In the ‘good old days’ before any global financial crises, selected management would up-sticks and take their family to far flung parts of the world, live in comparative luxury, educate their children at the best international schools and then move from one assignment to another. More often than not, as long as they were doing their job, the organisation didn’t question the cost or the long term gain for either party.
Not so any longer. Smart organisations now analyse the rationale for the move, match comp and bens accordingly and monitor the ROI for employer and employee. Money is no longer the only motivation with career development now a key factor with organisations developing an array of assignment policies to match those key drivers.
Assignment Package Design and Construction
The RES Forum recently investigated the latest trends in assignment package design, especially with regard to three key expatriation types. Long term (LTA), Short term (STA) and Local Plus Assignments where expats have a local contract with additional benefits.
Interestingly, just 47% of respondents distinguish between developmental and business driven/strategic assignments and, in the post-financial crisis period, many organisations have moved to be highly cost conscious and also to a more personalised HR approach. This has meant that the reward package designed for developmental expatriates would differ from standard LTA support, most likely to the financial detriment of the expat.
Overall, there were relatively clear trends with respect to the salary basis used for STAs, LTAs and LPs. Almost all STA packages (90 percent) were designed using a home-based balance sheet approach compared with 82 percent of LTA reward packages with another 8 percent determining reward by the higher of home or host. The reward packages of LP assignees are predominantly designed using the higher of home or host (69 percent). It is interesting to note that only one in four companies link the assignment compensation to performance. 23 percent of organisations pay annual assignment bonuses while 3 percent pay a one-time-only assignment completion bonus if the expatriate has achieved certain required performance levels.
Global Mobility ROI
In the wake of the financial crisis there was a lot of discussion about ROI in global mobility and how to reduce the cost of international assignments. One of the obvious cost reductions would be a financial contribution from expatriates for housing. The survey provides some surprises in this respect. More than half of LTAs are not asked by their employers to contribute to housing but, if they do, it tends to be in relation to a home housing norm based on external data. Unsurprisingly, STAs are rarely asked to contribute to their housing with just 18% making any kind of payment. The housing contribution is more frequent for assignees on LP contracts with at least 48% making a contribution.
RES Forum members were also asked to describe their support for accompanying partners. 94 percent did not provide any support for partners on STAs but, on for those on a long-term sojourn, however, this varied dramatically. Two thirds of companies provided spousal/partner support, using specialist providers (23 percent), paying a one-time-only cash allowance (19 percent) or an annual payment (13 percent). The remainder had other arrangements with reimbursement (capped) of expenses being popular and sometimes counselling by local HR was offered. Where there were cash payments these were sometimes linked to specific activities such as training and job search.
With respect to educational assistance, 94 percent of STAs do not receive any support. However, the picture is quite different with respect to the two other groups. Almost half of companies always offer their LTAs international or independent schools and a further 41 percent provide support if state schools are not available.
Interestingly, some organisations compare the home country with the host country educational status. This has the effect that if an assignee paid school fees at home, the company may only pay the incremental fee. In addition, sometimes traditional LTAs get the school education of their children paid in full while expatriates on developmental assignment do not receive this allowance. Some multinationals have one global allowance (e.g. US$10,000 was quoted) and assignees pay any excess.
Research has found that approximately 11 percent of assignees resign during an assignment and companies varied enormously in their policies and approach in attempts to claw back some of their investment. Different organisations would claw back different parts of the package including; outwards shipping costs, one off cash allowances, assignees bearing the costs of any lease cancellation or other costs associated with them leaving the organisation/returning home, some repayment of housing costs and even costs for tax briefings and/or cost of removal of goods back home. Most frequently, however, there is a case by case consideration of the situation, often factoring in the reasons why the assignee wants to leave early/the company, the time scale of how long the expatriate was in the host location and the contractual/regulatory obligations of the company.
Graduate Programme Policies and Packages
56 percent of the companies had an international graduate programme and amongst those 74 percent rotated graduates between two or more countries as part of the initiative. The duration of these international sojourns was often between six and 12 months and 64 percent of these organisations had a dedicated graduate relocation policy. 71 percent set the graduate salaries on the home or sending location and 52 percent offered all graduates who reached the end of the programme a permanent job.
As we’ve seen, employers are beginning to realise that what employees want is choice. With international travel now being so much more affordable and with both partners in many families having equally important careers so that more partners are choosing to stay at home, the traditional assignment and associated support package is becoming increasingly redundant. In the past, organisations have shied away from policies that allow assignees to cherry pick reward and support elements but many are now starting to exploit this idea to offer much more cost effective packages which support assignee’s individual needs more fully.
- David Enser: How are reward packages in global mobility programmes being designed in the post-recession world? - Thursday, October 29, 2015