role actually be filled by four individuals going for six months each? You would then be turning the long-term assignment into four short-term assignments, and this may make the assignment a more attractive option for employees who cannot relocate with their family for a full two year period. That way, by changing the type of assignment to accommodate the needs of more people, you would have a wider pool of potential assignees to choose from. Who has initiated the assignment or transfer and how does this match up with the potential business value or development value of the move? And what is likely to happen after the assignment? If you are not expecting the assignee to return to a role in the home country, is it really necessary to maintain links to the home company, be it contractual, salary-based or pension-related? So after considering all these different factors, how do you choose the right type of assignment and the right remuneration approach? Toni/JOR Here you are looking at creating a decision tree Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Remuneration methods Home equity Host local equity Global equity15 April 2017 Remuneration methods Home equity Balance sheet Hybrid Higher of home/host Host local equity Local Local plus Assignee host equity Expatriate market rate Int’l salary bands Global equity Nomad policies Select Base Most of these address one or more issues of equity Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Progressive policy approaches15 April 2017 Progressive policy approaches An umbrella policy with a suite of tailored provisions beneath it to reflect assignment objectives, business assignment drivers and assignee drivers Short-term Projects Graduate/development Commuter Rotator Long-term Leadership Skills transfer High potential Permanent Indefinite transfer Self-initiated transfer Global nomads So in order to try and respond to the differing needs of both employees and the company, we’re seeing that companies are increasingly trying to create sub-policies within each of the three duration-based umbrella policies. For a short-term policy, you may have a standard policy for short projects, but you may have a different remuneration method if sending graduates on short-term assignments for development purposes. You may also have a commuter policy where the assignee’s personal circumstances make relocating the family undesirable, so that instead the assignee can go unaccompanied and return home regularly. And of course depending on your industry you will have a rotator policy as well, taking into account the fact that an assignee cannot relocate and live in that kind of location on a full-time basis, be it an oil rig or a mine site. For long-term assignments, you may choose to differentiate the remuneration methodology and benefits provided to your senior leadership type assignees, to those provided to your more operational skills-based assignments and again to those provided to your high potential employees who you are assigning primarily for development purposes. For permanent transfers, there may be a distinction between the approach you take for those whose jobs the company is relocating to another country, therefore the company has initiated the transfer, and those who have asked to move to a role in another country, the self-initiated transfers. And then our global nomads, the assignees who we have classed under permanent because there is no intention that they will even come back to work in the home location, they will move from country to country as required. They will need their own remuneration approach that meets their particular needs, especially around elements such as retirement benefits. Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Mapping assignment policies to assignment objectives15 April 2017 Mapping assignment policies to assignment objectives Mobility strategy Expat Lite Local Plus Long-term assignment High developmental value Mobility strategy Long-term assignment Full Expat Local Plus Global Nomads Hybrid Development Strategic opportunity Local opportunity Skills/ knowledge Employee High potential Employee Senior level – top performers Any employee Self-initiated for a permanent move Low business value High business value Mobility strategy Expat Lite / Modified Expat Local Plus Long or short-term assignment Purple = Policy Green = Reward Here’s an example of how you could look to align the purpose of your assignments, with their respective business and development value, with some options for remuneration approaches to suit the assignment type, so that you can get your talent to be in locations where you need them and for the right cost. Our strategic opportunities, which are likely to be filled by your senior high performing employees and which will require a pay method that produces attractive packages. Our development assignments, which may not have an immediately high business value, but which you will use for your high potential employees who you are keen to retain and develop further. Our more operational assignments, which simply require anyone with the right skill set or knowledge to fill the role. In both of these cases, you may not need to be as generous as for your strategic assignments, but at the same time they need to be compensated fairly for the role and have a certain level of financial incentives, particularly for those with a high business value. And then our local opportunities, where there is a low business and development value, but there just happens to be a job going in another country and an employee, probably relatively junior, wants to go, and therefore the least level of financial incentivisation required. Mobility strategy Permanent transfer Local/Local Plus Low developmental value Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Strategic opportunity – can you pay a local salary?15 April 2017 Strategic opportunity – can you pay a local salary? Junior manager (EUR) Senior manager (EUR) Lets start with our strategic assignees, our high business value and high developmental assignees, arguably our assignees most important in terms of revenue. Why do we need to look at one of these kinds of options, why a full expat package or local plus, why pay more than a local. Because of course of the differing salary levels. Let’s look at these, ignoring for the moment any differences in cost of living, and really focussing on differences in base pay and in the net take home pay. This shows how wage levels will affect whether a local salary will suffice. While at junior level it will be difficult to attract someone to go from Norway to Mexico, at senior level, so your strategic assignments, the Mexican local salary looks quite attractive for a Norwegian senior manager. But of course the opposite can also be true. When we think of typical countries as having low salaries, it’s quite a sweeping assumption and doesn’t take into account how the wage curve can be quite steep. In other words, junior staff earn very low salaries, but as seniority increases the salary you earn increases much more rapidly than in countries typically thought of as high salary countries, such as in Western Europe. Which is why you have this effect. Sending a junior manager from Brazil to Sweden on a local salary is not going to be a problem on a net basis, but, if we didn’t know any better, wouldn’t we assume the same move would be possible at a senior level? Certainly a senior manager moving from Brazil to Sweden will be worse off on a local salary. Coupled with the higher cost of living in Sweden compared to Brazil, there will surely be problems. So if you’re trying to encourage your top employees to take up an assignment and retain them, you will be able to offer a local salary in some countries but not in all countries. You need to offer a competitive salary, and paying purely local will not achieve this everywhere. And of course, it’s not just about the pull factors, so accepting a local salary, but also about the push factors, in other words giving up your current salary, or, as is increasingly the case, giving up two salaries, the assignee’s salary and their working partner’s salary. If a Norwegian couple are both earning the Norwegian average senior manager wage of around EUR net, why would they give them up to take up this one marginally higher wage in USA for example that will be their joint income, if the assignee’s spouse cannot practise their profession in that country, for example because their qualifications are not recognised? And if the couple are not married, the assignee’s partner does not have the right to work in the USA due to immigration restrictions anyway. Local salaries source: Towers Watson Global Grades 2013 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Local plus Local salaries source: Towers Watson Global Grades 201315 April 2017 Local plus Toni – You need to look at your traffic lands and these will tell you what will work and what won’t work. So if you can’t get your assignee to accept an assignment on a purely local package basis, can you make that local package more attractive by adding on some expat benefits and make it a local plus package? Now local plus will mean very different things to different companies: for some, all it means is providing relocation and perhaps settling-in assistance. For others, it means providing many of the benefits that you would normally provide for a full expatriate package. It could be anything in between. Let’s assume for your strategic opportunity you are willing to pay for the assignee’s housing costs and schooling costs for their children in order to make the package more attractive to your senior manager. How does this change the picture, when comparing the assignee’s current pay at home to what they may get on assignment? <<add in housing and schooling, assume M+2, both primary, 3 bed house superior mid>> Well, it certainly makes a difference in some locations. It probably wasn’t enough of an incentive for the Norwegian senior manager to go to USA before as the salaries were not particularly different, but if you are now going to be paying for their housing and for schooling for the children then the value of the package certainly looks more attractive (at EUR ). So for your senior level assignees, this could now work as an option for some countries, where paying purely local terms would not work. But what about those senior level assignees in countries with very high wages? Is a local plus approach going to make our Brazilian assignee earning over EUR net, who you need to fulfil a strategic opportunity, want to move to move at all? Well to some of these locations, yes. To Singapore, to Australia for example. But what about to Norway or Sweden? There’s no real increase in pay experienced, even if you add on the benefits. In Norway the net Brazilian salary has just about been met, but in Sweden they’re still going to feel worse off. As with any approach, local plus has its limitations. It will work for your senior managers in some cases but it won’t in others. It’s certainly a hard sell to your assignee that you are the company’s top talent and vitally strategic to the organisation and the company needs you to take up this assignment, but yet you’re going to be worse off on assignment. So why don’t we just use a build-up approach for our strategic senior level assignments? We know that they won’t be worse off than if they had remained in their home country, and should work wherever they go. If we want to move our Brazilian senior manager to Sweden, then in theory, by protecting their net income, and providing them with benefits, the package will be attractive enough for them to accept the assignment. And although a local or local plus approach would make our Swedish senior manager go to Brazil, why don’t we just the use the build-up approach for them as well, thereby treating all of our senior managers, wherever they are coming from and going to, exactly the same? Local salaries source: Towers Watson Global Grades 2013 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
15 April 2017 Expat vs. local - Brazil Let’s go with that assumption: we’re going to use the build-up approach and full expatriate package for our strategic opportunity assignees wherever they are coming from and going to, because that way we know their home net salary is protected and, with the benefits and allowances added on top, they are going to be incentivised enough to take up whatever assignment you need them to for your business. We’ve just seen that a local or local plus approach won’t work in some scenarios so the build-up approach is the safe bet. It is still the most common remuneration method and certainly for this level of seniority. Let’s have a look at this in more detail, using our Brazil to Sweden and Sweden to Brazil example. Let’s look at a Swedish senior manager going into Brazil first. We know from our net comparisons that a local or local plus approach would work for your Swedish assignee going to Brazil, because the Brazilian net salary at this grade level is sufficiently higher than the Swedish equivalent. But why don’t we just use a full expat build-up approach? Would a build-up approach work as well? (insert purple line). If you are sending a junior manager into Brazil, this will work. They are receiving a higher net salary (in purple) than they did at home in Sweden (in green) and they are earning more than their Brazilian counterparts (in blue). However for your middle and senior managers, there comes a point where your Swedish expat will receive a lower salary than his or her Brazilian peers. At the top end of this scale the difference here is around EUR 40k. Under a traditional full expatriate package you are likely to be providing typical expat benefits such as housing and schooling so that gap can be bridged. But it certainly is interesting I think to see that even though you are paying a generous expatriate salary with a mobility premium and location allowance for your senior level assignees, this does not necessarily mean that they will always be better off than on a local approach. And what kind of message does this risk sending out to your senior manager assignees, that you have sent them on assignment as they are vital to the business and you are so keen to retain them, yet they are earning a lower salary than the Brazilian peers that they are working alongside, who may not be considered high performers? A local or local plus approach is going to reward your senior managers in the host country more than the build-up approach in this example. Local salaries source: Towers Watson Global Grades 2013 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Expat vs. local - Germany15 April 2017 Expat vs. local - Germany So what about our Brazilian senior managers coming into Sweden? We know already that a local salary in Sweden ( in green) is acceptable to a junior manager but out of the question for senior managers due to the large difference in net salaries, which we can see here as well (Brazilian local in blue). We know that even if we added on expat benefits in Sweden, your Brazilians would still face around a EUR 40k cash pay cut. So the build-up approach seems the natural way to go to incentivise them to move from Brazil and into Sweden (enter yellow line). But look at how the net salary of your Brazilian assignee on a build-up package (show yellow line) compares to the net salary of their peers in Sweden (green line). The Brazilian expat’s salary starts to exceed the local salary steeply all the back at the junior manager level, and by the time you get to senior manager, your Brazilian expat is earning nearly 3 times what his or her Swedish peers are earning in Sweden. So why has this happened? Well we know the starting point for the build-up is higher than in Sweden already (blue line). Then we add our COLA, based on an index of around 150 on cost-effective home-based, then a mobility premium and location allowance based on the high basic salary, and altogether this results in extremely high expatriate salaries. So, number one, can you justify paying an expat three times as much as your local employees at senior manager level considering the kind of discontent that this could cause, and number two, can the company even afford to pay at this level? Of course it’s not just Brazilians that we find this with. It’s any country that has a steep local salary curve and pays very highly at senior management level, and where cost of living is relatively low. In order to protect their strong purchasing power, you will need to pay a lot out to them. One of our UK clients had this exact problem. Imagine that instead of our green Sweden line on this graph we were looking at the UK, and this is what they were experiencing. They were finding that their trusted build-up method was generating much too high salaries for them to be able to bring in Brazilian senior managers to the UK. They simply could not justify these senior managers earning more than even their board level executives. So they had to think about how to incentivise these individuals to accept the assignments if as a company they were not prepared to pay what it would take to protect their Brazilian pay and lifestyle. Financial reward could only go so far, so they had to sell the assignments much more in terms of career progression and the idea that being sent to work at the headquarter company was prestigious and a necessary step to being considered for promotion to board level. This worked to an extent but they also introduced a local plus approach for these assignees, so that some benefits, namely international schooling, was paid for by the company. You might wonder why they even bothered trying to move Brazilians out of Brazil at this level considering the problems that their high salaries would cause, but the Brazilian part of the group was very important and to not be able to move Brazilian senior managers to the UK headquarters was unacceptable in the company’s culture. Of course, such companies are not just under pressure to reduce costs and not overcompensate, but there are also the pressures to ensure that the package being offered is competitive in the host country market and comparable to what other expatriates can expect to receive (show red line). We can see here that the typical expatriate market rate paid at theses levels for an expatriate in Sweden is more than a local national but still much lower than what a typical Brazilian would receive under the build-up approach. Companies can see how a salary being offered to an assignee compares to those being paid in the host country by participating in ECA’s MyExpatriate Market Pay survey and therefore having access to the corresponding reports. This can be a very useful reference point when you simply don’t know whether the salary you have calculated, regardless of your chosen methodology, matches up with those being paid in that country. You know how it compares to a local national salary, but is it normal for other expats to receive such a high level of pay? Local salaries source: Towers Watson Global Grades 2013 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Mapping assignment policies to assignment objectives15 April 2017 Mapping assignment policies to assignment objectives Mobility strategy Expat Lite Local Plus Long-term assignment High developmental value Mobility strategy Long-term assignment Full Expat Local Plus Global Nomads Hybrid Development Strategic opportunity Local opportunity Skills/ knowledge Employee High potential Employee Senior level – top performers Any employee Self-initiated for a permanent move Low business value High business value Mobility strategy Expat Lite / Modified Expat Local Plus Long or short-term assignment We’ve mainly been looking at your senior strategic moves, but what about your other types of move? What method should you use, for your developmental assignments, that may not have a high business value in the short-term, but you need these high potential employees to gain experience outside of their home country to facilitate their career progression? Or your more operational assignments required because of a certain skill set or knowledge, but where you do not need to target specific employees to take up the assignment for development reasons? Both of these types of assignment are also important, but one doesn’t have the same level of business value that your strategic opportunities do, and the other doesn’t have the same developmental value that your strategies opportunities have. So you arguably don’t need to have such a generous policy as for your more business critical moves. What are your remuneration approach options for these types of assignment? One way of varying the package is to take the full build-up approach that you may be using for your more high-level assignees and slimming it down, what some companies call “expat lite”. This usually means removing any kind of mobility premium and lowering or elimination the location or hardship allowance, and using a less generous cost of living index and slimming down some of the benefits values, so a lower housing allowance for example. Of course, one company’s expat lite package may be another company’s normal expat package, when looking at the actual values. But if you are under pressure to introduce more cost-effective packages, at least for some of your total expatriate population, then this is certainly an approach that approach that has its merits. One major point to bear in mind however is the salary levels of those employees who you would be moving for primarily developmental or operational reasons. Let’s take another example, this time looking at India to Norway. Low developmental value Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Development / skills-based assignment: Expat lite – China to Germany15 April 2017 Development / skills-based assignment: Expat lite – China to Germany Your development or skills-based assignments will tend to be your middle management level, sometimes your junior management or graduates if you have such a scheme. Expat lite is a reasonable approach for this kind of population: you don’t need to be as generous as your senior level expats but you still want to make sure that their purchasing power is protected. So what is the impact of using this approach on an assignee moving from India to Norway? Well all the way from junior management to middle management, you have a problem when using the build-up approach with this country combination, whether on a full expat package (purple line) or on an expat lite (yellow line). The full expat package (the purple line) is significantly lower that the Norwegian local net salary (green line). Not only may they not be able to afford to live in Norway, but they may not earn enough for immigration requirements. Again, you may be able to bridge the gap by paying for their housing and offering other benefits, but some countries do not take such benefits into consideration when determining whether the company is committing to pay a salary that meets the minimum wage requirements. In this particular example, the Indian expat only starts to earn more than the Norwegian local employee at the high middle management end. So by using an expat lite approach for your development or skills-based assignees simply makes the problem worse. The green line showing our expat lite salaries doesn’t meet our yellow Norwegian salary line until we’re nearly at senior manager level. In this kind of situation, you may need to use a hybrid approach that allows for the same spendable income as a local national to provide an uplift to the build-up salary, or you may decide simply to pay the Indian national the local salary in Norway, though that of course brings with it its own set of problems in terms of resistance to repatriation. But even if we disregard these practical matters of the expat salary being so much lower than the local salary, why would an assignee choose to go on an assignment under an expat lite arrangement if they are clearly going to be worse off than the peers they are working alongside, or in financial hardship because they don’t earn a high enough salary to live on? You could argue you don’t need to incentivise developmental assignees to accept the assignment, as the fact that the assignment links in directly with their career progression is an incentive itself, but I still think this is a tough sell if they can’t afford to live. If the assignment is primarily for operational purposes and you just need any employee that has the necessary skill set to go, regardless of whether they are a high performer or not, surely there needs to be some kind of incentive to go, and why would they if they were going to be worse off? Yes they are going to be earning more than they did at home (the yellow line, the expat lite package, is always higher than the blue line, the Indian local salary at home in this case) but they are not going to feel the benefit if they can’t afford the lifestyle of a junior level employee in the host country. Assuming you don’t want this individual to be worse off, then at what point does the build-up, whether a full package or expat lite, start being an option for you? Where on this scale is the tipping point? Of course, the answer is going to be different for each home/host country combination. In this example, the tipping point is here, pretty high up the scale. <<animation to show cross over points>>. But in our Brazil to Sweden example, we saw that the point at which the Brazilian expat package was higher than the local Swedish salary was right down at the bottom of the scale. So should you try and find the tipping point in each of your country combinations, so you can work out at what point on the scale the build-up starts to work for you? Practically-speaking, that’s very difficult and time-consuming, you have to take into account that exchange rate movement can make big differences in these comparisons, and of course you would need to update it at least once a year with your new salary scales. Considering the high wage inflation in India, which our Salary Trends survey anticipates being over 10% in 2014, it is likely that this graph would look different next year with the tipping points lower on the scale. Local salaries source: Towers Watson Global Grades 2013 Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Mapping assignment policies to assignment objectives15 April 2017 Mapping assignment policies to assignment objectives Mobility strategy Expat Lite Local Plus Long-term assignment High developmental value Mobility strategy Long-term assignment Full Expat Local Plus Global Nomads Hybrid Development Strategic opportunity Local opportunity Skills/ knowledge Employee High potential Employee Senior level – top performers Any employee Self-initiated for a permanent move Low business value High business value Mobility strategy Expat Lite / Modified Expat Local Plus Long or short-term assignment And then our local opportunities, where there is a low business and development value, but there just happens to be a job going in another country and an employee, probably relatively junior, wants to go, and therefore the least level of financial incentivisation required. We need to be a bit careful when we talk about self-initiated assignments. It may be that the employee has proactively asked for an assignment an identified a local opportunity in another country, but they may be high potential employee, so why should this employee be treated any differently to one of your other high potential employees who has waited for the company to come to them with an assignment offer? In other words, you need to be careful not to penalise an employee’s proactivity, so if they fall into to one of your other categories where there is a high development or business value to the proposed assignment, then it is unlikely you would treat them any differently. However, where the employee has asked to go and there is little development or business value from the assignment to the company, why would you consider paying any more than you would for a local national? The obvious remuneration approach in this case is a pure local salary offer on a permanent transfer basis. However there are a number of possible reasons why you might want to be a bit more generous than simply offering a pure local salary.. As a company, do you want to encourage your staff to move around as a general principle? Encouraging self-initiated mobility can help achieve a true sense of being a global company without borders. If you can assure that any employee who volunteers for a local opportunity will be provided with some basic assistance in relocating and settling-in, this may be all the encouragement they need at a junior level, especially if they have no commitments in the home country or a family, our generation y category of employee. But also the reason for an assignment is not always quite as clear cut as our grid implies. It may be that an employee volunteers for a local opportunity, but there is also a certain level of business value to the move, and so local management may want to reward the employee in some way. Mobility strategy Permanent transfer Local/Local Plus Low developmental value Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Local opportunity Local transfer (pure self-initiated)15 April 2017 Local opportunity Local transfer (pure self-initiated) Local transfer plus (part self-initiated, part company-initiated) Tax consultation Year of transfer only Relocation flight Provided Shipping Standard provision Additional assistance Language training None Housing allowance Company contribution for a defined period Education Temporary accommodation One of our clients put such a system together last year, whereby they differentiated part self-initiated/part company-encouraged from pure self-initiated assignments. The grid shows a sample of the kinds of benefits their policy offers in each case, with the local plus elements being optional according to the wishes of the host company and how much they want to assist the assignee and encourage them to accept the role. For example, while everyone gets tax assistance in their first year and their relocation costs paid for (flights shipping and temporary accommodation, the transfer plus gets an enhanced provision. And while the local transfer doesn’t receive any assistance with the cost of housing and children’s education, the transfer plus does. They will be able to send their majority of junior generation y employees on a local transfer, but if there is an element of company encouragement, and the company wants a generation x employee to move, who may have family commitments, then the transfer plus gives then the flexibility to offer a better local deal without always defaulting to a normal expat build-up approach, which in any case wouldn’t be appropriate if there are no plans for this individual to return to the home country. Flexibility in their policy is key to allowing them to meet the different needs of the host company and the employee while getting people to move. Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Mapping assignment policy to seniority15 April 2017 Mapping assignment policy to seniority Local opportunity Development assignment & Skills / Knowledge assignment Strategic opportunity So we’ve established that it wouldn’t be very practical to find the tipping points where the build-up will and won’t work in each of your country combinations, because the grade level has as much as an impact as the countries involved themselves. And we know that there is no one remuneration approach that will always work for all of your assignment types and even for assignments within one particular type, such as your strategic opportunities. The build-up can work particularly well in this middle part, but we know that it can be too low at the very bottom and too high at the top. Meanwhile a local or local plus approach won’t work at the bottom either for company-initiated moves, for example for Sweden to Brazil, but it does at the top. And a local salary may indeed be acceptable at the bottom if the individual has asked to go on assignment and is not in your high potential group, as they may looking at more than just the monetary value of the assignment for them, but may be more about the experience for them, your generation y employees. As long as you can offer them a local job and you can help them in relocating to Brazil, they will be satisfied. Of course companies didn’t used to have such problems, when most expatriates were from the middle to top and they were going to locations with similar payscales, so elsewhere in Europe, North America, etc. But sending out junior employees from low salary countries to high salary countries is relatively recent, as is sending senior employees to or from emerging markets with very different salary scales, and where there is a skill shortage at the top meaning those who have those skills are paid very highly indeed. So what’s the solution? While you should aim for a single remuneration approach for each of your policies, so one for strategic assignments and another for developmental assignments and/or operational assignments, and while you should certainly consider what locations your company is operating in when devising your remuneration approach, it is important that your policies have the flexibility to allow you to make variations to the remuneration approach where you need to, in order to incentivise the right people to go to the locations where you need them. To give the example of one of our South African clients, a telecommunications company, they use a local plus approach everywhere as far as possible for their largest group of expatriates, but in every case they will compare the home and host country salaries on a net basis, and if the host net is lower than the home net salary, they will guarantee the home net salary, so that the employee is not going to be worse off. However aside from the plus part of local plus, which in their case is housing, there are no cash incentives to take up the assignment if the host net is lower. Their approach towards the assignees is very much a “take it or leave it” approach, but obviously if they were a company in a different industry, such as oil and gas, that approach may not be so successful. Of course, having good systems such as ECAEnterprise will allow you to run calculations using different remuneration methodologies so that you can easily see if your preferred remuneration method is going to work given the employee’s salary and country combination, or whether an alternative approach needs to be applied on an exception basis. Junior manager Middle manager Senior manager Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Summary One policy rarely fits all assignment objectives15 April 2017 Summary One policy rarely fits all assignment objectives Changing assignee demographics and company needs lead to more complex policies Careful consideration can lead you to select the best fit remuneration approach Flexibility is key So, to summarise, there is no perfect remuneration approach for all assignment types and neither is there one for any given assignment type. Things are a lot simpler if you have a small assignment population who all have similar requirements and have a similar profile, and all your moves are all from one country to similar countries, and assignments are based on a business need only. But for a company to become truly multinational and send their staff from and to different countries at different grade levels and for development as well as business reasons, mobility programmes and remuneration approaches do inevitably become more complex. However in giving careful consideration to your different mobility strategies, the types of assignment you use to support them and the profile of your assignees, you can select the most appropriate remuneration method for each assignment type that allows you to motivate your employees to go where you need to, in the right measure according to the strength of that need. With this careful consideration, you should also be able to move the people you need to move most at an appropriate cost, while not overcompensating those where there is a lower business value. You may just need to be flexible within each assignment type to be able to manage the different results that the different remuneration approaches will bring you according to the home and host countries involved. And being aware of the potential problems from the outset will allow you to make the smarter decisions. Toni - Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
Account Manager - Client Services15 April 2017 Thank you Antonia Kueßner Account Manager - Client Services ECA International Questions? We have focussed mainly on long-term assignments here but the challenges with finding the right remuneration approach for short-term assignments and commuter and rotator arrangements will be similar, though with rotator arrangements you have the additional need of compensating the employee enough to work in an undesirable remote location. In any case, as we can’t talk about all different assignment type in detail in this presentation, you will see that you have a handout of sample policy elements for the various assignment types as a reference. So thank you very much for listening and do you have any questions? Mapping Assignment Policies to Assignment Objectives © Employment Conditions Abroad Limited 2013
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