Companies juggle cost cutting with maintaining competitive benefits for international assignments
Despite the global recession, expatriate numbers are increasing, but companies have imposed cost-cutting constraints on international assignments whilst maintaining competitive packages, according to a new survey by Mercer.
International assignments overall have increased by 4% over the last two years, with short-term assignments increasing faster than traditional long-term assignments. Technical expertise is the top reason for sending employees on international assignments.
Cost cutting measures
To keep a lid on costs, organisations now have more structured international assignment programmes that put emphasis on shortened assignments, hiring locally and eliminating non-essential benefits.
According to Mercer's findings, half of companies reported a rise in short-term assignments and these are “becoming more aligned with organisations' objectives due to their quick approval process”. As a result, two-thirds of companies globally have developed special policies for short-term assignments.
Anne Rossier-Renaud, Senior Consultant at Mercer, said: "Organisations are endeavouring to save costs but only to the extent that suitable internationally mobile employees can be attracted and retained. Whilst it is still challenging to locate the right candidates for assignments, the economic environment and higher jobless figures have somewhat widened the candidate pool. Many applicants are keen to move to countries less affected by the crisis than their own."
Companies are also trimming costs by hiring expatriates locally instead of paying for expensive moves from the home location. Mercer's research shows that around half of companies have increased or plan to increase the number of expatriates hired locally.
International assignment challenges
Mercer’s research suggests that, more than ever before, companies are torn between cost containment and addressing pressing business needs. Approximately the same proportion of respondents identify costs (60%) and the difficulty of finding suitable candidates (58%) as the main obstacles for international assignments.
Concerns differ slightly according to region. In the Americas, the biggest deterrent is cost, whilst in Europe and Asia it is the lack of suitable candidates.
Moreover, while business expansion is still a chief reason for sending employees on international assignments, other factors like knowledge and business performance are becoming more important:
68% of respondents report that the key driver for sending employees on assignments is lack of available local expertise
59% say it is improving the performance of an operation
56% say it is due to launching a new business.
Rossier-Renaud said: "As a result of the economic climate, many companies have had to postpone planned foreign investments and have turned the focus to their existing overseas operations. What we're seeing is a growing proportion of international assignments where employees are placed in locations that lack the local technical expertise."
Given the financial and administrative costs associated with international assignments, most organisations are reviewing their global expatriate policies:
Nearly nine out of ten organisations worldwide have been revising or are planning to revise their expatriate policy which includes benefits and allowances in order to save expenditure.
Among all regions, benefits (housing, education and home leave) along with expatriate allowances and premiums (cost-of-living allowance and mobility/quality-of-living premiums) are the leading elements of mobility policies under review.
Organisations are introducing “light” contracts, applying stringent governance procedures, creating a closer link between assignment and talent management, simplifying processes and ensuring effective communication amongst expatriates and the organisation.
Other survey findings
Compensation approach: Respondents report few changes in their compensation approach. Some are implementing a host country local approach to save costs, but finding candidates to move can be difficult with such a policy. What’s more, with the increase of destinations in low-paying countries, the host approach cannot be applied consistently. As Mercer points out: “These constraints can contribute to the need for more differentiation in policies, by length but also by type of assignment.”
Housing: Businesses in North America typically provide a housing allowance with a required employee contribution and provide assistance toward employees' housing in the home country. In other regions, companies offer free housing but employees must pay housing costs in the home country. Mercer explains: “In line with other cost-containment measures, companies are paying closer attention to the maximum budget for housing benefits and possible double payments of utilities under the cost-of-living and housing allowance.”
Security measures: More than a third of respondents have international assignees located in high-risk regions of the world. There is an increased awareness of risk among companies sending their employees to these areas. Mercer says: “Nearly two-thirds of companies - up from a half two years ago - have a formal evacuation plan in case a situation becomes critical in high-risk locations.”
Commuter assignments: This approach is becoming more popular in Europe (increasing from 28% to 45%) and North America (up from 30% to 35%). Due to the distance travelled in Latin American companies, commuter assignments are not a common practice.
Home leave: Nearly all respondents continue to provide home leave to their international assignees, either in the form of travel fare to the home location or a budget. Except for North America, where 46% of companies pay for some expenses during home leave, companies typically do not cover any of their assignees' expenses.
A final word
"We have not seen much evidence of companies moving away from expatriate assignments - rather, organisations whose future depends on overseas markets are assessing how they can make better use of these to support their global business objectives. With less cash in the system, there is more interest in making wise investments based on the value of each individual assignment . . .
". . . Organisations are revising their mobility policies not only to control costs, but to provide consistency in their fast-growing markets where disparities may have emerged in their corporate policies. There is also a growing trend to accommodate the needs of different sections of the employee population, such as Generation X, and this has led to an increase in single-status assignments especially in shorter-term projects." - Madeleine Berger, Senior Researcher, Mercer.
Want to know more?
Title: International Assignments Survey 2010, Mercer.
Survey details: Mercer's survey collects data from over 220 multinational firms across all industries. It captures policies and practices in employee mobility management. Topics covered include:
drivers of and barriers to international assignments
trends in expatriate allowances and support
use of different types of assignments, including short-term, long-term and commuter assignments.
Availability: To find out more about the survey visit www.imercer.com/products/2010/intl-assignments-survey.aspx.
Mercer is a “leading global provider of consulting, outsourcing and investment services”. Mercer works with clients to solve their benefit and human capital issues, designing and helping manage health, retirement and other benefits. Mercer’s 18,000 employees are based in more than 40 countries. For more information, visit www.mercer.com.