Global Talent

Maintaining or establishing a global presence is fundamentally about attracting, retaining, and supporting the right people. First, it’s not automatic that your top performers, the ones best suited for an overseas assignment, are interested in the upheaval and uncertainty that such a transition entails. Second, an expatriate living abroad may soon weary of the unexpected cultural and even social obstacles and seek a return ticket home. Not least are the economic and cost-of-living issues – for instance, an expat compensated in the host country’s currency may feel increasingly disillusioned with an unfavorable exchange rate.

There are also issues and considerations on the management side. W hile a recent study indicates that an overwhelming 95% of multinational companies surveyed are optimistic about the economy and plan to send more employees on overseas assignments, more than 58% expect to reduce the   size of expat packages to help defray the overall cost. However, according to the 2007 Worldwide ERC New Hire Report, more than 90% of the companies surveyed reported having difficulty in recruiting the right people. And while exact figures are not widely available, it’s estimated that there are from 3 to 10 million expats on short and long term assignments around the globe.

Relocation, from both the employer and employee perspective, automatically becomes more complex when it comes to global assignments. For employees, accepting an expatriate assignment means adapting to cultural, social, and business differences in the new host country. In many cases, it also means the relocation of family members and their adjustment. However, the underlying deciding factor for many employees facing relocation is, “Is it worth it?” Once that decision is made, the next question is, “What is it worth?” A critical challenge for the employer is the ability to design and offer a compensation and benefits package that will entice an employee to accept an expatriate assignment and, in short, make the relocation worthwhile for both employee and employer.

This leaves HR in a somewhat precarious situation. While tasked with recruiting and retaining top talent for expat assignments, they must also meet the expectations of management to hold down costs. Recent statistics indicate that the cost of posting a manager in another country is estimated to be about three times that individual’s stay-at-home pay and benefits. In terms of both recruitment and retention, compensation has always been a key factor, either as an impediment or an incentive, for expats to accept and retain assignments abroad.

For these reasons, HR   is compelled to look toward areas outside of direct expatriate compensation to help reduce costs related to expat assignments. In fact, many of these costs are " hidden" or simply not tracked, until they add up and impact the bottom line. In fact, a ccording to a recent Global Assignment Policies and Practices survey from KPMG, only 14% of companies reported that their expat employee programs are designed to control costs and ensure an appropriate return on investment.

The good news is that the same solutions that help manage and administer global compensation are also ideally suited to automate a range of processes that can help HR get a handle on other expenses associated with expat assignments.

Recruiting and managing an expat workforce brings two conflicting needs into play: the employee’s compensation and HR’s mandate to keep expat expenses to an acceptable level. Recruiting and retaining talented employees to accept overseas assignments presents a challenge for HR on a variety of fronts, compensation being among the foremost. Indeed, compensation can easily override other the factors, such as cultural, social, and business differences, that may contribute to an employee’s dissatisfaction with an expat assignment. However, retention is key since a great deal of effort and resources – from training to relocation to compensation – are expended during the life of an assignment. The true global competitive advantage is having the right people in the right jobs in the right location.

Thomas Shelton is Founder and CEO of HRToolbox.

Areas for Cost Control

A global compensation solution can provide HR with a means to collect data and compile reports to monitor a number of areas to ensure that the company is not incurring added expenses or overlooking costs that can be recouped.

● Tax equalization. When an employee goes on international assignment, employers often choose to assume liability for foreign taxes, which puts the assignee in a neutral position during the assignment. This ensures that he or she neither suffers financial hardship nor collects a windfall as a result of varying tax structures in different countries. Employers typically pay taxes in the home and host location and deduct a hypothetical tax from the employee’s pay. The hypothetical tax is an estimate of the taxes the employee would have paid if he or she had continued working in the home country. On an annual basis, HR should work closely with Payroll and other departments to monitor and reconcile these tax payments to identify instances where employees may have been overpaid or underpaid in terms of tax equalization.

● Deposits for expenses. Some international locations require significant upfront deposits on housing and rental cars. HR can use an automated solution to track and manage these deposits and initiate a collections process after an assignment ends rather than risk writing these funds off as a loss.

● Assignment budgets. Using a technology solution to manage budgeted versus actual expenses of an assignment can help identify areas where costs are too high or which assignment locations cost the company the most. In turn, this information can help HR determine how to reduce expat packages on an individual or geographic basis. In addition, ongoing monitoring and tracking can serve as an advanced "warning" system to indicate when the dollar amount that was initially set aside for the assignment is being approached.

● Fees paid to vendors. HR can track payments to vendors for “used and unused” services related to relocation, as well as for services provided throughout the term of an assignment. These services include everything from transportation and moving costs to programs to help the expat’s family adjust in the country of assignment (i.e., language services and employee assistance programs). In addition to helping better manage assignments, HR can create an aggregate report on fees paid and use this information to negotiate better pricing when renewing vendor contracts.