Reviewing mobility policy

If international HR practitioners were already thinking about reviewing the effectiveness of techniques and processes used in their international assignment policies, then the economic crisis has, for many, served as a catalyst.

 

In 2007, 25% of companies surveyed in ECA’s Expatriate Salary Management survey reported having made some changes to their pay system within the previous three years and a quarter were forecasting making changes within the next three years. According to ECA’s Exploring change in international assignment options survey, over 94% of companies are now currently revising, or intend to revise, at least one key aspect of their mobility policy. Understandably, analysis of the cost-benefit of individual assignments and projects is high on the agenda.

 

Along with cost-effectiveness, major drivers for change include consistency and being able to respond more flexibly to changing business circumstances, according to respondents. Reviews will range from a comprehensive reappraisal of all aspects of mobility policy, including strategic objectives, to ensuring consistent and cost-effective application of processes and pay models. So which areas are employers re-evaluating?

 

The business objectives behind an assignment are the backbone to any policy, so understanding them fully is essential. The recent big push towards cost saving means that companies (as our lead article from Panalpina indicates) are paying particular attention to reviews of why and when an expatriate is necessary and recommendations of where savings can be made.

 

Effective cost-benefit analysis is commonly recognised as key to helping to determine the business case for an international assignment. Currently a quarter of companies are undertaking detailed cost projections. Over the next two to three years this figure is likely to triple. In addition, 5% are introducing cost-benefit analysis for alternatively employing local nationals.

 

Assessing return on investment in more depth, including analysis of the commercial benefit of an assignment compared to its cost, is something to which companies may well also want to turn their attention.

 

Identifying and recruiting suitable staff for working and living abroad is a major challenge for companies. ECA’s latest Managing Mobility survey highlighted the fact that increasingly companies are adapting their normal recruitment procedures for international assignees due to the rapidly growing international demand for staff with required skills, especially in high growth areas in Asia. The main focus is on finding:

 

• The most talented/best qualified available.
• People who are able to adapt to working and living in locations with different living conditions, cultures etc from the ones they know.
• Potential leaders, especially if international experience is deemed essential for running an international company.

 

While potential assignees are typically sourced from within the company, there is a drive towards expanding the search for suitable candidates beyond a narrow pool of potential candidates in order to improve the recruitment process. More and more, organisations are reviewing recruitment procedures, looking more widely within the company as well as sourcing talent from outside.

 

An alternative approach is to consider taking on locals or at least sending someone on assignment who has the experience to train up locals for the future.

 

Increasingly, potential assignees are concerned about their future career opportunities once the assignment is over. This issue can be a barrier to accepting an assignment and is certainly a major challenge for organisations planning repatriation. Ideally, the recruitment process would determine more effectively the degree of alignment between the employer’s objectives and requirements and potential candidates’ career plans. This can be addressed by using more searching interview techniques, including tests and profiling along with counselling of prospective assignees and their dependants even before a job offer is made.

 

The management of administration is another area on which companies may focus. Issues include whether a company has enough resources to manage growing assignee numbers and whether they should centralise/de-centralise. Many employers feel that centralised arrangements are more likely to result in greater control and consistency of policy application and therefore reduce the chances of expensive exceptions becoming the rule. Equally, this approach often means that the use of outside expertise (e.g. tax, relocation specialists, and information providers) can be more effectively monitored to ensure that their services are provided satisfactorily.

 

A review of the use of IT facilities and computer software (including software for tracking assignees) can improve understanding of policy and ensure consistent application amongst all those responsible for managing assignments.

 

For many companies, international expansion strategies have resulted in staff being assigned to and from many different locations, with differing living standards, costs of living and levels of taxation. This has prompted them to adapt their policy in order to use more than one approach to pay. Examples of this include:

• The higher of home or host country-based calculations for specific assignees (dual approach).
• Using the home-based method in specified locations and host-based approach in others.

 

Any adjustment to pay methods needs to be well thought through. While it is the home-based approach that continues to predominate, with just over 50% of companies applying it everywhere, there is a growing trend towards the ‘host-plus’ approach i.e. applying the market rate for local nationals together with additional benefits or allowances to cover specific costs for expenses such as local housing, schooling, medical insurance, and trips home. Although the perception among some employers is that this method is a less costly approach, it very much depends on the assignee’s home and host countries and how effectively methods are applied. Costs associated with assignments from developing to developed locations, for example, are not likely to be reduced.

 

Before making any adjustments to pay elements, benchmarking is advisable to determine the relative competitiveness of assignment pay and specific compensation elements, such as cost of living, mobility allowances or benefits.

 

In response to cost-containment directives, the current trend is towards reducing allowances and the value of assignment benefits provided. We have seen that a higher proportion of companies are now applying negative cost of living indices and cost-effective indices.

 

In most circumstances, a major contribution to the total cost of an assignment is host country housing. Imposing stricter guidelines regarding the provision of financial assistance, and requiring an employee contribution towards the cost of local housing are ways in which we have seen companies manage this.

 

According to the Exploring change in international assignment options survey, 71% of those undertaking short-term and commuter assignments believe that these assignment types will increase in importance compared with traditional long-term assignments. These alternative assignments are perceived to be more flexible to cope with changing economic conditions and more project-based assignments.

 

If companies do use various assignment types, documented polices are essential to ensure that all the options are effectively managed.

 

To ensure that international policy and IHR processes remain viable in changing business and economic conditions, policy reviews should be made regularly. Deciding what needs to be reviewed is just part of the process – executing any policy changes requires careful thought and a detailed look at how to manage such revisions would need addressing in another article. However, any modification to policy, whether a complete overhaul or a small scale amendment, needs to be based on sound defensible reasons, clearly documented and consistently applied in order to be effective. If you need help with your international assignment policy, ECA Consultancy will be able to assist.