An International outlook from Australia’s leading online HR Magazine

www.humanresourcesmagazine.com – “ The facts about expats” Jacqueline Burns

 
The so-called war on terror and the well-publicized security risk associated with international travel have had little impact on worker mobility. As Jacqueline Burns reports, global and multi-national organizations are mobilizing their workforces more, not less.

The ease and frequency of international travel has been the main catalyst for change. Initially, expatriation was reserved for the crème de la crème and handsome suites of benefits – amounting to up to four times an executive’s salary – were used as bait to attract and retain talent. Literally every cost incurred during the term of an assignment was borne by the employer.

These days, a mobile workforce is regarded as an imperative for any global business because it facilitates the transfer of skills and knowledge, aids in career development and assists in responding to diverse business needs.

However, heightened competition, several years of economic downturn and a better appreciation of shareholder value have imposed pressure on HR practitioners to better manage the cost of international assignments. Consequently, the old expatriate model is outdated. Companies are neither willing nor able to provide the same level of benefits as in days gone by.

In a 2002 Ernst & Young survey, Managing International Mobility in an Economic Downturn, 80 per cent of companies reported concern over the cost of international assignments. Despite that, 78 per cent acknowledged they had no clear understanding of their total costs. The broad response to the squeeze on costs has been to reduce the number and value of benefits offered. It is not about being less generous; it is about doing things smarter.

“The traditional expat assignment supported a very luxurious lifestyle. Now it’s driven by a business need and all the costs are scrutinized. My challenge is to tighten my budget without reducing support to employees. We have to be offering all the support our competitors offer but at a cheaper rate and without compromising the service,” says Kylie Rostron, relocation advisor for mining firm Santos.

Public relations firm, Text 100, has around 6 percent of its 430 employees internationally deployed throughout Europe, North America and Asia. Rachael Heald, the firm’s global director of human resources, has witnessed a diminution in the number and value of benefits offered by companies. She adds benefits that were previously considered the norm are reducing in prevalence.

“In days gone by it would be normal practice for someone to have in their contract a return trip home for them and their family once per year. Now companies are either reducing that benefit to a limited time, such as for the first two years of assignment but not after that, or taking it out altogether,” says Heald.

The long and the short of it

More rigor is also being displayed when developing a business case for an international deployment. There is a growing preference for hybrid forms of assignment, such as commuting and international transfers, and for short-term assignments, which typically range in length from three to twelve months.

Thirty-five per cent of respondents to Ernst & Young’s 2002 Global Mobility survey reported an increase in short-term assignments.

For employers, the distinct advantage of short-term assignments is that they entail a shorter duration with fewer benefits.

According to ORC’s 2003 Global Survey of Short-term International Assignment Policies, 96 per cent of short-term assignees remain on their home country payroll and salary and benefits system. Half of the companies surveyed pay for the shipment of personal effects but not household furniture.

Most significantly, three-quarters of short-term assignments are unaccompanied – saving companies huge sums in living costs as well as spouse and family expenses.

Expert assistance

Over the past five years many organizations have flattened their HR departments, necessitating generalists perform in specialist roles whenever the need for an international assignment arises.

Yet, international deployment is a highly complex business. Visa, tax and immigration laws are constantly changing and the penalties for non-compliance can be extremely costly – potentially amounting to millions of dollars in penalties, fines and levies. Moreover, the devil’s in the detail and practitioners often fail to realise the mistakes they are making or the risk they are unknowingly carrying.

Simultaneously, many Australian companies have cut their consulting and outsourcing budgets. They are only calling in help when they think they need it. Heald agrees mistakes are made because people do not know what they do not know. “The biggest mistake small companies can make is trying to do it all themselves because they don’t want to spend money to engage someone who’s a specialist in the area,” she says. “Regardless how many times I’ve moved people internationally, I always call in specialists because it’s an area that’s constantly changing.”

Large global organizations will sometimes employ in-house international mobility specialists to manage tax and immigration compliance. Heald is fortunate in that she has access to her company’s New York-based international assignment specialist – as well as the liberty to engage the services of migration specialists.

The lonely guy

Fonterra commenced operations several years ago following the integration of three New Zealand dairy cooperatives. It is now a global organization with a 20,000-strong workforce, half of which is based outside New Zealand.

As manager of Fonterra’s Global Mobility Centre, Trevor Phillis is responsible for 120 expatriates across 30 countries. He describes his situation as more complex than most because there are no outsourced providers to rely on in New Zealand. Fonterra’s best option was to build the resources and skills in-house – itself a challenge given the scarcity of qualified expatriate administrators.

“The next largest organization in New Zealand has only 20 expatriates so we’re really on our own here in terms of access to peers and local benchmarks,” he notes.

Phillis considers his biggest challenge to be ensuring Fonterra’s policies are consistently applied across the whole organization. He spends a large amount of time managing exceptions arising from individual negotiations.

“Do you provide motor vehicles? What level of accommodation do you provide? What is the visa approval process? What are the COLA (cost of living allowance), hardship and tax policy principles? The outcomes will vary country to country because of different circumstances but the policies and principles can still be applied consistently and rigorously,” he says.

Heald considers one of her main issues to be whether the person and their family will be able to culturally adapt to the country that they are going to.

“Will the standard of living and quality of life be substantially different to their home country or will they be able to adapt? Will they actually fit in, in the sense that they will get a positive experience in going to that other country?” she challenges.

Years of experience have taught Heald to insist the employee and their family visit the location before they accept the job, especially given the easy going Australian nature.

“Australians are laid back and have a tendency to think everything is a great adventure. They’re sometimes a little naïve and will go into an assignment not really knowing what they’re getting into. It can then be quite tough for them when they hit the ground. I’d always try to send them on a reconnaissance trip first so they’ve at least eye-balled the place,” says Heald.

Bring it back

The repatriation of international assignees is where many organizations come unstuck.

As one respondent to the Ernst & Young study noted: “Assignments do not develop careers (ironically) – it is out of sight, out of mind.”

Estimates of repatriation attrition range from 30 per cent to as high as 75 per cent within the first 12 months.

“We spend a lot of time thinking about getting someone to a host country but don’t give a lot of thought and effort into bringing them home,” Heald notes. “An international assignment has to be a career step and the job the person comes back to has to be fundamentally different and offer more of a challenge or they simply won’t stay with you.”

Organizations are most frequently criticized for not having an adequate framework of support in place in the home country. Consequently, an employee might be brought back to do another job but feel frustrated because the skills and learnings they acquired offshore are not recognized or not accepted.

Trevor Phillis says an even worse scenario is when an employee is repatriated back to a black hole because insufficient thought has been given to their longer-term career.

“Repatriation begins with expatriation. I’m a very firm believer that when you send someone on assignment you have to think what their next move will be,” says Phillis.

Most of Santos’ 30 expatriates are on three-year assignments in either Jakarta or Houston. Though the company is committed to the seamless repatriation of its international workers, Kylie Rostron concedes it is difficult to plan ahead at the time an assignment is initiated because of the volatile climate and cultures the company is working in.

“It’s difficult to predict where you’ll be in three years time because things change so often. We’re constantly being pushed to live with change and embrace it. The best way we can manage international mobility is by keeping in touch throughout those three years, staying up to date with what’s going on and where people are at, and ensuring we do our regular reviews,” concludes Rostron.