Lee Quane, Regional Director, Asia – ECA International advises HR professionals across industries on how to cope with challenges to international mobility of talent, compensation considerations and allowances, regulations and compliances, norms, cultural differences, climate, employee-employer friendly policies, benefits and allowances, so on and more, before you actually embark on a strategic plan for international mobility of key talent across countries in a volatile economy.
The opportunities in new markets drive and influence business development and employee mobility in Asia. In the past, markets like China, India and the Middle East were the most popular destinations for employee assignments. In the recent times, companies are looking at new horizons in final frontier markets in Asia, largely around locations in Cambodia and Myanmar.
There are various factors that companies should consider when developing their mobility strategies and policies.
Companies need to consider the following questions before devising a mobility programme. Where are they sending the staff to? Who are they moving? Why are they moving them and for how long? What is life like in the relocation city? What kind of hardships will the employee/staff member face in the new city? Does the relocation affect only the member of staff, or their family, too?
For example, a company relocating staff on a permanent basis from Sydney to Singapore will need to offer a different relocation package, from a company that assigns staff on long-term assignments from Malaysia to Vietnam.
A key challenge that needs to be addressed is the purpose of an assignment, and its relevance to the host country/line management.
Companies are increasingly sending staff on assignments for different reasons and durations. For example, there has been a growing trend in the number of short-term assignments (typically for durations of less than 1 year).
In addition, staffers are increasingly being sent for different reasons. For example, for career development purposes, or for strategic purposes such as a need for an employee’s skills and experience in the overseas office.
Very often, these different reasons for an assignment will require a variation of the standard mobility policy, or a different policy altogether. As assignment types become increasingly varied, knowing which policy variation to apply and why, represents a major challenge for many HR professionals.
Agreement from the line-manager’s perspective also holds the key. Companies often encounter push-back from line managers, particularly when presenting the costs associated with an assignment. In many cases, costs are seen to be high and line management often requests for revisions in the relocation package.
The first challenge here is to ensure that line management understand why certain allowances and benefits are being provided (i.e. explaining the rationale behind providing the employee with a relocation allowance to help meet miscellaneous costs associated with the relocation, or why the employee’s salary should be aligned to the salary structure of the home location).
Additionally, it can also entail involving line management throughout the process and taking them through cost comparisons – between the costs associated with an assignment compared to the necessary costs associated with recruiting employees locally to perform the job role.
The biggest risks associated with mobility are tax and immigration. Mobility professionals understand that an employee cannot commence work in the host location without a valid work permit. However, HR teams are often not involved in the recruitment and selection process of employee assignments and so communication is the key.
It is not uncommon for HR to be asked to manage a relocation after an employee has already departed for the host location (in some cases the employee will already be in the host location on an extended business trip), requiring HR to retroactively apply for a work permit. This process is often associated with risks, so it is important for line managers to involve HR in the relocation process as early as possible.
In terms of tax, the biggest compliance issue is misreporting an employee’s assignment-related income to tax authorities in the host location. Typically, the assignee’s compensation is managed and delivered by the payroll function in the home location.
However, the income must be fully declared in the host location in order for the appropriate taxes to be paid. This requires the home country payroll to communicate the package and any subsequent changes to colleagues in the host country responsible for reporting the employee’s income to the fiscal authorities.
A common mistake companies make is failing to communicate any revisions to an employee’s salary (i.e. due to a salary review), to host colleagues.
See: Singapore Ranks Second among 109 countries in International Talent Mobility and Global Competitiveness
We have our own widely respected proprietary software, designed to provide users with accurate and reliable location allowance recommendations.
ECA’s Location Ratings system looks at a series of factors which affect the living conditions of an assignee and accompanying family members. It is built around set scoring criteria relating to those factors.
The resulting allowances vary according to both the home and host location. There are eight broad sections with each attributed a specific weight based on its relative level of influence upon everyday lifestyle: Climate (including Air Pollution), Health, Language and Culture, Goods and Services, Isolation, Social Network and Leisure, Housing, Utilities and Education, Personal Security and Socio-Political Tensions.
Detailed reviews of living conditions in all published locations are undertaken annually using a combination of assignee survey responses and reliable, verifiable sources.
The review is impartial and care is taken to reflect the landscape over the course of the year without unduly focus on individual events. This multi-source approach enables ECA to provide up-to-date, independent and objective hardship assessments in order to determine suitable location allowances.
The annual update procedure takes into account all events that have taken place in the preceding year, including any natural hazards (accounted for in the Climate section) and terrorist activity (covered in the Socio-Political Tensions scoring).
The assessment and scoring recognises not only those events which have taken place over the past year but also the potential for such incidents to occur in the future. As such, any location allowance paid during a global relocation assignment would have taken into account both natural and man-made incidents.
The biggest issue is salary delivery. Assignees have cross-border financial commitments during an assignment: commitments in their home country can include savings as well as housing commitments. In the past 12 months, many locations in Asia (such as China, Indonesia and Malaysia) have witnessed a weakening or volatility in their currencies.
Without assistance from the company, employees may be adversely affected by currency volatility, which can have considerable impact on employee morale and, in extreme situations, the employee’s willingness to continue the assignment.
There is no silver bullet solution since different solutions suit different companies, but companies can consider options such as split pay and regular salary reviews to account for currency volatility, where appropriate.
The crucial element here is making sure an assignment is aligned, where possible, to an employee’s career development. One of the major challenges experienced by companies is retaining staff upon their completion of an international assignment.
Very often an employee returns to their home location post-assignment and the company doesn’t have a road map in terms of how to utilise the skills and experience that the employee has gained on assignment.
Resultantly, the employee then leaves the company meaning that the company gets very little return on investment from the assignment.
Our Country Reports provide users with independent, impartial and thoroughly researched, actionable information to help users manage compensation and benefits: from per diem allowances for business travellers and allowances for short-term assignments, to allowance and benefits recommendations for long-term assignees and benchmark information for all assignment types. Our comprehensive data ensures that companies have the information they need to manage employee relocation.
Opinions regarding the attractiveness of a location are subjective to the individual’s and company’s preferences. For example, an employee’s fondness towards a particular city may be influenced by elements such as their marital status or their location of origin.
Similarly, a company’s decision regarding whether or not to establish operations in a given location are driven by its ability to generate revenue and source the employees, it needs to be able to succeed for the Asia Pacific region, here are ECA’s Location Ratings rankings below, in terms of living conditions and other factors. They give an objective overview of the attractiveness of these locations from the perspective of an Asian expatriate.
|Asia Pacific Rank 2016||Location||Global Rank 2016|
Also read: How Automating Processes in Talent Mobility Can Bring Down Costs: MOVE Guides Answers
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