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For Expats, Juggling Cost Cutting with Competitive Benefits

The numbers of expatriates are increasing despite the global recession. However, companies have placed various cost-cutting constraints on international assignments while maintaining competitive pay and benefits packages, according to a new report by Mercer.

Mercer's International Assignments Survey 2010, which collects data from over 220 multinational firms across all industries, found that organizations globally now have more structured international assignment programs that put emphasis on shortened assignments, hiring locally and eliminating nonessential benefits in an effort to manage costs more effectively.

"We have not seen much evidence of companies moving away from expatriate assignments—rather, organizations whose future depends on overseas markets are assessing how they can make better use of these to support their global business objectives," said Madeleine Berger, senior researcher at Mercer. "With less cash in the system, there is more interest in making wise investments based on the value of each individual assignment."

Reviewing Benefits Policies

Given the financial and administrative costs associated with international assignments, most organizations are reviewing their global expatriate policies. Nearly nine out of 10 organizations worldwide have been revising or are planning to revise their expatriate policy, which includes benefits and allowances, in order to reduce costs.

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.

In addition, organizations are introducing 'light' contracts, applying stringent governance procedures, creating a closer link between assignment and talent management, simplifying processes and ensuring effective communication among expatriates and the organization.

"Organizations 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," said Berger. "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."

According to Mercer's research, over one half (56 percent) of companies send married employees without their families on long-term assignments. European companies lead the trend in this type of single-status assignment with two-thirds (66 percent) sending married employees on assignments alone.

Other Trends

Mercer's study also highlights these expatriate pay and benefits trends:

  • Compensation approach. Overall, companies 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. Furthermore, with the increase of destinations in low-paying countries, the host approach cannot be applied consistently. These constraints can contribute to the need for more differentiation in policies, by length but also by type of assignment.
  • Housing. Companies 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 provide free housing but employees must pay housing costs in the home country. 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 one-third of companies have international assignees located in high-risk regions of the world and there is an increased awareness of risk among companies sending their employees to these areas. Nearly two-thirds of companies have a formal evacuation plan in case a situation becomes critical in high-risk locations.
  • Commuter assignments. Commuter assignments are becoming more popular in Europe and North America, with an increase from 28 percent to 45 percent in the former and from 30 percent to 35 percent in the latter. Due to the distance traveled in Latin American companies, commuter assignments are not a common practice with them.
  • Home leave.Nearly all companies 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 percent of companies pay for some expenses during home leave, companies typically do not cover any of their assignees' expenses.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Handling Taxes for Expatriates, SHRM Tools and Templates, April 2006

Expatriate Compensation, SHRM Tools and Templates, June 2005

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