This blog is guest authored by Tom Saunders, Business Development Manager, International.
Global mobility is on the rise again post-COVID. As the number of employees working abroad increases, nearly 47% of all employed expats moved to a different country for career reasons, with 15% being internationally recruited. The ROI for these kinds of mobility programmes remains strong:
- Higher performance and stronger commitment: According to a Localyze survey, 78% of businesses surveyed saw relocated employees demonstrate higher performance and a stronger commitment to the company.
- Address global talent shortages: 88% of HR professionals in an EY survey considered mobility as an approach to address global talent shortages.
- Drive business growth: 90% of employers believe aligning their mobility strategy to organisational goals drives business growth, according to the same EY survey.
So, how do global mobility programmes look in the world of employee benefits and total rewards? In short, international mobility programmes can create considerable complexity regarding benefits. It can be a compliance minefield, and the potential for things to go wrong or get missed is significant. It’s no surprise to hear that whilst only 35% of organisations say they have digitalised key mobility processes, 76% plan on investing in this area over the next five years.
What we mean by global mobility
There are several short-term types of mobility, including business travel, nomad working and short-term assignments (generally lasting for a year or less). Each of these has its unique requirements when it comes to benefits, but for this blog, we are going to focus on the following two categories:
Long-Term Assignments: Generally lasting between one to three years, although these can be extended. Anything over five years is then typically seen as a permanent move. In this case, the assignee maintains their home country's compensation and benefit plans.
Permanent Assignments: These are framed as a “one-way trip” for an indefinite period, where the assignee becomes a local company employee. Here, the best practice is for the employee to transfer to their new country’s local payroll immediately, and all compensation and benefits are based on the labour laws and requirements of the destination country.
Key Considerations for Digitalising Assignee Benefits
The biggest factor when it comes to assignee benefit management is whether the assignment is long-term or permanent. As mentioned above, a long-term assignee will maintain their home benefits, whilst a permanent transfer will move to the local benefit plan.
For long-term assignees, the key benefit change will be that they likely move onto an international medical plan (often covering medical, dental and vision), so it is essential to notify the current carrier that the home market plan will be paused whilst also notifying the international carrier of the “new joiner”. The programs may vary significantly, require additional information, and will likely necessitate the resubmission of dependent details. Having a central record of this data and seamlessly integrating with carriers globally can ensure that this happens automatically and that any relevant payroll deductions are made.
We also see in the long-term assignee scenario that some organisations choose to offer some of the local host benefits to the assignee, although they are restricted to non-tax efficient benefits as the assignee will not be domiciled. If this is the vision of your organisation, then having a global benefits system has several key advantages, such as the employee being able to switch between countries (avoiding the pain of having to use multiple systems) and being able to track total costs and uptake in a single analytics tool.
Permanent transfers are a bit more complex as all the benefits will need to be concluded in the home market and the relevant providers notified, whilst all the new benefit providers in the host market will also need to be informed of the new local employee. For organisations with rich benefit plans, this could be upwards of 20 different providers who all need to be notified of this change.
By ensuring your providers are integrated into a digital benefits system, this predominantly takes place automatically without the employee or benefits team having to do a single thing, therefore removing a significant amount of manual work. Similarly, for long-term assignees, it may also make sense to continue to allow access to the home market benefit system for a time to allow employees to view their historical benefits, such as pension and long-term incentive plans. Doing this in a single system makes it much easier for everyone involved.
Providing clear and personalised communications about benefits and beyond
When employees move countries, a lot needs to happen. I recently saw a brilliant infographic from ECA International, which showed just how much needs to be considered, and even this is relatively high-level.
Finding a new home, learning a new language, moving your children from their school, finding your spouse a new job. All monumental undertakings in their own right, not to mention it is all in a country they will likely know little about. What an employee shouldn’t need to do at this time is worry about what happens to their benefits, and constant, clear communication can help.
One area where we have recently helped several clients is around a concept Benify calls “Custom Pages”. These provide the ability for an organisation to create a personalised area to host information, which can be challenging to host on intranet systems due to their inability to personalise to the individual and provide ongoing communications. They are often used for areas such as wellbeing, share plans and hosting policy documents, but more and more organisations are using these to host information about mobility programmes.
The concept is pretty simple: assignees and expats are effectively treated as new joiners at the company, where they can find a personalised checklist of tasks they need to do, find out what happens to their existing benefits and access the new benefits available, read host location information (such as recommended schools and housing), and find out the latest news about their move. At the same time, the team can use the system to send out personalised communications with the latest updates and urgent tasks. It creates a clear, up-to-date experience for employees at a time when they have so much to think about.
Total Rewards Statements as an enabler for compensation discussions
When it comes to global mobility, expectations around compensation can be extremely complex. Organisations have several options available to them in how to manage this effectively, as detailed by the Society for Human Resources Management:
The home-country-based approach is designed to match the employee to a standard of living enjoyed in their home country. With this approach, the employee's compensation package is typically broken down into four categories: taxes, housing, goods and services, and discretionary income.
The host-country-based approach. This is based on local and national rates, with many companies continuing pension schemes and providing housing allowances.
The headquarters-based approach assumes that all assignees, regardless of location, are in one country (usually the HQ).
Balance sheet approach. Compensation is calculated using the home-country-based approach with all allowances, deductions and reimbursements. After the net salary is determined, it is converted to the host country's currency. The team then list all expenses in the home and host countries, and any differences are used to increase or decrease the compensation to ensure balance.
However, when it comes to completely local benefits, it can be like comparing apples and pears. I recently heard a story of an employee moving to a host country where pension contributions agreed by the collective agreement were significantly higher, whilst social security contributions also heavily outweighed those of the home market, and the currency exchange has fluctuated considerably since the budgeted year. For the same total package, the salary couldn’t be directly converted without a significant increase in cost to the company.
For these challenges, we see a real advantage in using total reward statements as part of the offer letter to visualise the total compensation the employee will receive. Companies can also take inspiration from markets such as India and South Africa, focusing more on cost-to-company statements instead of total rewards to enable an honest and open discussion regarding a compensation package.
Providing access to a holistic benefits package to reduce mobility failure rates
In truth, there is a wide range of estimates online regarding failure rates for assignees, and they vary significantly by industry and destination (research from INSEAD estimates it at around 40% overall). But the reasons for assignments not working out don't vary anywhere near as much. One in three (33%) of 163 global mobility leaders from organisations such as AbbVie, Bayer, and Cipla say mobility assignments fail because of family-related issues, whilst 18% put it down to the inability to adapt to the host location. This raises the question, are organisations providing the right benefits package to support employees with their move?
There is typically a range of core mobility benefits offered to assignees which Benify support clients digitalise, such as:
- Home leave & travel allowance, including dependents
- International Medical, Dental and Vision Plans
- Relocation allowances
- Housing (allowance-based or in-house provision)
- Company cars
- Emergency evacuation services (medical, political, natural disaster)
- Locally-compliant benefits if the transfer is permanent
However, to improve the success rate with transfers, we see more companies offering a more holistic offering to support their employees in the new home market and address common failure reasons, with a few examples below:
- Company events, sports clubs, and wellness allowances to provide opportunities to integrate and build a social network
- Childcare support (with families moving away from their support network, it can put real pressure on spouses)
- Mental health support and access to an EAP service
Language learning classes
At a time when everything is new, it becomes even more important to effectively communicate which benefits they can access to support their specific needs, and we see technology playing a massive role in helping with this.
If your organization operates on a global scale, don't hesitate to contact our team of professionals to explore how we can assist your HR teams in providing a seamless rewards and benefits experience for all employees. Click the link below to schedule a personalised demonstration.