The good ol’ days of the fat cat expat are reportedly disappearing into the distance. With increased emphasis on managing assignment costs and heightened security issues in some countries, managing expatriates has become a priority in many organisations. Teresa Russell talks to managers of expatriate workers and discovers some very different approaches
The good ol’ days of the fat cat expat are reportedly disappearing into the distance. With increased emphasis on managing assignment costs and heightened security issues in some countries, managing expatriates has become a priority in many organisations. Teresa Russell talks to managers of expatriate workers and discovers some very different approaches
That Australian business is international is a reality here to stay. Changes seen in the past decade include a greater amount of overseas business travel as companies seek new markets for their products, the true globalisation of many companies that have established offices around the world, technological advances in communication (such as satellite telephones and the internet), as well as the development of major infrastructure in many third-world countries that were once considered hardship posts, transforming them into truly cosmopolitan cities.
Australians are working in countries all over the world while global organisations use new markets or countries (including Australia) as training grounds for their star performers. Some expatriates are sent to learn, others to teach. Usually, they end up doing both. There is a plethora of suppliers of international assignment support services, ranging from the big four global accounting firms who will manage all aspects of a company’s expatriate workforce, through to local single solution providers that offer services as varied as cross-cultural training, international furniture removal, medical evacuation planning or personal bodyguards.
There is no single model that suits all organisations. Orica fully outsources the management of its 60 expatriates. Toyota Motor Corporation Australia manages its 28 outbound and inbound expatriates largely in-house, having brought remuneration back into the organisation a few years ago. Hewlett-Packard Australia has used its parent company’s global co-sourcing arrangement since 2001 to help manage its several hundred expatriates on assignment or on permanent transfer.
Hot issues
Once an individual has agreed to accept an overseas assignment, there are many administrative issues that need to be considered (see box). As we approach the middle of this decade, the hot issues with respect to international assignments are:
1. Managing the cost of the entire assignment.
2. Risk minimisation in terms of security and healthcare in some countries.
3. Linking career development with international assignments.
4. Career disruption for the expatriate’s partner.
5. Continuing to operate legally within changing laws across the world.
6. How much of expatriate administration management should be done in-house.
Managing assignment costs
Heather Duncan is Hewlett-Packard’s (HP’s) relocation management consultant. Her department of five manages more than 200 inbound Asia Pacific expatriates as well as Australian domestic relocations. Duncan says that because everyone is travelling more than in the past, there is not as much hand-holding as there used to be. “The inconvenience [of working in another country] used to be compensated, but now employees are expected to look after themselves a lot more,” she says.
Duncan has been working in international relocations for 12 years now, so is well positioned to talk about trends in the market. “HP now tailors packages to suit the individual. Our flexibility reflects the needs of each individual’s circumstances,” she explains. For example, HP will pay school fees for some expats, but this means that something else within the package budget is decreased. In times past, most companies which employed an expatriate work force automatically paid school fees. The company produces a cost projection for each international assignment and the cost is then allocated to the home or host country.
In contrast, Toyota Motor Corporation Australia has standardised all its international relocation packages in the past two years. Sue Calvey, Toyota’s global assignments manager explained that there is now no disparity between employees on the same level and that the policy is available for all to see on Toyota’s intranet. “We use data from Mercer to determine the expatriate incentive and the quality of living (QOL) incentive to produce standardised packages and to ensure a transparent process,” she says.
Risk minimisation – security/health care
The recent SARS epidemic in Asia and heightened security risks in many countries around the world have forced organisations to review risk minimisation policies. Heather Scott, remuneration analyst and international assignee manager for Orica, says the company has its 60 expatriates in some politically unstable areas in the Americas, the Middle East, PNG and the Pacific, as well as SARS-affected countries in Asia. Orica outsources its entire expat administration management function to KPMG, although it currently has to re-tender, due to corporate governance issues. (KPMG is Orica’s external auditor as well).
“During the SARS epidemic, our employees got medical check-ups every week. All were offered evacuation, but none took it up. Some sent their families away for a while, but mostly, they just worked from home if there was a risk,” says Scott. KPMG sends out a security bulletin every week. Orica’s policy states that if there is a security problem, the employee must call a certain emergency phone number and protection or evacuation plans are activated immediately.
Toyota has an office in Bahrain. Calvey says that things are running fairly smoothly there at present, but are closely monitored. A detailed evacuation plan for these employees was developed several years ago in response to heightened Middle East tensions.
Duncan says that HP has a high priority on security for business travellers, assignees and their families. Emergency contact details and contingency plans are in place for all. During the SARS epidemic in Vietnam and China, HP offered R&R, repatriation or temporary relocation to its international assignees. Not many took up the offer, although some did send families away.
Linking career development
There was a time when poor performers were shipped off to other countries, rather than shipped out of the company, but those days are behind most modern day businesses. Heather Duncan says that career planning is often not done well in many companies. “One of the problems is that people grow too big for the small ponds they came from, so sending them back after the assignment doesn’t work for everyone.” If they are happy in the country and job, Duncan says they should be “localised” (moved on to local employment conditions) after five years. Heather Scott says that Orica often considers another international assignment after the successful completion of the first one. “A third country move is common, creating a global executive expat population,” she says.
Partner’s career disruption
When moving an employee overseas, you also have to take into account the disruption this will cause to their partners and family. Many families have a dual income and one of those incomes will probably have to be sacrificed in order to move with the employee. Duncan says that HP takes this into consideration when negotiating the expatriate’s salary.
Toyota sends a lot of its expatriates to Japan, but says that getting a working visa for the partner in many countries is generally difficult. “If it is possible to get a working visa for the partner, Toyota will fund the application for a visa, as well as provide resume and job hunting services for the working partner,” says Calvey. It is also difficult to get a Japanese visa for de-facto partners, or the wife of someone who has not changed their name at marriage. In the latter case, Toyota pays for all the documentation required to change the wife’s name.
Operate within changing laws
Even companies that manage all of their expatriate administration in-house will outsource its international taxation compliance to a specialist firm. According to KPMG’s Global Assignment – Policies and Practices Survey 2003, 78 per cent of companies tax equalise their assignees. This means they pay no more or no less tax than they otherwise would at home. However, 35 per cent have a laissez-faire attitude to spousal income and 28 per cent ignore income from other investments. KPMG notes on its International Payroll Assurance brochure that “tax officials in Indonesia are working in conjunction with immigration in order to review expatriates’ compliance with taxation law.” Clearly this is an area that needs to be considered by all international assignees and their companies.
In-house or outsource?
“It is important to understand what is involved in international relocations. It is extremely time consuming and a long process. If you don’t have the resources, you’d be well advised to seek external specialist support and develop successful partnerships,” says Toyota’s Calvey. Orica outsources all but remuneration, in order to “free up the line managers and HR to focus on the business policies and strategies, so they don’t get bogged down with administration,” says Scott
Expatriate administration
An exhausting, but not exhaustive list of considerations…
Salary package: Cash component, currency, where it’s paid, where it’s taxed, tax equalisation, cost of living allowance, hardship allowance, superannuation continuity
Perks: Home visits, school fees, tax on fringe benefits, relocation leave, extra annual leave
Productivity: Language classes, cross-cultural training, driver or translator, communications in host country
Housing: Sell or rent out own home, find accommodation in host country, pay rent in host country, relocation allowance, international removalists, local storage, family relocation, visas for all, ability of partner to work in host country, suitable schools and health care, security/health considerations
Risk minimisation: Immunisations, pre-assignment medical, transit insurance, travel insurance, vehicle insurance, health insurance, safe driving courses, evacuation plans, personal security (bodyguards)
Repatriation: length of assignment, career development planning, managing expectations
