Voluntary, Virtual and Overseas

In this article Juliet Carp (Speechly Bircham LLP) explores some of the legal consequences of allowing employees to work at home in other countries for personal reasons.

A few years ago a Danish lawyer asked me at a conference what I thought about “virtual” employees.  She was referring to an employee who worked via her computer and had chosen to follow her husband to South America.  As far as the employer was concerned it was “business as usual”.  I replied that I thought the virtual employee was just like any other international assignee, that all the usual considerations applied and took another bite of my pastry.   But, of course, I was wrong.  The usual considerations do apply but there is so much more to think about.

Starting with the obvious, our virtual employee is an employee, she lives and works in the Host Country and provides services to her employer based in its Home Country.  The proposal is superficially attractive.  The employee wants to keep her job and the employer wants to keep her.   Why not just say “yes”?

The employer should consider the usual issues associated with international mobility: social security contributions, income tax, payroll deductions, bank accounts, tax returns,  registration requirements, immigration permission, corporation tax, employment laws and collective agreements, whether she should be employed by the Home Country employer or a Host Country entity instead etc, etc.  In some ways the arrangement will be relatively straightforward: the virtual employee wants this so there is no need to tempt or reassure her with a complex expatriate remuneration and benefits package.  She is also far less likely to negotiate hard over contract terms.  The employer may be in a good position to offer its preferred package and say “take it or leave it”.

But the proposition will not be cost-neutral for the employer, even where the employee does not ask for more money and where there is no Host Country law or collective agreement requiring additional remuneration.  Dealing with the issues raised above properly will entail expense, and, if the assignee wants to work in a country where other employees do not already work for the employer, this expense may be higher than for a more “typical” employer-initiated assignment to a familiar Host Country.  A tendency to ignore these issues because the employee is “relaxed” and this is a “one off” arrangement is understandable but will not help the employer if things go wrong.  If the rules are not properly checked and dealt with, the employer’s relationship with Host Country immigration, tax or social security authorities may be permanently tarnished and, in most cases, penalties for failure to comply apply to the employer as well as the employee.

As with any international assignment, the employer should never ignore the possibility that the arrangement could trigger a requirement to pay substantial employer’s social security, or other employee-related, contributions and to comply with onerous payroll / tax deduction obligations in the Host Country.

In addition to the usual international assignment issues, the employer should think about issues normally associated with homeworking in a domestic context.  For example:

• Will the employee be able to carry out core duties, eg will there be difficulties with meeting clients, supervising colleagues or attending training?
• How will the quality of the employee’s work be monitored and how will the employee be managed (Will it be possible to have those difficult conversations without meeting face-to-face?  Can her communications be monitored under both Home and Host Country rules)?
• How will working time be measured and controlled and her working environment be checked and monitored from a health and safety perspective?
• How will business security issues be dealt with, eg disposal of confidential paper waste or cleaning the employee’s hard drive on termination of employment?  The choice of Host location could have an impact on business risk management too.  For example, business continuity plans and security can become more important at locations where there is a higher risk of crime or national disaster.  There may also be higher risks of governmental interference or unwanted disclosure risks in the Host Country.
• Can the employee’s home be accessed, practically and lawfully, to deal with these issues?
• Will the employer or employee provide equipment such as desk, chair, computer, paper supplies and pay telephone or other utility bills?
• Will Host Country planning restrictions allow the employee to carry out her work at home?
• Will any domestic arrangements impinge on the working environment?
• Will employers’ liability, professional indemnity, medical, life and other insurance arrangements still cover the employee if she is working away from the office and outside the Home Country?
• Will a trial period or fixed term contract be practical or appropriate?
• A request to work at home abroad is a “flexible working request” and all the discrimination issues that can arise when such a request is refused domestically can apply to a request for international flexibility too.  This will rarely mean that the proposal must be accepted but process, decisions, communications and documentation should be considered carefully in the light of both Home and Host Country laws.  (In the UK the employer may also need to comply with the various pieces of flexible working legislation relating to the “right to request flexible working arrangements” if the employee is a parent or carer.)

It would be difficult (if not impossible) for a UK employer to comply with all its duties as employer without dealing with these issues, and most likely this will be the case wherever employee or employer are based.  For example, every EU country has laws on working time.   In addition, many “ordinary” expatriate and home working issues become more acute where the employee is both working at home and abroad.  For example:

• the question of travelling expenses becomes more significant (Will employee or employer bear them?  Can the tax burden be reduced?)
• more than one jurisdiction’s employment and other rules may need to be complied with at the same time and the requirements may conflict (this may be particularly apparent where there is a commuter or peripatetic working arrangement and the employee actually works in more than one country)
• it may be easy to forget to check regulatory issues that are specific to the business (for example if a banker or lawyer lives in France, working in London for two days and at home in Paris for three days each week, will French or English rules apply to him, or both)
• special considerations that apply to “start up” arrangements are more likely to have a practical impact (eg If the employee is the first employee to work in a particular country would the proposed activities create a “permanent establishment” for corporation tax purposes?  If so, it may be possible to change the employee’s duties or responsibilities, or create a self-employed consultancy or other arrangement, to reduce that risk.)
• extra care may need to be given to post termination restrictions that the business may later want to enforce in more than one country (and there may be a conflict between legal requirements in the Home and Host Countries)
• data will be travelling across borders – not just the employee’s and the family’s data but also third party, eg customer, data – and the employer may need to consider whether existing data protection agreements, consents and registrations are sufficient to enable this to be done lawfully
• if intellectual property is to be created there may be some ambiguity over which country’s laws will apply to those rights (which could be resolved by documenting the arrangements appropriately).

With a bit of imagination employers and employees can usually find a mutually acceptable solution following a domestic flexible working request.   But before saying “yes” to an apparently sensible international homeworking arrangement, the employer may wish to ask itself whether it is “worth it?”.   Before answering that question the employer may want to take account of the following:

• the value of the employee to the business and how long the arrangements are likely to last
• whether the arrangements could be made to work, ie how the arrangements would be managed practically and how any challenges could be dealt with (this is where frank discussion with the employee and line managers can really help)
• the real costs of saying “yes”, taking account of set up costs, ongoing administration and potential termination costs
• how the decision-making process and decisions should be communicated and documented.  (As with any a-typical or expatriate employment arrangement the employment documents can help the employer reduce the risk of dispute, manage claims if they arise and demonstrate that it has complied with the plethora of applicable rules).

Of course, the employer could just take a punt and see what happens …and the ostrich approach may already have been inadvertently adopted by many organisations.   The reality is that employees do not always tell their employers when they move abroad or start working away from home.  Their normal working arrangements may be such that the change is not immediately apparent, particularly to those within the employer’s organisation who understand why the change of location might be significant for the business.  Some organisations actively monitor telephone numbers or the currency of expense claims or require employees to provide the HR team with regular updates.  For others ignorance may be (perhaps temporary) bliss.

The consequences of failing to tackle these issues could be severe for the employee as well as the employer.  For example, the move abroad could affect personal tax, inheritance rights or the availability of health treatment.

It is in both employer’s and employee’s interests to keep track of where employees are working and to address the practical challenges that arise from “virtual” relocation abroad.

Author

Juliet Carp
Solicitor and English and international employment law specialist at Speechly Bircham LLP
+44 (0)20 7427 6412
juliet.carp@speechlys.com

2010 Quality of Living worldwide city rankings: Mercer survey

• European cities continue to dominate the top of the ranking
• Vienna remains at the top, Baghdad at the bottom
• Calgary is first in the new eco-city ranking, London ranks 63

Vienna retains the top spot as the city with the world’s best quality of living, according to the Mercer 2010 Quality of Living Survey. Zurich and Geneva follow in second and third position, respectively, while Vancouver and Auckland remain joint fourth in the rankings.

Mercer conducts the ranking to help governments and multi-national companies compensate employees fairly when placing them on international assignments. The rankings are based on a point-scoring index, which sees Vienna score 108.6 and Baghdad 14.7. Cities are ranked against New York as the base city, with an index score of 100.

Mercer’s Quality of Living index list was revised and now covers 221 cities compared to 215 last year, which means direct trend comparison will not be possible until 2011. The new selection includes prominent capital and other major cities from across the world currently available in Mercer’s database and better reflects where companies are sending their expatriate employees in the current business environment.

Slagin Parakatil, Senior Researcher at Mercer, commented: “As the world economy becomes more globalised, cities beyond the traditional financial centres are emerging as attractive places in which to expand or establish a business. Cities in many emerging markets, such as in the Middle East or Asia, have seen a significant influx of foreign companies and their expatriate employees in recent years.”

“To ensure their expatriates are compensated appropriately and an adequate hardship allowance is included in their benefits package, companies seek a clear picture of the quality of living in these cities. We have reviewed our index to reflect these developments and it now better represents the cities that most interest our clients,” Mr Parakatil said.

European cities continue to dominate amongst the top 25 cities in the index. In the UK, London ranks at 39, while Birmingham is at 55 and Glasgow at 57. Two new cities have been added for the UK, Aberdeen at 53 and Belfast at 63. In the US, the highest ranking entry is Honolulu at position 31, followed by San Francisco at position 32. Singapore (28) is the top-scoring Asian city followed by Tokyo at 40. Baghdad, ranking 221, remains at the bottom of the list.

“Quality of living standards remained relatively stable on a global level throughout 2009 and the first half of 2010, but in certain regions and countries the economic recession had a noticeable impact on the business climate,” according to Mr Parakatil.

“Despite the economic downturn and companies’ efforts to contain costs, quality of living and hardship premiums remain important means of compensating expatriates for differences in living conditions. However, companies are more inclined to review the measurement of such allowances to ensure they are cost-effective."

This year’s ranking also identifies the cities with the best eco-ranking based on water availability and drinkability, waste removal, quality of sewage systems, air pollution and traffic congestion. Calgary is at the top of this index (score 145.7), followed by Honolulu in second place (score 145.1) and Ottawa and Helsinki in joint third (score 139.9).  Wellington in New Zealand (5), Minneapolis (6), Adelaide (7) and Copenhagen fill the next four slots, while Kobe, Oslo and Stockholm share ninth place. Port-au-Prince in Haiti ranks at the bottom of this table with a score of only 27.8 (see attached table).

Mr Parakatil commented: “A high-ranking eco-city optimises its use of renewable energy sources and generates the lowest possible quantity of pollution (air, water, noise, etc). A city’s eco-status or attitude toward sustainability can have significant impact on the quality of living of its inhabitants. As a consequence these are also pertinent issues for companies that send employees and their families on long-term assignments abroad, especially considering the vast majority of expatriates are relocated to urban areas.”

“A certain standard of sustainability is essential for city living and forms a very important part of its inhabitants’ quality of living. Though a high standard of living may be taken for granted in certain cities, a lack thereof is much more noticeable and can even lead to severe hardship,” said Mr Parakatil.

Americas

Canadian cities still dominate the top of the index for this region with Vancouver (4) retaining the top spot, followed by Ottawa (14), Toronto (16) and Montreal (21). Calgary ranks 28 on the overall quality of living ranking.

Honolulu (31) is the city in the US with the highest quality of living, followed by San Francisco (32) and Boston (37). Chicago and Washington share position 45 and New York - the base city - is in position 49. Newly added cities Philadelphia and Dallas are ranked 55 and 61, respectively.

In Central and South America, Point-à-Pitre, capital of Guadeloupe and new to the index this year, ranks the highest for quality of living at 62. San Juan in Puerto Rico follows at 72 and Buenos Aires at 78. Havana (192) and Port-au-Prince (213) are the lowest-ranking cities in the region.

Mr Parakatil commented: “Quality of living remained stable in North American cities. However, in South and Central America a general decline is witnessed mostly due to political instability, economic woes and energy shortages in certain countries. High levels of crime also remain a major problem in many of the region’s cities.”

Canadian and US cities are strongly represented at the top of the eco-city ranking, both for this region and globally. Calgary grabs the top spot globally with a score of 145.7, closely followed by Honolulu (score 145.1) in second. Ottawa is in third position with a score of 139.9 and Minneapolis follows in sixth place (score 137.8). Mr Parakatil commented: “Calgary’s top ranking is down to its excellent level of service on waste removal, sewage systems, and water drinkability and availability, coupled with relatively low air pollution.”

The highest-ranking Central and South American city is again Pointe-à-Pitre (49), followed by San Juan (69) and Montevideo (70).

Europe

Europe has 16 cities amongst the world’s top 25 cities for quality of living. Vienna retains the highest ranking both for the region and globally and is again followed by Zurich (2), Geneva (3) and Düsseldorf (6). The lowest-ranking Western European cities are Leipzig (64) and Athens (75). In the UK, London is the highest-ranking city at 39, followed by newcomer to the list Aberdeen (53), Birmingham (55), Glasgow (57) and Belfast (63).

Levels of quality of living continue to improve in Eastern Europe, with most index scores increasing slightly. Prague is the highest-ranking city at 70 and its index score increased from 93.9 to 94.8 in 2010. Budapest follows in position 73 and Ljubljana in 77.

In the eco-city index, Nordic cities fare particularly well with Helsinki (3) the highest-ranked in the region, followed by Copenhagen (8) and Oslo in joint ninth place with Stockholm. “Nordic cities do particularly well because the modern parts of most of them have been designed with potential environmental impacts in mind,” said Mr Parakatil. Aberdeen (19) is the highest-ranking UK eco-city, followed by Belfast (30), Glasgow (47), London (63) and Birmingham (64).

Middle East and Africa

Dubai (75) in the United Arab Emirates and Port Louis in Mauritius (82) are the region’s cities with the best quality of living. Abu Dhabi (83), Cape Town (86) and Tunis (94) follow and are, along with Victoria in the Seychelles (95), Johannesburg (96) and Muscat in Oman (100), the region’s only other cities in the top 100. Following the revision of the index a selection of cities from this region has been added, including Doha in Qatar (110), Rabat in Morocco (112), Banjul in Gambia (164) and Abuja in Nigeria (205).

Baghdad (221) remains at the bottom of the table, though its index score has increased slightly (from 14.4 to 14.7 in 2010). A lack of security and stability continue to have a negative impact on Baghdad’s quality of living and its score remains far behind that of Bangui (27.4) in the Central African Republic which is second to last.

In the eco-city index, most of the region’s cities rank below 100. The highest-ranking cities are Cape Town (30), Victoria (38), Muscat (48), Johannesburg (54) and Abu Dhabi and Dubai (in joint 65). Antananarivo in Madagascar (217) is at the bottom of the list with an eco-city score of 39.7, while Baghdad is at 214, scoring 40.5.

Mr Parakatil commented: “The lack of adequate modern infrastructure in some of the African cities combined with relatively high air pollution explains why many of them are ranked below 100.”

Asia Pacific

Auckland (4) retains its position as the highest-ranking city for quality of living in the region. Sydney follows at 10, Wellington at 12, Melbourne at 18 and Perth at 21. At 26, Canberra is new to the index. Singapore remains the highest-ranking Asian city at 28, followed by Japanese cities Tokyo (40), Kobe and Yokohama (both at 41), Osaka (51) and Nagoya (57). The region’s lowest-ranking cities are Dhaka in Bangladesh (206) and two cities new to the list – Bishkek in Kyrgyzstan (209) and Dushanbe in Tajikistan (210).

Mr Parakatil commented: “Quality of living declined in a few countries in Asia between the start of 2009 and 2010. Increasing threats of violence and terrorism, coupled with natural disasters such as earthquakes, typhoons and cyclones have had a negative impact on the quality of living in Asian cities. This may result in higher hardship allowances for expatriates sent to these countries.”

With a score of 138.9, Wellington (5) is the highest-ranking eco-city in the region followed by Adelaide (7), Kobe (9), Perth (12) and Auckland (13). Dhaka in Bangladesh (220) ranks lowest with a score of 30.9.

Download the complete table in Adobe PDF format here.

Source: www.mercer.com

Effective Relocation Management

Cost-containment

Emily Tuite, Head of Communications at ECA International, looks at the opportunities for containingthe cost of assignments and highlights the dangers ofbeing too economical.

Making expatriate management cost-effective is always on the corporate agenda – but nevermore so when times are hard. Because the essence of many businesses is the expertise of its employees, international assignments continue to be necessary for the ongoing maintenance of business whatever theeconomic climate, and employee costs form a significant proportion of financial outgoings.

Many of ECA’s clients have reported that they are not planning to sever or reduce the number of existing assignments as a result of the current economic conditions, nor are they planning to scale back in the immediate future. In our recent Expatriate Salary Management Survey of multinational companies worldwide, only 18% of companies are forecasting decreases in assignment numbers over the next three years.

While most companies report that they are continuingto follow their plans for international assignments, two thirds are reporting that they are coming underpressure to reduce assignment terms and conditions.

As a result, it is of little surprise to find that over 50% of companies cite cost-containment as their biggestchallenge inmanaging assignment programmes. Aquarter of companies surveyed havemade changes to their assignment pay policy in the last three years and 30% plan to do so within the next three years. Although only 26% and 38% of those groups respectively cited cost reduction as the primary driver for these changes, other reasons cited such as the need to provide greater transparency and increased flexibility are reported byemployers to facilitate the creation of a cost-effective approach.
Measures cited by respondents as ways of reducing thecost of their international assignment programme include:

• The removal or reduction of allowances, for example:
• Changing froma standard home country based cost of living index to a cost-effective index;
• Reducing or eliminating mobility incentive allowances
• Reviewing the cost and delivery of benefits designed specifically for assignments
• Applying tax procedures more rigorously
• Introducing a localisation policy to reduce allowances after a pre-determined assignment length.

Figure 1 shows how adjusting different elements of thehome-based salary calculation methodology (whereelements of the equivalent home salary is taken and anumber of factors and allowances are applied to it tocreate the assignment salary) can result in considerablesavings to a company.

Nearly 45% of companies using the home based buildupapproach now calculate cost of living allowancesusing 'leaner' indices,which reflect an expectation thatthe assignee shops as cost-efficiently on assignment asat home. The diagramshows how this affects theassignment pay.
Another area where assignment packages can beslimmed down is on the payment of a mobility allowance.

A casualty of both the squeeze onassignment costs and the increased perception ofinternational assignments being requisite to further acareer inmany companies, the mobility incentive allowance – traditionally paid as an incentive for an employee to take an assignment – is waning inpopularity. Only 44% using a home-based build-upsalary quote amobility allowance as part of it,compared with 75% who were quoting it four years ago.

In particular, this allowance is sometimes excluded completely where no real incentive tomove is needed –eg between Western European locations (cited by 15%of respondents to the survey).

Location or “hardship” allowances continue to be paidby 73% of companies using the home-based paysystem. 77% of those use a system to ensure consistentand fair application of allowances which can alsoimprove efficiencies and reduce negotiations with expatriates which may result in higher costs. Housing is a key area where savings can bemade, as it makes up a considerable proportion of the assignmentpay package.

Although 70% of companies provide freelocal housing, themajority of employers exercisecontrol by specifying a ceiling to the local rent they willcover. They also encourage employee choice based onavailability of accommodation of acceptable quality bylocal standards, instead of trying to replicate too closelyhome country customs which can prove expensive. Some companiesmake deductions from the elementsof home pay designed tomaintain the assignee’s homeproperty (see figure one), as they will be fundinghousing in the host location and choose not to pay theassignee twice.

Reviewing elements of pay is just one of a variety ofmeasures companies undertake to control costs. Alternative types of assignment such as shorter term,commuting or unaccompanied assignments are part ofthe arsenal available to companies looking to reducecosts. Larger companies often havemultiple policies with varying degrees of generosity: a graduate activelyseeking international experience will not need compensating as generously as a senior manager with family who is desperately needed in another country tomanage a new project, for example.

There are other pay methodologies which can create economies – such as paying the host equivalent salary– although this depends some what on the location of the assignment. Similarly, localisation,whereby the payand benefits designed for an international assignmentare converted over time into a local national equivalent (usually if the assignment length has exceeded a specified maximum length) will usually result insavings.

Corporate savings can also bemade through taxplanning,whereby companies identify when it is more cost-effective to provide specified benefits instead ofcash and vice versa. Additionally, a tax equalisation policy, applied by three quarters of companies surveyed,protects employees fromlosing out when taxes arehigher on assignment, but also allows employers tomake savings when taxes are lower in the host county.

Effective Strategies for Expatriate Cost Management

We all know that expats are expensive and that a significant proportion of assignments fail - but what can be done to manage costs and to maximise the overall return on investment? And in these straitened economic times, we all know that expatriate costs are increasingly under the microscope. Hopefully, this report will provide some useful insights and guidance for anyone struggling with the thorny issue of expatriate cost management.

As my contribution to the debate, I set out 21 simple ideas for effective Expatriate Cost Management. All of these ideas have been adopted by companies and are proven to work in practice but, as far as I am aware, no one company has adopted every single one of them. So, take a look down the list – some of the ideas will be familiar and you may well be using them already. Others however will appear radical – but do give them due consideration as they are all workable suggestions.

1. Prioritise. Too many companies try to cut expatriate costs by reducing headcount in the International HR department or by forcing vendors into unsustainable price reductions. The reality however is that it is not internal headcount or vendor fees that make assignees expensive. In fact research undertaken by the Forum for Expatriate Management suggests that in-house costs typically amount to just 1-2%of total assignment costs and external costs amount to no more than 8-10%. The big costs are Assignment Allowances (35%), Property Costs (35%) and Relocation Costs (15%). So if you are looking to control expatriate costs, concentrate on the big ticket items - don’t rush to slash headcount.

2. The easiest way to control overall Expatriate Costs is to have less of them in the first place. So undertake a rigorous review of who is an expat. Introduce new or revised policies for the selection of assignees and internal governance procedures. For example, insist that cost estimates are always undertaken and that the line is fully aware of the cost of every candidate for the assignment.

3. While on the subject of candidates, never ever let the potential assignee know that he is the only candidate. If you do, you will have surrendered all the negotiating chips and assignment costs will skyrocket.

4. Not all assignees need to be on a traditional expat package. Consider using Local Plus or Expat Lite packages. Look at commuter assignments, local hires and, most importantly, review your localisation policy. All too often corporates are loathe to change their assignment policies because of the adverse impact on existing assignees. The simple solution is to grandfather existing assignees .

5. If you want to be truly radical, move to a “Flexpat” policy. The concept is broadly similar to Flexible Benefits - assignees are given an overall value for their Flex Allowance, which would cover all the normal allowances such as rent, home travel, disturbance, removals etc and it is then up to the assignee to determine how the allowance is spent and how much to take in cash. True, Flexpat is often far less tax efficient than, say, rental allowances, but with a modest overall cap on the Flexpat allowance costs can be controlled far more rigorously.

6. Deductibles. It never ceases to amaze me how some companies almost always use deductibles and others shy away from them completely. In my view, deductibles are one of the simplest and most transparent means on controlling assignment costs. The aim of the deductible is to reduce allowances to compensate for the fact that the assignees is saving money – eg a housing deductible where an employee is expected to rent out his home location property, a schooling deductible where children are in private education etc. If you don’t use deductibles for property or education then this is an easy way to mitigate costs.

7. Manage your Relocation Agent. You can do this through both incentive deals and penalty clauses but the message you need to get across is that the aim is not to find the assignee the home of his dreams but to find him an appropriate home that is within the allocated budget. All too often, relocation agents show properties to assignees that are outside their rental allowances. That in turn raises assignee expectations and encourages them to renegotiate their allowance. I know this may upset some in the industry, but if I was a client I would put a penalty clause in the contract if the relocation agent shows any property that is outside budget without prior approval from HR.

8. Conversely, you can gain share with the relocation agent by offering a bonus to the extent a property is selected that is below budgetary limits.

9. This may be considered too radical by some but try gain sharing with the assignee. Most companies I deal with will openly admit that almost all assignees spend every penny of their rental allowance. However, one leading FMCG company recently told an FEM company that 80% of their assignees select accommodation that is substantially within budget. What is this household name company doing right that so many others are doing wrong? The answer is Gainsharing with the assignee. Under their housing policy, the assignee gets to keep 50%of any unspent rental allowance. Not surprisingly, this changes the whole dynamic of the rental decision and encourages assignees to select more modest accommodation and pocket some of the savings. This is truly a simple win-win and the Gainshare concept can be equally adapted to deal with any other allowance, such as education or home travel.

10. Look carefully at your mix of hotels, serviced accommodation and long term rentals. The traditional approach of using hotels for short term and initial visits followed by individually selected long term rentals for each assignee can be extremely cost inefficient – especially if you always have a certain minimum number of assignees in any one locations. By contrast, some of the major management consultancies (who move substantial numbers of employees) tend to “bulk-rent” a selection of properties in their major locations. These properties can then be fitted out and used by the assignees when they first arrive. Such solutions can be significantly cheaper than hotels or even serviced accommodation and provided you set the number of properties well below the likely level of demand you are unlikely to ever have major void period. The balance of your property needs can be met by hotelling or using serviced accommodation in the normal way.

11. Another key area where cost savings can be achieved is Removals/Shipping. The secret here is to plan in advance. Don’t ship goods at the last minute (prices will be high) and certainly try to avoid the school holidays.

12. You may even find it is cheaper to rent furniture in the host location for a short period of time.

13. Incentivise your removals/shipping company to investigate “shared loads” (i.e. sharing a container) or “Back Loads” (i.e. return trips). Substantial savings can be made but you are most likely to find them if you incentivise your vendor.

14. You should also incentivise the assignee to leave more stuff in storage back home by enforcing rigorous volume limits.

15. One cost that can be substantial but is often hidden is the cost of currency exchange and rate volatility. Most offshore bank accounts are designed for the retail market and often better deals can be achieved by liaising with specialist foreign exchange dealers. This is an area where it pays to shop around and to explore innovative strategies to hedge foreign exchange liabilities.

16. In-house – v – Outsourcing. This is an area where the jury is still out. Some companies are strong supporters of outsourcing while others have tried it and regretted every moment. One thing is for certain, you cannot outsource responsibility so if you are going to outsource you should do so with your eyes wide open. That having been said, it is certainly worth talking to leading outsource providers as there will almost certainly be a point on the spectrum from fully outsourced to fully insourced that best works for your organization.

17. Outsource enforcement. Although you cannot outsource responsibility you can outsource enforcement (even if only to an internal shared services centre). If your policy is rigid then “Computer says No” can be an effective first barrier to assignees who may be trying their luck with your already generous allowance package.

18. Don’t separate costs into multiple budgets. The more allowances you have the more budgets and cost centres you use, the higher your overall costs will be. My advice is to limit the number of allowances to as few as possible and to keep all costs within a single cost centre. Lose control of the accounting and you lose control of your costs. The only winner will be the assignee – who is frequently extremely adept in maximising his allowances!

Hopefully these 18 suggestions have provided some food for thought as you manage your expatriate costs. The last three suggestions are more generic in nature butpossibly even more mission critical.

19. Have a policy and stick to it. In many cases the excessive costs of expatriate programmes come as much from the exceptions as from the policies. Make sure your policy is rigorous and well documented. Make sure the line understands the policy and that it is enforced from the top down. If you have board members who are assignees, make sure that they understand the importance of leading by example. With them on your side, controlling cost is a piece of cake !

20. Focus on the family not just the assignee. We all know that a significant percentage of all expatriate assignments fail. The reasons for assignment failure are multiple but in many cases it is because lack of attention has been paid to the assignee’s family. The employee often has a well grounded support function at work. The trailing spouse is all to often left to fend on their own. A good spousal support program can have minimal cost (for example, many companies use other expat spouses as volunteers) but the costs of failure can be significant for the host location.

21. Lastly and most importantly, talk to your service providers. Best practice is to treat service providers as partner not vendors. At the end of the day, there is a common client (namely the assignee) and the common goal is to manage the assignment programme as efficiently and effectively as possible. Try to build gainshare arrangements with your service providers.

Establish realistic Service Level Agreements and above all communicate, communicate, communicate. Neither corporates not service providers are telepathic – on-going frequent communications (both formal and informal) are the best (and possibly only)way to achieve a long-term relationship that works for employer, assignee and service provider.

By Brian Friedman, Founder,

The Forum for Expatriate Management

www.totallyexpat.com

Taken from The Forum for Expatriate Management’s report ‘Effective Strategies for Managing Expatriate Costs.’

Read the latest report ‘Managing Expatriate Reward’ here.

To contribute or advertise in future FEM reports contact Steve Ashton on +33 (0) 963 532 063 or by email steve@totallyexpat.com .

Routes to the Top - How CEOs embrace Global Mobility

32 % of FTSE 100 companies have a foreign national as CEO and 67% of FTSE 100 CEOs have been on assignment during their working careers. Among the Fortune 100, 10% of CEOs are foreign nationals and 33% have been on assignment according to a new survey authored by Dr Elisabeth Marx of Heidrick & Struggles.

The Chief Executives of the FTSE 100and Fortune 100 populate the pagesof the financial, and increasingly,the mainstream press. They makedecisions that routinely affect millionsof people, influencing economic,social and environmental outcomes.Yet who are these individuals? Whatare their common characteristics andwhat do they reveal not only aboutthe business world of today, but whowill succeed tomorrow?

Download the full report here.

Source: Heidrick & Struggles

• 

  Talent mobility 2020: PwC report investigates the future of international work

  Number of people on international assignments increased by 25% in the last decade; further 50% growth predicted by 2020

• Global organisations placed employees in an average of 13 locations in 1998, this increased to 22 by 2009 and could reach 33 in 2020
• New ‘capital’ cities will emerge as business hubs according to size of local working age populations and new revenue streams
• Collaboration will be the watchword as companies and governments share costs and knowledge to remove barriers to mobility and manage regulation
• Economic and demographic imperatives could force leniency on immigration rules for specific workers, while technology will reduce tax compliance burden

The globally-connected nature of trade, technology, capital, and regulation will necessitate a significant swell in the movement of employees between countries, leading to increased use of short-term and ‘commuter’ international assignments, according to new research by PricewaterhouseCoopers LLP (PwC).

These factors – coupled with the rise of emerging markets, increased focus on new revenue streams and changing demographic imperatives – are projected to increase the number of people working outside their home country by 50% over the next decade.  Additionally, the number of countries that employers host employees in is expected to continue to increase presenting new compliance, remuneration and communication challenges.  PwC data documents the impact of globalisation showing an increase from an average of 13 locations in 1998 to 22 in 2009 and an expectation that this will rise to 33 by 2020.

The report – Talent mobility 2020: The next generation of international assignments – is based on trend data regarding international assignments for 900 companies, population data and the opinions of both CEOs and workers around the globe.

CEOs identify having the right talent in the right place as a critical factor for business growth with over half (55%) of recently surveyed CEOs planning to reconsider their approach to global mobility as a result of the downturn.  It is clear that businesses recognise both the economic benefit of international assignments and the need to evolve the way they are managed and used.

Carol Stubbings, international mobility partner PricewaterhouseCoopers LLP, said:

“While we’re not consigning existing international work models to the history books, governments and companies will have to work together to manage some of the barriers to international mobility that will otherwise impede global competition and operations.

“As companies venture into underdeveloped locations, organisations and governments would benefit from sustainable co-investment in the infrastructure needed for individuals to live and do work comfortably – this might extend to schooling and training, medical facilities or entertainment.

“Ideally, the movement of employees and executives between countries will be fluid and characterised by collaboration, not by onerous and costly administration.”

Fortunately for organisations, the new generation of workers ‘the millennials’ see overseas working as an important part of their personal development.   PwC research (into the expectations of 4,200 graduates) show 80% want to work abroad, with 70% expecting to use a non-native language at work and 94% expecting to work across geographic borders more than their parents.

Carol Stubbings, international mobility partner PricewaterhouseCoopers LLP, said:

“Younger employees’ appetite for working overseas could eventually remove the need for financial enticement, but current immigration and tax systems, combined with the need for certain skills or experience levels, can make deploying staff around the world complex and costly.  Articulating shared values will be increasingly important as loyalty is even harder to foster across borders.

“On the positive side, technology is evolving to ease compliance and tracking burdens.  The eventual harmonisation of living standards and remuneration across some skill sets and industries will also make things easier.”

New business hubs and the impact of demographics

The growing importance of emerging markets will change mobility patterns as skilled employees from these territories operate domestically and beyond.  PwC research projects that the E7 countries will overtake the G7 in terms of GDP by 2020 and that the combined E7 GDP will be around 30% higher than the G7 total by 2030.  These countries (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) present not only a very real source of demand and competition, but also an increasing pool of talent.

Additionally, the populations of traditional business capitals have changed and many are now dwarfed by growing locations elsewhere.  Of the 30 most populated cities in 1950, 11 have slipped off the list to be replaced by new destinations.  New entrants include Lahore, Shenzhen and Chennai.  By 2025, London and Lima will be pushed out by emerging ones.

Carol Stubbings, international mobility partner PricewaterhouseCoopers LLP, said:

“Population trends will undoubtedly mean some organisations will enter new locations and exit some of their traditional ones bringing a host of new immigration, tax and communication requirements.”

Additional trends

Other key points from the report include:

• Companies now face the additional challenge of managing three or four different generations’ needs, expectations and skills;
• Advances in technology will change the way global and virtual teams are managed;
• Technology will be used to track workers’ global movements so the appropriate tax and compliance rules can be adhered to, but this sophisticated tracking also raises data privacy issues; and
• The oil and gas, mining and construction industries already rely heavily on mobile employees – other sectors can learn from the models they operate.

Carol Stubbings, international mobility partner PricewaterhouseCoopers LLP, said:

“While Singapore is a well-known hub for international workers, the mining industry in Africa also operates an interesting model whereby employees’ schooling, housing, healthcare and most other needs are met by the employer and workers are, to a great extent, insulated from the outside world.   More mobile communities also exist for oil, gas and construction employees in Southeast Asia and Siberia.  The next step for companies operating or investigating these types of international work models will be to conduct thorough analysis of cost, risk, productivity and employee engagement measures.”

PwC’s Talent mobility 2020: The next generation of international assignments report is available to download here: www.pwc.com/managingpeople2020

Source: PricewaterhouseCoopers

Global Relocation Trends Survey 2010

The Global Recession Forced a Record Number of Companies to Cut Back on Overseas Assignments of Employees in 2009; Outlook for 2010 Shows Significant Optimism for a Rebound, New Survey from Brookfield Global Relocation Services Finds

• 46 percent of multinational companies reported a decrease in the number of international assignments over last year - the highest rate in the 15-year history of the survey. However, 44 percent of multinational firms expected the number of international assignments to increase in 2010
• Just 17 percent of international assignees were women, the lowest percentage in nearly a decade
• Only 47 percent of international assignees had families with children – an all-time low
• China & India continue to be the most challenging locations for international assignments

Woodridge, Ill. (April 7, 2010) – The deep global recession drove broad reductions in the number of corporate international assignments during 2009.  This decrease (46 percent) was nearly double what was forecasted by the respondents in last year’s survey. The good news is that despite last year’s deep cuts, almost half of the companies (44 percent) in this year’s survey expect their expatriate populations to expand.  Meanwhile, 44 percent of respondents expect their overseas assignments to remain the same, while 12 percent forecast a decrease.

This renewed optimism indicates confidence from the private sector that the economy is expanding again, according to the just-released 2010 Global Relocation Trends Survey Report, published by Brookfield Global Relocation Services (http://www.brookfieldgrs.com).

In efforts to ensure successful overseas assignments, companies that are transferring employees for both short- and long-term assignments are turning to older, more experienced employees.  Expatriates ages 40 to 49 increased from 37 percent to 40 percent, while those 50 to 59 years old increased from 14 percent to 16 percent.  Not coincidentally, these age groups typically have fewer children at home or in school – and this year’s survey revealed that families with children on assignment are lower (47 percent) than ever before.

Further reinforcing the challenging economic times, the survey recorded two all-time lows: A mere 8 percent of expatriates were new hires (which reflects the general slowdown in hiring), the lowest in the survey’s 15-year history, and the population of female expatriates also fell to its lowest point since 2001 (17 percent).

In all, 120 multinational firms participated in the worldwide survey; combined, these firms manage a total worldwide employee population of 5.8 million.  Brookfield Global Relocation Services will present key findings of its 2010 survey on Tuesday, April 20, during a complimentary webinar designed to provide a comparative analysis of the key global mobility issues facing today’s business world.  To register, go to: http://www.brookfieldgrs.com/2010GRTS_Webinar.html

Since its inception 15 years ago, the annual Global Relocation Trends Survey has been regarded as the definitive study of companies’ employee-relocation practices, policies and projections.  As it does each year, the newly released survey paints a comprehensive picture of evolving trends and emerging issues facing companies of all sizes that rely on an internationally mobile workforce.  To receive the full Global Relocation Trends Survey report, go to: http://www.brookfieldgrs.com/2010GRTS.html

“Last year, caution seemed to be the overriding sentiment as the then-bleak economic outlook held in check many multinational companies’ overseas assignment activities,” said Rick Schwartz, president of Brookfield Global Relocation Services.  “While the economy clearly remains a factor in 2010, a growing sense of optimism appears to have taken root, as more companies report plans to increase their expatriate activity for the remainder of this year.”

Some of the survey’s other key findings include:

Work For Expatriate Partners: A Tough Row to Hoe – it is becoming increasingly difficult for previously employed partners to find jobs during assignments. Hitting an all-time low, only 9 percent were employed both before and during assignments, compared to a historical average of 14 percent. The difficulties in finding partner employment were related to economic conditions or to the locations where assignees were posted.  Language and cultural difficulties can inhibit employment and the challenges of immigration discourage potential employers from considering expatriate partners for employment.

Family Concerns – The most commonly cited reasons for candidates turning down assignments were family concerns, partner’s career, and employee career aspirations.  Family concerns also topped the list of reasons for early return from an assignment.

Scott T. Sullivan, executive vice president of Brookfield Global Relocation Services said, “a key way for companies to maximize their return on investment while minimizing assignment failure is by providing mandatory cross-cultural training to assignees and their family.  Although 80 percent of companies surveyed said they provide formal cross-cultural preparation only 17 percent (down from 22 percent last year) mandated it.”

As alternatives to face-to-face cross-cultural training, 35 percent of companies said they provide media-based or Web-based training – an all-time high.

China and India: Still the Greatest Challenge for International Assignments

• China, India, and Russia ranked first, second and third, respectively, as the countries that expatriates found the most challenging.

• This year, India took the top position as the most challenging destination for corporate international assignment policy and program managers – replacing China -- which had occupied the top position since the 2003-2004 report.

• As was the case in last year’s report, China and India topped the list of locations with the highest rates of assignment failure, and the United States ranked third (replacing the United Kingdom).

• The United States and China were the top two international assignment destinations, with the United Kingdom rounding out the top three destinations.

• The results for emerging assignment locations, however, were surprising. While China remained in the top position, Singapore moved from fourth to second place.  While India fell from second to fourth place; the United States rose to third place – climbing all the way from the 19^th spot in last year’s report. In another unexpected change, Russia fell from third position in the previous report to 21^st, most likely as a result of that country’s struggling economy.

“Led by strong economic activity from emerging and developing economies in Asia, international assignments in the region are increasing but challenges – mainly due to the difficulty in finding suitable housing, schooling, health care, and immigration red tape – remain,” said Schwartz.  “Helping our clients overcome these issues is why we established an office in China and why we are opening an office this year in India as well.”

Other Key Trends

When asked about the career impact of international assignments, respondents reported that expatriates received promotions more quickly (33 percent), which has been the first choice historically.  But 28 percent also indicated that expatriates changed employers more often.

There appears to be increasing agreement that successful repatriation is an integral part of the international assignment cycle.  While 95 percent of companies helped repatriating employees to assume new positions within the company, mandatory assistance was offered by transferring departments at only 32 percent of companies.  Otherwise, employees had to rely on informal networking (25 percent) or formal job postings (25 percent).

Increasingly, expatriates are leaving companies during the first year after repatriation – 38 percent this year compared to 35 percent in 2009 (the 15-year historical average is 22 percent).  This is due to the fact that employees were unable to find jobs at these companies upon their return due to the weak economy and some cases were laid-off.

During assignments, less than two-thirds (64 percent) of companies tracked costs – compared to 68 percent in the 2009 report and the historical average of 70 percent.  This decline reflects two trends: First, the number of destination countries and the complexities of managing and collecting data contribute to a decline in cost tracking.  And second, there were fewer resources for tracking costs as companies have reduced the size of the internal mobility function in order to cut costs.

About the Global Relocation Trends Survey

The 2010 Global Relocation Trends Survey Report is the 15th report issued by Brookfield Global Relocation Services.  Released annually, the reports are considered one of the most reliable and respected sources of global mobility data and trends information.  The longevity of this survey enables the company to compare each year’s results with historical averages, which help gauge the relative importance of annual variations.  This year’s survey contained 120 questions answered by 120 respondents representing small, medium, and large organizations with offices located throughout the world.  For additional information on how to receive the 2010 Global Relocation Trends Survey, go to http://www.brookfieldgrs.com/2010GRTS.html

About Brookfield Global Relocation Services
Brookfield Global Relocation Services (http://www.brookfieldgrs.com) is a leading, full-service outsourcing partner of end-to-end employee relocation, assignment management and mobility consulting services, for multinational organizations. The company serves corporations throughout the world and funds more than $3 billion in relocation-related expenses annually.

Linking employee benefits to corporate responsibility strategy

There is growing evidence that a company’s corporate responsibility (CR) activities help attract and retain quality employees. Evidence shows that talented professionals want to work for a company firstly, in which they can thrive and secondly, for a company that exhibits good corporate citizenship. It’s a strong element in what sets first rate companies apart from the rest and you would be hard pressed to find a top 500 company that does not have CR as part of its strategy.

Read the full report: Download the Adobe PDF

Source: Zurich International

HSBC Bank International Expat Explorer: Offshore OffspringHSBC Bank International Expat Explorer: Offshore Offspring

Commissioned by HSBC Bank International, Expat Explorer is the largest ever global survey of expats. Now in its second year, the survey has questioned more than 3,100 expats on the opportunities and challenges they face living away from home. The survey provides an insight into how expat life differs from country to country, continent to continent.

Commissioned by HSBC Bank International, Expat Exploreris the largest ever global survey of expats. Now in its secondyear, the survey has questioned more than 3,100 expats on theopportunities and challenges they face living away from home.The survey provides an insight into how expat life differs fromcountry to country, continent to continent.Offshore OffspringOffshore Offspring is the final report of the three-report series to be produced fromthe Expat Explorer survey 2009 research. The report focuses on expats’ experienceswhen bringing up children abroad. A league table has been compiled using asubstantial set of criteria to reveal which locations expats voted as the places withthe best opportunities and experiences for their children.Expats rated childcare, education, ease of integration, costs of raising children, timespent outside, and time spent taking part in outdoor activities.

Read the full article (Download the Adobe PDF)

Source: HSBC

European Global Mobility Challenges 2010 Survey Report by Interdean

At the beginning of 2010, Interdean commissioned a survey on the challenges facing organisations operating international relocation programmes out of Europe.

The first of its kind, the survey was completed by 137 companies with relocation programmes managed out of Europe.  The report provides insight into their priorities, identifying trends across the European region and a breakdown by member states and zones.  The report also provides a comparison of the priorities of large relocation programmes against those of smaller volume relocation programmes.

Top 5 Priorities for the European relocation programmes

It will come as no surprise to you to learn that cost control topped the list of priorities for the majority of companies involved.

In fact, across the companies questioned in the survey, 82% of all respondents defined controlling costs as a high priority for their organisations for 2010, and it’s interesting to note that it was controlling costs that was a priority rather than cutting costs. A key challenge identified by the HR and Mobility professionals that responded, related to managing costs against fluctuations in currencies, housing prices and rental costs.

Regional Variations Defy Cultural Stereotypes

Priorities between different regions within Europe varied more considerably than expected with the results making interesting reading.

Large Vs Small Relocation Programmes

Amongst the findings, businesses operating larger volume relocation programmes were more focused on issues relating to refining and improving the performance of their relocation programmes, whilst smaller relocators were more likely to prioritise cost control measures.

Read the full report:

http://www.interdean.com/PanEuropean_Mobility_Challenges_2010_Survey_Report/index.html

Source: www.interdean.com