Are flexible policies the smart solution?

With growing pressure on relocation professionals to find, and implement, ever-tougher cost-control measures in their deployment of international assignees, could the answer lie in greater relocation policy flexibility? Sue Shortland considers the pros and cons.

With growing pressure on relocation professionals to find, and implement, ever-tougher cost-control measures in their deployment of international assignees, could the answer lie in greater relocation policy flexibility? Sue Shortland considers the pros and cons.Each day, the state of the economy becomes more gloomy, and cutting expenditure becomes a higher priority for us all. Yet the cost of doing business remains; as the old adage goes, you have to spend money to make money.

However, those who spend less can potentially reap more, provided those organisations continue to engage and motivate their employees to continued (or greater) productivity.

The cost of international mobility has always been a burden, with expatriates sometimes viewed as a necessary evil; they are part and parcel of doing business abroad, as their skills and competencies are required to lead, manage, train and develop local people and to carry out day-to-day operational roles where skills shortages occur.

Expatriation is also a known excellent developmental tool, preparing assignees for future global leadership roles.

International mobility cannot simply be dispensed with; indeed, its use is reported within practitioner surveys as increasing, owing to the spread of global business operations and exponential rise in global trade.

Relocation professionals, nonetheless, are well aware of the high costs of expatriation – traditional long-term assignments are often cited as costing three times the equivalent home-country remuneration.

While policy element trimming has taken place for many years as organisations become ever-more cost conscious, there comes a time when acting lean appears mean; employees become disgruntled and demotivated, and the willingness to ‘go the extra mile’ becomes simply not worthwhile.

The balance is a fine one, and potentially difficult to achieve: just enough to attract, develop, motivate and retain staff, but not overly generous so that margins are damaged.

Assignees may argue that the policy components that support their expatriation have been cut to the bone; those who manage the policies may still see further cost savings through trimming.

Rather than take cost cutting and policy element trimming through to their natural end point (the lean, mean policy simply no longer serves its purpose), perhaps alternative approaches can provide the way forward.

This being the case, could flexibility replace trimming as the new mantra?

Flexible policies in practice

Since the 1980s (when international assignment policies were, in the main, unsophisticated or noticeable by their absence, and individual deals ruled), we have seen increasing use of assignment policies and the gradual introduction of forms of policy flexibility.

In the 1990s, organisations became increasingly aware of the need to have written policies, to ensure equity and transparency and to prevent cherry-picking of benefits. Policies tended to cover long-term, out-and-back-from-HQ- style mobility.

As international travel became more widespread (and cheap), so alternative assignment patterns were developed – most notably, commuter and frequent-flyer-style assignments. Short-term assignments also grew in popularity, and lengthy long-term assignments began to shorten.

To reflect these changes and new styles of international mobility, early forms of policy flexibility began to be developed in the mid to late 1990s. Organisations no longer used the one-size-fits-all long-term assignment policy,
but developed more tailored policies to reflect the new ‘flexpatriates’: short-term, commuter, extended business trips, and frequent flyers.

This was, perhaps, flexibility in policy design at its most rudimentary, as it did not distinguish between the various rationales for assignments, business need or employee/family requirements. More progressive approaches were proposed by consultancies and slowly adopted by organisations in the new century.

One example concerned the development of an umbrella policy with a suite of tailored provision beneath it to reflect assignment purpose (key skills, development, strategic). Another permutation concerned tiered provision linked to business assignment drivers and needs (for instance, volunteer, graduate trainee versus management, executive mobility).

Assignee drivers such as requested alternatives (commuting instead of family relocation) were also accommodated in suites of policies reflecting dual careers and children’s education and other family concerns precluding full- scale international relocation.

In this new decade, Brookfield’s Flexible Policy in Practice 2011 report suggests that the increasing use of global relocation service providers acted as an impetus for greater policy sophistication and the provision of core and flexible elements that recognised the needs of local business units and regional differences when assignees’ conditions were being administered globally.

Outsourcing expatriate administration and benefits requires consistency and a detailed policy to highlight which elements apply, where, and to whom, for efficient vendor management. It is possible, though, that the growing interest in flexible benefits in international mobility has simply flowed across from their recognition as incentives.

Advantages and disadvantages

Core-and-flex-style international relocation policies are suggested to have numerous advantages. Brookfield, for example, highlights that employee needs are met, budgets and costs can be controlled, there are no unused or wasted services, and individuals’ priority needs are addressed within an affordable budget.The core-and-flex approach can take a number of formats, as shown in Table 1:

Table1Flexible policies appear very attractive through their potential to provide highly tailored and cost-effective provision, but it is important to consider potential difficulties, and to ensure these are addressed before moving to such a flex approach.

To do this, it is important to return to basic policy-design principles, starting with why a policy is needed and its objectives, as highlighted in Table 2:Table2Flexible policy design should aim to provide a consistent approach to the treatment of assignees, ensuring equity within (not necessarily between) like groups of transferees. Careful definition of employee groups may be required, to ensure that they are ‘alike’ in terms of potential treatment.

Policy transparency is crucial to manage employee (and family) expectations and to aid communication by HR to those affected; it should be written down and available for inspection. The policy should cover all types of transfer and the entire expatriate cycle, and be seen and understood as equitable.

While equity, on the whole, does not motivate, perceived inequity certainly does demotivate. Flex policies can run the risk of being highly complex, with pick-and-choose elements becoming complex to administer and potentially generating perceived unfairness, owing to their tax treatment in different jurisdictions. Having a pot of money to allocate to cafeteria-style choices can result in favourable outcomes in some regimes, but not in others, undermining the cost- effectiveness, easy administration and tax-efficiency objectives (and creating inequity).

While taking into account family considerations, policy design can appear more generous to those with accompanying family. Relocated families require bigger houses, education and possibly dual-career support; singles do not. The money-pot principle should be carefully managed, so that singles carrying out similar roles on similar grades do not expect additional benefits/remuneration to level them up with the expenditure for couples and families.

A further consideration relates to core elements and options and who chooses them. Training (language, culture), if offered as an option chosen by the assignee, may be rejected in favour of perceived higher rewards (a bigger shipping allowance, say). Turning down training can reduce productivity and lower the chance of successful adjustment, and thus such a flex option could be detrimental to employee productivity and the assignment’s success.

Optional home leave is another debatable choice. Home leave aids repatriation, and swapping it for another benefit of similar cost may reduce reintegration and increase turnover on return.

These are just some examples. The message is not that flex benefits cannot work; rather, it is that care must be taken in determining the core and the non-core.

There is no doubt that the poor shape of the economy and continuing pressure to undertake cost-control measures while raising employee productivity require new approaches to policy design. Flexible international assignment policies can help to provide tailoring to meet both business and employee needs. However, a careful approach to their design and implementation is required.© 2011. Article taken from the summer 2011 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.To download back issues of the magazine, click here.