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How to compensate employees living and working in remote and extreme locations

ECA launches a new Remote Allowance Calculator to rationalise the calculation of special allowances for exceptional locations.  Neil Ashman reports.

For companies whose function requires people to live and work in locations with very basic facilities like mines, plantations, military bases, oil and gas facilities, disaster zones and similar sites located in remote or challenging environments like jungles, deserts or the Arctic, a different approach to compensation is warranted.

Standard location allowance calculations are not designed to reflect the exceptional circumstances these people experience, and although companies know they need to both incentivise staff to take these jobs and compensate them for the hardships they will have to endure, not all have a defined process for establishing the figures.

We worked with our client companies to create a fair, equitable and defensible system that takes the guesswork out of creating location allowances for such places.  The Remote Allowance Calculator can be used for long-term, rotator, commuter and other mobile workers.

How does the calculator work?

By working with clients employing staff in remote locations, we identified the common factors cited that turn a location into a ‘remote’ location for the purpose of paying additional allowances.  Using this information, and continuing to liaise closely with clients, a calculation system for working out these allowances was created.

The calculator works by taking a location rating calculation, which provides a recommended location allowance for a standard move between a home and host location, and asking the user to provide more detail on the particular circumstances and characteristics of the remote host site(s).  These additional details are assessed to suggest a recommended addition to the standard location allowance.

Because the host location itself is likely to be unique to the client or not a standard ECA location in any way, the remote locations calculator asks the user to choose an ‘anchor’ location (ie a standard nearby location) for the host as a starting point for the calculation. 

For example, if the assignment is to an oil platform in the Niger Delta, the user might choose Nigeria – Port Harcourt as the anchor host.  Doing this will return the standard suggested location allowance for Port Harcourt, which covers a great deal of typical considerations for establishing location allowances including security, distance from home, climate, language etc.
Building on this, the user can then factor in other characteristics that may add to the hardship experienced by the assignee, additional to those already accounted for.

Which factors are considered?

For calculating the extra allowance, users simply select from additional options to assess the following circumstances, particular to their own site: 

Climate – the anchor point chosen will already provide an assessment of the climate for the area. However, if the actual location is deemed by the user to have an even more extreme climate than the proxy (for example, an oil rig regularly battered by storms or a mine in the middle of a desert) the user can choose to factor this in.

Access to location – Poor accessibility not only poses practical issues but can also increase the sense of loneliness and isolation felt by an assignee.  Users are asked to assess ease of access and the availability of international flights.

Type of accommodation - Often, the kind of accommodation provided in remote locations in no way resembles the town house or apartment a standard assignment would involve; it is more likely to be a tent, a portakabin or a dormitory. Privacy, as well as comfort, is a major consideration in many remote sites and these considerations are factors in the calculation. 
  
Recreation facilities - Boredom is one of the key issues the clients we worked with identified as a hardship in remote locations.  Employees without access to a reasonable range of facilities will need higher compensation.

Medical provision - Most sites require a minimum standard of healthcare and companies are likely to have an evacuation plan in place, but for expeditionary assignments (for example), where there really is very little or no medical support, an allowance beyond that already provided by the location allowance may be warranted.

Family status - because it is not unusual for assignments to remote locations to be unaccompanied, many companies consider this part of the job and the base salary will reflect this.  ECA’s calculator allows the user to decide if separation from the family should be considered as part of the remote location allowance calculation.

How does this translate into allowances?

When the above considerations have been assessed, a difficulty rating is calculated, with a percentage supplement to the standard location allowance (provided as part of the report) recommended.  If insufficient criteria have been met, no supplement will be indicated.  In all likelihood, this means that the location in question could be reasonably assessed using ECA’s standard location ratings methodology.  ECA can undertake a special location analysis to provide a suggested allowance or suggest an appropriate proxy in such cases.

How to buy Remote Allowance Calculations 

Calculations can be bought individually from your ECA contact or as an add-on to a subscription to ECA’s location ratings calculator, allowing users to plot, save and share site information with colleagues. 

Companies wishing to attribute their own allowances to the system or customise the ‘bands’ to which the scores and allowances are attributed, can have the calculator configured. Please contact your account manager to find out more. 

An animated overview of the tool is also available online at MyECA>Calculators

With the Remote Allowance Calculator, you can:

  • Establish whether a remote allowance is warranted
  • Create fair and rational allowances for all your employees
  • Apply a consistent policy
  • Reflect the individual characteristics of assignment sites
  • Plot and save individual sites online
  • Create location rating reports

Ideal for assignments types such as:

  • Offshore installations and vessels
  • Mining facilities
  • Military installations
  • Polar or tundra research stations
  • Desert or tropical outposts
  • Charity and relief programmes

Ways to buy:

  • Individual calculations by calling us
  • As an additional function to ECA’s Location Ratings Calculator in MyECA
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