Trends in international relocation assignment types and remuneration strategies

Despite the recession, numbers of international assignees are rising. Against this backdrop, Sue Shortland considers the latest trends and developments in remuneration policy and practice for international mobility

Despite the recession, numbers of international assignees are rising. Against this backdrop, Sue Shortland considers the latest trends and developments in remuneration policy and practice for international mobility.

According to Associates for International Research Inc (AIRINC) Europe, some 80 per cent of organisations worldwide have either maintained or increased their numbers of international assignees, with 90 per cent anticipating growth in their assignee populations in the future.

Brookfield Global Relocation Services reports that 63 per cent of global companies expect an upward trend in overseas assignments during the remainder of 2012, while Santa Fe reports 47% of organisations have seen the number of international assignments rise over the last 12 months. However, it notes that 51 per cent of companies require a cost-benefit analysis to justify an assignment– a 10 per cent increase on last year–and 14 per cent of assignments failed on compensation and benefits grounds. It is, therefore, critical to get the expatriate remuneration, allowances and benefits package right, as this is a key element of the assignment cost, and it affects employees' motivation to go, and to complete.Yet the picture is not straightforward. Weichert Relocation Resources reports that: 62 per cent of organisations are either currently using alternative types of assignment to traditional long-term mobility or are considering implementing them in the near future; 66 per cent expect their use of such assignments to increase in the coming year; and 77 per cent consider alternative assignment types to be effective in meeting their mobility needs.

Weichert's survey of 180 HR and relocation professionals reveals that: 80 per cent of organisations make use of alternative assignments to address business unitsí and subsidiaries' needs specifically; 47 per cent make use of such flexible assignments to save costs; 48 per cent use them to achieve company-specific objectives; and 55 per cent use them to support project-based initiatives. The most popular alternative assignment types are extended business travel (used by 72 per cent), commuter assignments (58 per cent), local plus (45 per cent), and rotational (42 per cent). These flexible assignment options offer lower costs and faster deployment, and potentially a wider candidate pool, than traditional assignments.

The use of different mobility strategies has an effect on remuneration policy and practice. As a result, we see changes taking place in the use and nature of expatriate pay systems.

Expatriate pay

The traditional balance sheet remains the number-one pay methodology; 72 per cent of organisations currently use this approach, according to AIRINC Europe. While providing a very flexible approach to expatriate remuneration, it has the drawbacks of being expensive and difficult to administer, and of creating inequity between workers based in a host country who are from different home countries. It is, therefore, not surprising to find that organisations use alternatives where possible.

Indeed, AIRINC Europe notes that organisations have an average of 3.8 different policies. These include host plus (there is a strong pull towards this approach), localisation and localisation plus, and globalist.

One third of organisations contacted by AIRINC Europe, reported that they were seeking a low-cost alternative policy to the home-based balance sheet, typically preferring a host-plus approach and looking to establish more home/host combinations where such a pay methodology would work. Of course, host plus is not appropriate in lower-wage countries, and it has the disadvantages of lack of transparency (owing to currency fluctuations and cost-of-living changes) and difficulties in benefits portability (for instance, social-security benefits).

Nonetheless, for moves between economically-similar countries, where pensions and social security are portable and local salary levels are aligned with the sending country, hostplus pay is an attractive and lower-cost remuneration option. There is also increasing employer interest in localisation (either in full or localisation plus); this requires moving expatriates to local salaries, phasing out aspects of expatriate pay and benefits over a period of time. Such pay systems require a methodical approach, clearly transparent in nature.

However, their advantages concern cost control/reduction and the removal of expatriate status.

Global expatriate pay remains relatively uncommon. It involves determining a global salary structure for a predetermined, selected group, most usually top talent or perpetual movers. A balance-sheet-style approach to pay is used, with the home base being a fictitious location. All assignees in the globalist group are paid on the single-salary structure, with home/host differences adjusted using a 'home' balance sheet, with no tie to a real country, but rather to a fictional home base (for example, Euroland).

While this approach to remuneration is not increasing significantly, it is notable that 29 per cent of oil-and-gas sector firms use a globalist approach (reflecting their constantly-mobile expatriate populations), and that many companies in other sectors are considering its advantages of transparency and facilitation of global mobility.

Policy implementation

The first point to consider is the strategic nature of the pay methodology choice; it should be matched to global mobility objectives, not only cost control. (There is no point in having a low-cost policy if no one is motivated by it.) Of course, whichever remuneration approach is chosen linked to assignment type and purpose, it is critical to communicate it effectively, otherwise employees will not be encouraged to take up an assignment, or to succeed once in post. Suggestions include a quick reference guide for employees, as well as access to the policy itself. Transparency helps to demonstrate equity and manage expectations.

It is important to remember all stakeholders: HR and others who will brief assignees, payroll, and providers who are involved in outsourcing the policy, as well as the assignees and their home/host managers (who need to buy into policy content and not vary it on implementation, so as to preserve equity and transparency). Where there are several policies in operation to address differing groups of assignees undertaking assignments for different purposes (for example, strategic, project, skills transfer, developmental) or on different bases (short term, commuter, and so on), it is important to make clear why different policies are being used.

Remember, the issue is to maintain equity within–but not necessarily between–groups of assignees on different types of international assignment.

Implementation also needs to be considered on a centralised, regionalised, or local basis–here, it is important to be clear as to who holds responsibility for what, and when (a corporate checklist or timeline is an important factor).

Finally, policy design and implementation practice must be kept under constant review, to ensure effectiveness.

Innovations in Expatriate Pay Methodologies, AIRINC Europe,
2012 Global Relocation Trends Survey Report, Brookfield Global Relocation Services
Global Mobility Survey 2012, Santa Fe Group Alternatives to International Assignments, 2012, Weichert Relocation Resources

Visit the International Assignments section of www.relocatemagazine.com for more news and articles.

© 2012. This article first appeared in the summer 2012 edition of Re:locate magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.