No matter what the industry, geography or size of a global business organisation, one of the most important issues for HR professionals is staffing for success. Having the right types of employees with the right skills in the right places at the right times is a constant challenge
No matter what the industry, geography or size of a global business organisation, one of the most important issues for HR professionals is staffing for success. Having the right types of employees with the right skills in the right places at the right times is a constant challenge.
The cost of the expatriate strategy is dramatically increasing while the logistic and operational complexity of such assignments grows as well. The result is the need to balance the use of all of the available staffing models to the optimal advantage of the organisation.
Regardless of what the staffing strategy includes, the effective management of the overall process is becoming a key-determining factor in the success of the HR function and of the underlying business. Having the proper information for analysis and decision making becomes integral. For the purposes of this column, the term ‘cross-border employee’ refers to the members of the global employee category.
In these activities, there is a constant struggle between the organisation’s business managers and the human resource function. The business people focus on getting the job done. In a global environment, this can mean finding an employee anywhere in the world and having him in place. The mechanics of locating that employee, bringing him on board, establishing the compensation and benefits, and keeping the employee in place and contented is the HR responsibility.
Historically, the principal concern has been financial. The ‘business’ perspective has been oriented to getting the proper result at any cost. The HR perspective, now extending to senior management, is to add a degree of cost management to the process. One of the key elements in the process is retirement planning. Being a longer-term issue as compared to the other elements in the assignment process, there has been a much less formal decision-making and structure. In addition, some of these types of employees are actually starting to retire and the lack of planning and structuring are causing huge financial and logistical problems.
The end result is that many multinationals are interested in putting the plans and processes in place now to guard against the same types of problems arising in the future.
This type of retirement planning can be very complex due to factors such as: reconciling assignment policies and the administrative infrastructure to support them with business considerations (and ‘deals’ cut); total remuneration orientation for the treatment of all workers including cross-border employees; multiple tax provisions; currency issues, especially given the time needed for asset accumulation and the potential for fluctuations in currency values; the potential for interaction with social security systems as an employee moves from country to country and coordinating this from both cost control and benefit delivery perspectives.
Of course, the nature of the cross-border employee population is changing. Now, it’s just as likely that this type of employee will come from Australia or India than from Europe. Certainly, employees coming from the Asia-Pacific Rim region will have different retirement experiences and expectations and these will need to be considered as well.
At the end of the day, there will be many factors that will influence the various decisions. Some background issues to facilitate a coordinated and efficient review leading up to those decisions include.
• Is there a (global) organisational philosophy as to the parameters of the retirement planning? For example, sometimes the US-based employer thinks the US retirement program should serve as the model. Other times, the employer does not want to consider the US program as a model as global employee issues can be clearly different than those in the US.
• Are there operations in the host countries and are there local country retirement plans in place in those countries? Assuming that some such plans are present, these plans might reflect the local custom and practice, are competitive and are tax-approved in the local country tax environment.
• Presumably the employees in question are working in the host country on a legal basis. Are there ‘split payroll’ issues? Often, there are strategies where the compensation is divided into two parts. One part is set to maximise the host country retirement benefits from a tax-beneficial perspective.
Cross-border employees are emerging as a very important part of the global staffing strategy. For these kinds of employees, retirement planning is becoming a key element of the assignment package. Careful attention to the retirement planning can determine whether the assignment will be successful, from both the cross-border employee’s and the employer’s points of view.
By Erwin Janush, senior vice president of Aon Consulting
