Latest News about Expat Workers

Although most companies provide incentives to employees posted overseas, those incentives are dwindling somewhat, according to ORC Worldwide’s latest study, the 2008 Worldwide Survey of International Assignment Practices and Policies. The study is based on expatriate pay practices of more than 900 organizations. The majority of participating firms are headquartered in the Americas (52%), followed by Europe/Middle East/Africa (24%), Japan (19%), and Asia-Pacific (4%).

“Although the majority of organizations continue to use some form of incentive to encourage employees and their families to accept an international assignment—even to desirable host locations,” says Geoffrey Latta, Executive Vice President for ORC’s international compensation practice area, “over the years there has been a steady trend to provide fewer and smaller premiums.” In fact, 36% of participants do not provide any foreign service premium, and 23% cap whatever premium amount they pay out. In addition, 6% of the participants have reduced their premiums in the last two years—thereby continuing the trend.

“Proactive employers use other cost-cutting tools, as well,” according to Latta. “HR administrators have a number of effective and flexible means at their disposal to save money over the long run on expatriate assignments.” For example, 38% of the survey participants reduce the expatriate’s pay package after a defined period. Others implement either “efficient purchaser” indexes (48%) that presume the assignee is familiar with local brands or “modified” indexes (41%) to avoid duplicate payments to their expatriates and paying for items (e.g., alcohol) that they prefer not to subsidize. Roughly one-fifth of the participants go even further and cap the differentials they provide to bridge any price gaps between home and host locations.

Expatriate assignments into the Middle East have steadily increased in recent years. Representing only 5% of all assignees in 2000, this percentage doubled to 10% six years later and now stands at 14.7%. But China and India have also seen increased activity, both inbound and outbound. Further, assignees from less-developed countries, such as those in Eastern Europe and Africa, are also becoming more common as new markets continue to emerge and attract global investors. Eighty percent of multinational employers today use short-term assignments—that is, lasting less than 12 months—according to the ORC Worldwide study. Only eight years earlier, this number was 59%.

Short-term assignments are not feasible for certain types of work. However, some business situations lend themselves well to a shorter international assignment, such as the need for on-site training, an assessment of the local or regional market before launching a new product, the opening of a new facility, or a quick troubleshooting effort. “If it is feasible, use of a short-term assignment provides the option to trim assignment costs,” says Latta. “With a short-term assignment, a typical pay package reflects the use of per diems, less-generous allowances, and premiums that are reduced or eliminated entirely.”

But short-term assignments have an added advantage. “They help minimize disruption in the personal lives of assignees by allowing spouses to remain in their home-country jobs and children to continue with their studies in a familiar school,” explains Latta. “After all, family members accompany short-term assignees in only about 17% of the participating organizations.” So, when faced with dual-career concerns, particularly for younger expatriates with spouses already following their own career track, short-term assignments prove a reasonable alternative.

The study predicts that the two policy areas least likely to come under review or adjustment by expatriate administrators in the near future are policy development for assignments into the headquarters country and car practices (provision of car, allowances, and so on) for expatriates. What employers do with regard to this last topic, automobile policy, often depends on what peers in the home country would receive, what peers in the host location would receive, and safety factors (such as the need for a car and driver). Consequently, car policy is not usually a “hot topic.”

For more information about the survey, please visit orcworldwide.com


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