HR’s remit is shifting as organisations become ever mindful of expat costs, with the emphasis on shorter more frequent stints overseas, says Laverne Hadaway
There was a time when employees sent abroad to work were supported by a large package of benefits designed to cushion the effects of the move.
Then came the terrorist attack on the World Trade Center in 2001 which effectively halted international travel and work assignments for a period. Chris Dear, head of business at NatWest International, recalls: “Pre-9/11, businesses were moving people around the globe. A lot of money was thrown at international moves and employees could have anything they wanted for themselves and their families. It was very costly. After 9/11, companies took the opportunity to step back and ask whether they needed to move so many people.”
Dear estimates that post-9/11, the numbers of workers being sent abroad dropped by as much as 20%, but he believes that they are now back up to their original levels. Simon Dudley, head of international group benefits at the consultancy Watson Wyatt, agrees: “”We’re seeing a strong use of mobile employees and there’s a lot more interest in setting up international plans for them.””
Employers have become increasingly aware that international work is attractive to many employees and are realising that they no longer have to throw money at individuals to persuade them to move to another location.
Dudley suggests that many employees are often happy to move overseas for a time because they feel that they need international experience in order to reach the top of their career.
Extended business trip
NatWest’s Dear points to several things employers have done to overhaul their international relocation practices and to ultimately reduce the benefits bill. They are now more likely to send European-based employees to another part of the continent on extended business trips rather than relocate them completely. An Italian-based executive, for example, might regularly fly into the UK on a Monday and back home again on a Friday. Alternatively, an international member of staff might be posted to the UK for a few months and then return home.
It is certainly now much less common for employees to be based abroad for periods of two or three years than prior to 9/11.
“[Extended business trips] minimise the disruption to families and the overall costs of moving people and having to arrange family accommodation and schooling for the children,” says Dear.
Short-term secondments
Chris Bruce, director of marketing and technology at Thomsons Online Benefits, has a similar perspective. “Organisations aren’t so willing to pay their employees expatriate packages for [such long periods].” Instead, organisations are opting for shorter-term secondments and if employees are abroad for a longer time, are moved onto suitable terms for their situation.
Another new trend, according to Dear, is to advertise an available role to anyone in the company anywhere in the world. This practice tends to put the onus on the individual to move themselves abroad in order to take up the post. “”Local hire conditions and contracts will prevail and companies will vary [in] how much assistance they will give,”” he adds.
Another development is the trend to recruit students in their final year at university who may be interested in working abroad. Many of these are prepared to move from overseas to the UK for a healthy starting salary in the City of London. And as Dear points out, the individual foots the cost of moving themselves abroad, while the company will pay local contract conditions. In addition, where recruits are young graduates, they are not likely to have many family ties or dependants needing to be relocated and supported in the new country.
Bruce also says employers have begun to look more carefully at the cost of sending an expatriate to do a job that a local employee can probably do just as well, especially where the expat may cost up to three times more.
He points to three main factors shaping the expatriate benefits on offer today — the specific industry, the packages offered by rival employers and the market conditions. Clearly, different industries have different demands and characteristics which will help shape what is on offer. Where there is a war for talent, however, an employer may need to try harder. Asia, for example, is currently seen as a hotbed of rising employee talent. This means that there may be a need to offer better incentives and packages to attract the very best staff in these particular markets.
Medical cover
Bruce says the core benefits employers seek to provide across the different countries in which they operate are financial protection, such as a savings vehicle for long-term retirement provision, protection in the event of being unable to work and medical cover for the family.
As pointed out above, what is on offer will also be shaped by local market conditions. In the US, where medical cover is one of the most important and sought-after benefits, most employers will offer full cover even to staff only stationed in the country temporarily. For an employee based in the UK, healthcare is less important because of the existence of the National Health Service, while in Singapore, the market is dominated by cash plan-type benefits that allow money to be claimed back on any medical treatment that may be needed.
Making sure staff can hit the ground running when they move also helps. Even simple things like setting up a bank account for them can make a difference. Julian Gouge, head of international personal banking at NatWest, which supports HR departments by providing banking arrangements for employees from overseas, says: “”[Employers] don’t want staff spending time having to work out how to open a bank account, especially one that may have to handle a salary paid partly in dollars and partly in sterling.””
In other words, the emphasis is no longer on paying lots of money to ensure everything is taken care of for the employee and his family. Instead, the aim is to provide benefits to get staff up and running and fully productive.
Summary
- After 9/11, international travel all but ceased, but is now back up to levels before the terrorist attack.
- Employers began to rethink the overseas work proposition and came up with more cost-effective solutions.
- Overseas assignment periods now tend to be shorter, which means less upheaval and disruption for families.
- Employers may consider local workers in the first instance instead of assigning someone from overseas.
- Many employers are starting to recruit graduates to work abroad because they will often pay for their own relocation and usually have few family ties and dependants.
- There is now more emphasis on facilitating employees to function in their new environment and less on expensive expatriate packages.††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††
Case study: Ernst & Young
Professional services company Ernst & Young has traditionally offered a two-year global exchange programme to its 114,000 staff. However, through staff focus groups, it emerged that many employees would also like to have the option of shorter stints working abroad.
Riaz Shah, people leader for assurance and advisory business services at Ernst & Young, says: “Many employees felt that two years was too long and a big commitment.” As a result, the firm has introduced 12-week stints alongside longer-term relocation. “They wanted something that would give a flavour of international secondment so that they could make an informed decision about a longer [trip] back to that country, to a different country, or to stay in the UK.”
Employees on secondment abroad, whether for two years or 12 weeks, remain an employee of the UK company and their status only changes if they decide to transfer on a permanent basis to a new country.
The international benefits package itself, however, has not changed substantially over the last few years. “We pay for pretty much everything, from relocation to ongoing pension payments,” says Shah.