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Employers struggle to curb costs as the number of expatriate staff grows

With the number of expatriate employees increasing, companies have been forced to cut costs on constraints on international assignments whilst maintaining competitive packages.

According to Mercer’s International Assignments Survey 2010, which collected data from over 220 multinational firms across all industries, organisations globally now have more structured international assignment programmes that put emphasis on shortened assignments, hiring locally and eliminating non-essential benefits in an effort to manage costs more effectively.

Despite the economic downturn, international assignments overall have increased by 4% over the last two years and to control costs, companies are focusing on short-term assignments and, as a result, these have been increasing more quickly than the traditional long-term assignments.

According to Mercer’s findings, 50% of companies reported a rise in short-term assignments and these are becoming more aligned with organisations’ objectives due to their quick approval process. As a result, two-thirds of companies globally have developed special policies for short-term assignments.

According to Mercer’s research, over one half (56%) of companies send married employees without their families on long-term assignments. European companies lead the trend in this type of single-status assignment with two-thirds (66%) sending married employees on assignments alone.

Overall, companies report few changes in their compensation approach. Some are implementing a host country local approach to save costs, but finding candidates to move can be difficult with such a policy. Furthermore, with the increase of destinations in low-paying countries, the host approach cannot be applied consistently. These constraints can contribute to the need for more differentiation in policies, by length but also by type of assignment.  

Companies in North America typically provide a housing allowance with a required employee contribution and provide assistance toward employees’ housing in the home country. In other regions, companies provide free housing but employees must pay housing costs in the home country. In line with other cost-containment measures, companies are paying closer attention to the maximum budget for housing benefits and possible double payments of utilities under the cost-of-living and housing allowance.

    Security measures: More than one-third of companies have international assignees located in high-risk regions of the world and there is an increased awareness of risk among companies sending their employees to these areas. Nearly two-thirds of companies – up from a half two years ago – have a formal evacuation plan in case a situation becomes critical in high-risk locations.

        Commuter assignments are becoming more popular in Europe and North America, with an increase from 28% to 45% in the former and from 30% to 35% in the latter. Due to the distance travelled in Latin American companies, commuter assignments are not a common practice with them.

        And nearly all companies continue to provide home leave to their international assignees, either in the form of travel fare to the home location or a budget. Except for North America, where 46% of companies pay for some expenses during home leave, companies typically do not cover any of their assignees’ expenses.

          Given the financial and administrative costs associated with international assignments, most organisations are reviewing their global expatriate policies. Nearly nine out of 10 organisations worldwide have been revising or are planning to revise their expatriate policy which includes benefits and allowances in order to save expenditure.

          Among all regions, benefits (housing, education and home leave) along with expatriate allowances and premiums (cost-of-living allowance and mobility/quality-of-living premiums) are the leading elements of mobility policies under review.  

          In addition, organisations are introducing ‘light’ contracts, applying stringent governance procedures, creating a closer link between assignment and talent management, simplifying processes and ensuring effective communication amongst expatriates and the organisation.

          Moreover, companies are trimming costs by hiring expatriates locally instead of paying for expensive moves from the home location. According to Mercer’s research, approximately 50% of companies have increased or plan to increase the number of expatriates hired locally.

          More than ever before, companies are torn between cost containment and addressing pressing business needs. According to Mercer’s research, approximately the same proportion of companies identify costs (60%) and the difficulty of finding suitable candidates (58%) as the main obstacles for international assignments. Concerns differ slightly according to region. In the Americas, the biggest deterrent is cost, whilst in Europe and Asia it is the lack of suitable candidates.

          Moreover, while business expansion is still a chief reason for sending employees on international assignments, other factors like knowledge and business performance are becoming more important. More than two-thirds (68%) of companies report that the key driver for sending employees on assignments is lack of available local expertise, while 59% say it is improving the performance of an operation and 56% say it is due to launching a new business.

          Anne Rossier-Renaud, senior consultant at Mercer, said: "Organisations are endeavouring to save costs but only to the extent that suitable internationally mobile employees can be attracted and retained. Whilst it is still challenging to locate the right candidates for assignments, the economic environment and higher jobless figures have somewhat widened the candidate pool. Many applicants are keen to move to countries less affected by the crisis than their own.

          "As a result of the economic climate, many companies have had to postpone planned foreign investments and have turned the focus to their existing overseas operations. What we’re seeing is a growing proportion of international assignments where employees are placed in locations that lack the local technical expertise."