Dave Reis's HR Web
International HR

DATE: March 6, 1996

AUTHOR: David M. Reis

Summary of Surveys on Expatriate Management Practices

Index references are to the questionnaire on strategic international human resource policy and management of international employees.

The amount of material available for each section of the questionnaire varied greatly. In particular, very little information was available for the "strategic international human resource policy" section.

Significant Points of Interest

  • Have a variety of approaches (e.g., home country, host country, hybrid) to fit different situations
  • Set total compensation pie and let employee choose how to allocate
  • Different programs for married vs. single, with/without children, etc.
  • Destination pricing, which is keyed to what an executive would be paid in the local market, and substitutes certain allowances with performance related inducements
  • Lump-sum mobility and completion bonuses instead of foreign service premiums
  • Tie premiums to achievement of business objectives.
  • Efficient purchaser model for allowances
  • Cafeteria approach where employees choose benefits they want
  • Some companies eliminating premiums entirely
  • Need based, vs. wholeness, approach
  • Eliminate home buy-out. Replace with home marketing assistance program.
  • Marketing bonus (e.g., 2.5% of sales price) to employees who sell their own home
  • Encourage expatriates to retain and rent their home.
  • Relocation credit cards.

Strategic International Human Resource Policy

5.a. recruitment and selection of management employees (18) All companies reiterate that colleges and universities provide the greatest number of new employees for both entry and upper-level positions. However, in Europe, employers now seek more experienced people who are able to immediately add to companies’ profitability. Interviewed companies tend to concentrate their European university recruiting efforts on developing firm relationships with individual professors rather than with career placement centers as is the norm in the U.S. University career placement centers are a secondary source. To enhance university recruiting efforts companies may: donate used equipment to universities or key professors, act as guest speakers in classrooms, bring students to company plants to pursue theses, sponsor interns, or support research teams of professors. Companies use recruiting consultants far less frequently than U.S. companies, but may have some local arrangements, and international volume discount contracts with agencies such as Manpower, Inc. Companies also rely on communication between existing employees and potential candidates, some newspaper advertising, referral bonuses to current employees, and the internet.

Management of International Employees

II.1. selection of employees (2) 11% of companies use external vendors for selection and assessment. Companies that don’t use vendors generally choose candidates based on technical skills and rely on internal methods for selection. (10) Run cost projections and inform management before you send anyone. Develop a pool of candidates. Encourage HR’s role in the selection process. Pre-screen candidates before approaching them about an available assignment. Prepare a brochure summarizing the main points of the international program. Look beyond work experience (e.g., personality, family). (15) Use global employee resume database to develop candidate lists. Use short-term (6 months) assignments more.

II.3. pre-assignment orientation (3) 23% provide pre-move counseling, of which 8.3% is provided by a relocation firm (rest provided inside the company). (10) Present the foreign service program in both written and oral form, and include the spouse. Consider expanding the scope of the employee assistance program (EAP) to address concerns of international transferees. Outline and clearly communicate job responsibilities. Provide advance trips to transferee and spouse, and have the employee bring the appropriate documents to start the immigration process. Give employees a list of documents they should hand carry. Educate spouse re: realistic job prospects. Be frank regarding the quality of schooling for children. Educate employees about emergencies and good health care providers.

II.3.xiv. physical exams (6) Approximately 80% of companies cover medical exams for U.S. citizens transferred abroad. (7) Generally required for all family members at company expense. Per Mercer, companies also typically provide for the updating of legal wills (not initial drafting).

II.4. advance trips (6) Nearly 60% of companies provide advance trips prior to transfer offer acceptance. (7) Typical U.S. company practice is a 7-day trip with spouse with all reasonable expenses covered. Economy airfare is typically utilized if flight is less than 5 hours.

II.6. tax advice and return preparation (3) 83% provide additional tax assistance for international relocations. (10) Always have planning interview before departure, as opportunities are lost once employees are overseas. Review what needs to be done to terminate state domicile to avoid state taxation on the employee’s worldwide income. Always monitor the assignment’s timing - to reduce the overall tax costs, you might want to shorten or extend the assignment. Pay attention to foreign tax assessment dates. For example, inhabitance taxes in Japan can be avoided simply by ending an assignment just prior to the assessment date. Most companies offer expatriates a tax return preparation service for both U.S. and foreign tax returns as a way to control company cost. Negotiated fees are usually set with one of the Big 6 accounting firms. With the company committed to pay the excess tax burden under tax equalization, it is important for the company to ensure itself that the returns are prepared on a least tax basis.

II.6.c. tax reimbursement policy (4) Tax equalization is overwhelmingly the global norm. The basic premise behind tax equalization is that the expatriate pays no more and no less tax than they would have paid had they stayed at home. The employee pays a hypothetical tax on their base and bonus, and the company pays all home and host country actual taxes. (10) Remember that the sale of the stateside home increases tax costs due to the lost interest deduction. Before the assignment, have the expatriate participate in calculating the projected taxes under tax equalization so they aren’t surprised at year-end. Have a formal statement in the policy that limits the amount of outside income the company will tax equalize without management approval. State in the employee contract that the foreign tax credits due to company-sourced income belong to the company. Continue tax equalization for one year after the international assignment ends to cover taxes on any delayed expenses and ensure that any forthcoming tax credits go to the company. (11) Word the tax equalization policy in a general way to avoid having to get policy changes every time the law changes. (16) Be sure to charge a state hypothetical tax. Although many employees break state residency while on assignment, and a state tax return is not necessary; the company should reflect the state tax savings in the tax equalization calculation because it represents a true benefit to the employee. Use actual itemized deductions, not hypothetical federal itemized deductions, to ensure that employees that have few actual deductions don’t get a windfall.

II.7.a. language training (2) 75% of employers offer language training (57% of those who don’t select employees with language skills.) (4) Language training is offered to expatriates by about 85% of U.S. companies.

II.7.b. cultural training (2) 59% offer cross-cultural training to employees. 94% of spouses and 85% of children receive training. 33% of companies offer programs that examine the influence of culture on various business functions, such as negotiation, motivation, superior/subordinate relationships, evaluation, etc. (5) In the 63% of companies that offer cross-cultural preparation programs of at least one day’s duration, over half of the eligible expatriates choose not to participate. (5) 34% offer programs to all family members, 25% to the employee and spouse, and 4% to employees only. (2) 46% offer business briefings to employees (many of the companies that don’t believe that business issues are adequately addressed during cross-cultural training). (14) The average duration of a program is three days. Most companies run orientations solely in the home country before the assignment. However, on-site orientations appear to be a lot more practical than those run before the assignment. Survey participants said orientations should include more on housing, shopping, education, and entertainment.

II.8. spousal assistance (3) 36% offer spousal employment assistance. 18% pay a job finders fee. 7% would actively try to place the spouse in the organization (88% allow it) and 16% would find the spouse a job outside the organization. 21% offer the same assistance to "significant others" (24% per (5)). (16) Of the 27% of employers (ERC study) offering spousal assistance: 70% pay counseling/placement agency fees, 53% pay for resume printing, 35% refer spouse to job contacts, 32% provide printed job-search materials, 31% pay for job-hunting trips, 27% pay for licenses/exams, 23% try to place within the company, 19% provide in-house counseling on job-hunting. (4) 69% of all early returns are due to "spouse problems." (15) Try to coordinate simultaneous expatriation with spouse’s employer. Use company networks to try to find spouse a job. Consider hiring spouse where real value can be delivered. Finance spouse to maintain training level in profession. Reimburse spouse for work-related expenses. Offer flexibility between size of housing and home trips. (16) Some companies, such as Motorola, pay the spouse (assuming he/she previously worked) a fixed amount (e.g., $5,000) per year for 2-3 years, which the spouse can use for tuition, memberships in professional organizations, employment agency fees, language training, etc.

III.1.a. on-site support (2) 73% of companies provide destination assistance. Programs average from two to five days. (16) 35% of companies offer elder care assistance (per 1995 Atlas Van Lines survey) - generally a list of service providers, but sometimes companies will move the elderly relative or allow employees to set aside a percentage of pre-tax dollars for elder care. Nearly 25% of companies have formal policies for child care/schooling assistance - most often a list of service providers, school finding assistance, and written materials.

III.1.b. communications loop (10) Use a home-country mentor who is a senior executive in the same functional area as the employee (not an HR person). Don’t just give employees assistance. Survey them six months after receiving it and see if their needs were met. Forward employees’ personal mail on a weekly basis via express mail. Publish an expatriate newsletter, with articles about different countries written by employees on assignment there, employee profiles, etc. (16) Provide families with computers and access to e-mail and the internet so they can stay in touch. Be on the phone frequently with the expatriate and the spouse. Be sure that community networks are available if the family has trouble. Suggest that parents subscribe to many home country magazines that keep the family current on popular culture. Suggest that friends send videos of popular home country TV programs. Try to connect families who have been in the location with new ones relocating - this is very helpful for children/teenagers.

III.2.a. base salary determination (19) The three most common approaches are the headquarters based system (paid as if an employee of the headquarters country), the home country based system, and the modified headquarters/home based system (combination of their home country structure and a chosen standard). Under the modified approach, allowances are typically tied to salary grades so all expatriates at a particular location with the same grade are provided with the same allowance regardless of their nationality. Base pay and employee contributions, such as hypothetical tax, are tied back to the home country. Expatriates from headquarters most commonly use the headquarters based approach (45%). Expatriates to headquarters and other expatriates most commonly use the home country approach (50%). (16) Some companies use a "higher of home or host" compromise. Within Europe, a common approach is a "net-to-net" calculation. For expatriates moving within Europe, a composite intra-regional salary is sometimes used (set at a higher level than salaries in most individual countries).

(4) Runzheimer most frequently recommends the home country (balance sheet) structure because it facilitates relocation from virtually all locations. The assumption is that the employee will return to the home country at the end of the assignment. (16) Host country pay systems or hybrid pay systems are often better suited for a company’s technology transfer, management development, and organizational development phases. Host country based systems become problematic if the host country pay is lower. Non-U.S. companies are more likely to use a variety of approaches, among them the modified home country, better of home or host country, local market, or other approaches. Having a variety of approaches can contribute to cost cutting (16) Some companies are exploring alternatives to the balance sheet approach because they are now moving people from many different countries and there has to be some kind of parity (it can be divisive to pay expatriates at the same job level different compensation based on nationality). Some companies are exploring different programs for different types of people (married vs. single, with or without children, people who are close to retirement). Cafeteria style programs can help recruit non-traditional transferees. Some companies are exploring destination pricing, which bases the expatriate’s compensation on the economic value of the job, minimizes allowances, which typically incur heavy tax penalties for the employer and have nothing to do with job performance, and fits the expatriate into the local culture. Destination pricing is keyed to what an executive would be paid in the local market. It substitutes such lifestyle premiums as high rents and COLAs with performance related inducements like deferred compensation, loans, lump-sum payments and career enhancement. Mobility/completion bonuses are becoming a trend. (15) Strive to keep net income whole. Use pay-for-performance programs. Make intra region transfer pay systems less generous. Increase flexibility (e.g., lump sum), and use spending account balances with more individual freedom. Send development expatriates on reduced packages (per (19) approximately 40% of companies do this, at least occasionally). Use phantom stock option schemes rather than stock to facilitate tax planning. (18) A small percentage of companies provide non-base premium type job allowances (which it eliminates upon repatriation) for expatriates assuming jobs with larger scopes of responsibility.

(13) Companies should measure compensation on a pretax basis, because administering the global compensation plan on an after-tax basis essentially turns all of your senior managers into expatriates. Any time a government adjusts its tax laws, you will have to adjust your compensation policy. An additional reason is the fact that local managers receive benefits from the taxes they pay (arguably expatriates don’t). It may be wise to exclude medical benefits from consideration when measuring global total compensation because, for example, the cost of surgery varies dramatically from country to country, but the "value" the employee receives is fundamentally the same. Exchange rates used to convert pay to local currencies should be based on purchasing power parity. Eliminate salary grades in favor of total compensation ranges (assuming a pay hierarchy is required at all). Allocating the global compensation pie among the countries could be based on 1) establishing a local mix based on company cost effectiveness and individual tax effectiveness, or 2) defining a mix of pay elements on a position-by-position basis, taking into account the ability of the position to make strategic decisions and the potential impact on company results. You could also ask the employee to decide how they receive their pay. (16) The total compensation approach involves the employer and employee agreeing on the total price that the employer will pay for a job, which can then be delivered as all cash or a mixture of cash and benefits.

III.2.b.i. foreign service premium (16) 34% of U.S. companies don’t pay any premium. 28% of companies now pay lump sums. (19) Approximately 30% of companies pay no premium, 35% include as part of normal pay cycle, 25% pay lump sums.(1) Reduce foreign service premiums. (4) The trend is rapidly away from paying FSPs, because many companies believe that they no longer have to incentivize employees in this way. Replace with lump sum mobility/completion bonuses (10-15%) paid prior to departure and after return. Such bonuses reduce tax cost, ease repatriation, and improve the motivational aspect (a large one time amount that is not buried in the regular pay cycle). Need to be sure that use of lump sums doesn’t mean that all of the work for the relocation has been "dumped" in the employee’s lap. (15) FSPs can be calculated as a flat percentage of base salary, a tapered percentage of base salary, or a variable percentage of base salary depending on the location. The amount of base salary on which the FSP is based is normally capped. The question remains whether or not we should continue to use FSPs or mobility premiums as incentives. Maybe we are attracting the wrong expatriates by providing them with incentives which really do not make much sense in today’s global business environment. (16) Tie FSP to business objectives (open the office, hire/train local replacement, complete assignment within 3 years).

III.2.b.iii. hardship premium/danger pay (4) Most companies pay 5-25% of base as recommended by the State Department. (15) Some companies pay a flat dollar amount without regard for the base salary, on the assumption that the degree of hardship experienced is the same for all expatriates at the designated post without regard to base salary. Some companies provide a blended FSP and hardship allowance.

III.2.c. benefits (16) A company might consider developing a basic package for startup operations in new countries, thus avoiding the need to reinvent the wheel every time a small sales office is opened. This might be an offshore program financed via a multinational insurance network and providing simple benefits-perhaps two times salary for life insurance, a 10% defined contribution retirement plan, etc. Corporate benefits might want to approve any new long-term defined benefit liabilities, while giving local operations the authority to make adjustments to the reasonable and customary limits of a health care plan. (18) Expatriates are most often kept on their home country benefit plans.

III.3. payroll procedures (4) Most companies keep expatriates on U.S. payroll. (18) Most companies pay U.S. expatriates from the U.S. payroll to ensure benefits eligibility and reduce tax liability. Some companies offer a split payroll option (e.g., pay allowances and some "spending money" in host country payroll). Because of U.S. tax requirements, most companies pay individuals coming to the U.S. from the U.S. payroll, unless the assignment is very short term (less than 365 days). (19) The most common payroll currency approaches are: total payment in home currency (30%), goods and service and housing allowance paid in host currency (rest in home currency) (20%), currency split based on employee request (20%), total payment in host currency (10-20% depending on whether coming/going to headquarters). (10) To potentially avoid higher foreign tax rates on bonuses, premiums, and stock options, and take advantage of foreign tax credits, make payments before employees leave or after they return. You can even split the payment, which can also serve as an incentive to complete the assignment. (10) Make sure the payroll department is clear on the concept of tax equalization so they can implement the proper procedures. (15) In countries such as Italy and Sweden that require that the expatriate be paid entirely in local currency, it may be possible to simplify payment by considering the foreign branch as a "paying agent" for the domestic payroll department. (11) Loan bonus arrangements are possible in a few countries - the employee borrows money from a bank to pay their foreign taxes so there’s no compensation from the company to the employee in the current year. When the employee repatriates , the company pays the employee a bonus equal to the amount owed the bank. (16) Double check the tax coding of expenses. Sometimes companies don’t do a good job of putting things in the right category, and they en up counting things as income that aren’t really income. For example, loan discount points are tax deductible and should not be grossed up.

III.4.b. housing allowance (10) By providing housing for expatriates in certain countries (e.g., Japan), you may be able to avoid taxes that would normally be levied against a housing allowance paid directly to the employee. (4) Regardless of which alternative you choose (e.g., wholeness), consider charging a housing norm or employee contribution (don’t provide free housing). Move toward a need based, not wholeness, housing allowance. (15) Base allowance on actual family size, not just two breakdowns (no children, married with children). Don’t use a flat percentage of base salary, because as salary increases, a smaller portion of the increase goes toward housing. The expatriate’s contribution to housing cost could be based on 1) the maximum contribution the expatriate will be required to make to the cost of housing (the expatriate must bear the cost up to the amount of the deemed home country housing cost - if rent and utilities exceed that amount, then the employer will pay a foreign housing allowance up to a stated amount in excess, or 2) the employer pays the full cost of foreign rent/utilities up to the maximum. The most effective way to control foreign housing costs is to have a foreign housing cost figure which is current, is credible and is adhered to. The maximum rental figure given to the expatriate must be one at which suitable rentals are available. Whatever housing allowance is paid to the expatriate it should not exceed the lesser of actual rent or the maximum rent set by the guideline. (10) The housing deduction should be included in the home country rental loss calculation - many companies reimburse employees for rental losses without including the housing norm in the analysis and, consequently, reimburse employees for losses that do not exist. Many companies have tiered benefits where relocation provisions (guaranteed buy out, loss on sale benefits, shipping of vehicles, tax gross up) vary by the level of the person. It may be desirable to avoid having different programs for U.S. expatriates vs. those from other countries, as the differences can cause resentment.

III.4.d.i. purchase of home by outside firm (3) 42% will purchase the employee’s residence (mostly through a third-party program - only 14% of companies have in-house purchase programs, 67% of companies use third party homesale assistance). 78% will pay the average of several appraisals, 4% will pay the employee’s appraised value, and 7% will arrange with a national Realtor. (17) 3% offer guarantee against loss, 18% offer direct reimbursement of selling expenses, 10% offer in-house purchase of the home, 68% use an outside home buying company. (19) 60% of companies do not guarantee an employee reimbursement on the loss from the rental of a home country principal residence - 10% will with a cap or a specified number of months rent or a fixed amount. (16) Eliminate home buy out as an option and replace that practice with a well managed and closely monitored home marketing assistance program; or, if you still want to offer home buy out, require transferees to market their homes for 60-90 days before they can accept the buy out. Delay ordering appraisals up front. Instead, initiate home marketing assistance; then two to three weeks into the marketing period, order appraisals if a bona fide offer has not been make on the home. Do not order all the up-front inspection that have become routine; instead, when the home sells, let the buyer order and pay for inspections (this may only be ideal for newer homes, as repairs may be required on older homes). Extend the self-marketing period up to 30 days beyond the normal buy out, provided the property is listed realistically and market conditions are favorable for a sale. Consider paying for repairs on the property even though, technically, repairs are the transferee’s responsibility. Doing so may facilitate a sale, and a sale is generally preferable to the carrying costs. (16) American President Cos. Offers employees a 2.5% of the sale price marketing bonus to employees who find a buyer during the required 60 day marketing time. The bonus can be grossed up for tax and can only be available if the sales price is within a certain percentage of appraised value. Adverse selection (the homes that are the easiest to sell will be the ones most likely to become amended sales values, and the problem properties will remain and be sold as "regular" sales) can cause the payment of a bonus to be less effective than a properly structured, mandatory marketing period. (16) Encourage expatriate to retain and rent the home to avoid payment of sales costs (i.e., pay employees a one-time payment equal to 15% of base salary on stipulation that employee agrees not to buy a house at the new location during a 3 year period). Some companies use a buyer value option (amended value from ERC) instead of direct reimbursement. Value is determined when a buyer is found. Individual then sells to the company who sells to the buyer. In this way gross-up is avoided.

III.4.d.ii. direct reimbursement of home selling expenses (3) 75% pay all costs. 9% pay none of the costs. 13% pay only the real estate commission. 42% guarantee a sales price. Per 1996 ERC Monitor, 96% of cos. Pay broker’s commission, 83% pay seller’s closing costs, 61% pay tax gross-up, 35% pay seller’s discount points, 35% pay duplicate housing expenses, and 9% pay for the cost of money. (9) Some companies offer a cafeteria approach to relocation benefits - employees can select what they want (i.e., temporary lodging expenses, but not closing costs). They offer a standard policy (e.g., househunting/homefinding, travel to the new location, temporary living, household goods shipment, miscellaneous payment, tax gross-up) and additional options (marketing assistance, home sale by employee or third party, rental management, loss-on-sale assistance, home purchase reimbursement, mortgage assistance, renters assistance, shipment of cars, shipment of pets, spouse career and family acclimation). Sears has implemented a one-percent selling incentive for employees who secure a home buyer. They have a broker referral program that employees call to secure a listing agent as well as an agent at their destination. Sears then earns referral fees. At Sun Microsystems, employees would receive closing costs only if they list with a designated broker and use the company’s home marketing service. (16) Companies often negotiate arrangements where the relocation company, or the employer, receives referral fees from the brokers that are responsible for buying/selling the employees home.

III.4.d.iv. lease termination expenses (3) 78% pay a lease termination penalty. 34% pay hook-up fees. 25% pay for security deposits. 41% reimburse search fees. 74% offer storage. 80% offer home finding trips. 30% apply temporary living allowance toward rent.

III.4.e. house-hunting trips (3) 42% allow the spouse one expense-paid house hunting trip. 40% allow for two trips. Trips can be 1-2 days (12%), 3-4 days (31%), 5-6 days (24%). (16) Many companies include as part of a lump-sum allowance that can also be used for temporary living expenses, lease breakage or apartment finder fee, pet transportation/boarding, other miscellaneous expenses (e.g., day care), and a cost-of-living-allowance. Paying the COLA (for a typical two-year assignment) in one lump sum often enables homeowners moving into a higher cost-of-living areas to supplement the down payment on a new home (this presumably only applies to domestic moves). Lump sums reduce expense reporting burden and exception requests. The lump sum allowances vary by location. For tax purposes, expenses associated with household goods shipment and home purchase typically are excluded from lump sum allowances. (17) The most common lump-sum miscellaneous relocation allowance is 8.3% of salary (e.g., one month). About 60% of companies tax protect the amount. (16) The miscellaneous expense allowance should be capped at lower than one month’s salary as most employees incur only approximately $1,500 in expenses. The recommended cap is $2,500.

III.4.f. temporary living expenses (19) Approximately 80% of companies pay all reasonable costs, 5% pay a per diem, and 5% include as part of a relocation allowance. (3) 32% pay a lump sum for temporary living/house hunting trips. (8) Normally 28 days is enough time for the transferee to get set up, except when household goods shipments are sent by surface, which often takes longer. In those cases, be flexible. (4) Consider per diems. (17) There has been a decline in the coverage of such expenses for family members (e.g., employee only). The most common time limit for covering such expenses is 60 days.

III.4.g. settling in payments/relocation advances (3) 53% assist with the arrangement of a mortgage or swing loan. 43% offer a cash bonus.

III.4.g.i. direct housing expenses at new location (3) 46% provide a mortgage interest differential (domestic moves?). Per ERC, the trend is toward elimination of formal mortgage interest differential programs. 42% pay for appraisals on houses in the new location. (16) Reduce reimbursement for discount points - some transferees will seek a lower rate by paying more points because they know their employer will reimburse them for it. Use a maximum of two points. (19) Approximately 75% deduct/charge the expatriate a home country housing norm/deduction, usually based on third party vendor data. (19) Only 2% of companies will reimburse a mortgage interest differential for an international move. If the employee purchases a home overseas, the following practices are common: 20%-the employee receives no assistance and will continue to be charged a housing norm, 25%-the employee is no longer required to pay a housing norm, 15%-the company will pay the housing differential.

III.4.h. moving expenses (3) For domestic moves - 70% provide full reimbursement for moving expenses. 43% provide full reimbursement for new hires. Per 1996 ERC Monitor, approximately 50% of companies use payback agreements for new hires which require the individual to pay back some of the moving expenses if they leave the company before a certain period has expired. 50% provide full reimbursement for belongings from a secondary residence. 84% will move an automobile and 56% will move a second auto. 27% will move a boat. 90% will pay to pack all items. 35% will move pets. 42% will pay for extended storage of certain items. 70% provide full replacement insurance coverage, 12% provide a released rate of 0.60 per pound, and 19% provide declared value protection. (4) For international moves, most companies have employees sell their car. Set limits on inbound and outbound expenses. Most companies won’t pay to move pets, and won’t pay for storage. (15) Companies normally don’t require itemization of lump sum relocation allowances that are used to cover incidental moving expenses. The amount is tax protected and equalized. It can be calculated as a flat amount, percentage of base salary, number of month’s of base salary. It can be capped. It can also vary depending on marital status and family size, and whether furnished or unfurnished accommodations are to be occupied. (16) Some companies offer relocation credit cards in lieu of lump sums (e.g., Merck in Whitehouse Station, NJ) to eliminate expense report review and offer employees 24 hour access to funds. Per 1996 ERC Monitor, the average 1995 cost to relocate a homeowning current employee was $45,373. The average cost to move a homeowning new hire was $35,382. The average cost to relocate a current EE renter was $12,962. The cost to move a new hire renter was $9,280.

III.4.i. home finding (6) The majority of companies do not assist foreign service employees in the purchase of real estate in the host-country - the focus is on rental housing.

III.4.j. moving company used (3) 50% of firms use a relocation service or brokerage firm (44% for real estate sales/purchase, 23% for orientation tours for the family, 19% for contracting of household goods moving, 16% for counseling about the planning and details of moving, 12% for counseling about company policy).

III.5. goods & service allowances (3) 34% offer a cost of living differential.(1) Use efficient purchaser model for COLAs and/or use lowest data available from vendors. Use 100% COLA for first year and reduce the percentage thereafter. (4) A modified balance sheet approach is becoming popular, especially for companies with expatriates in high-cost locations. This approach assumes that the assignment is temporary and, therefore, that the expatriate does not require full purchasing power parity while abroad. This plan meets the expatriate’s "needs", but it is not intended to keep the expatriate "whole". (15) Changes in the allowance could be driven by: change in base salary, change in family size, change in relative inflation, change in the rate of exchange. Negative allowances (e.g., foreign country is cheaper to live in) should possibly only kick in when the cost of living dips below 90-95% of home country. (16) Non-U.S. companies are less likely to update the goods and service allowance.

III.6. transportation allowance Although company cars are offered by most companies (sometimes only for bonus eligible employees), the "need" based approach is becoming popular (e.g., don’t pay for a car in central Tokyo as wouldn’t use anyway - pay for public transportation). Lease termination costs are nearly always covered. (19) Approximately 50% of companies provide no assistance with the purchase of cars overseas.

III.6.g. home leave (6) ERC research indicates more than 95% of companies offer home leave. Companies most commonly grant employees one trip per year after their first 12 months on assignment. Companies usually only grant emergency leave for situations involving the immediate family, which typically extends to the employee’s and spouse’s parents and siblings. (10) Develop a clear policy on the class of air travel, and use a travel agency for booking so they can search for low-cost fares. Check into purchasing round-trip tickets for en route travel as they may be less expensive than one-way and the return leg might be used for other travel. Giving an employee a plane ticket rather than a travel allowance can result in a non-taxable event in certain countries. Be sensitive to employee and family emergency leave situations. Don’t become overly bureaucratic or stingy. Encourage employees to use their home leave to network with corporate.

III.7. schooling allowance (3) 67% provide allowances for children to attend certain schools. (10) Arrange payment of school registration fees, tuition, and textbooks in home-country currency. It can speed the enrollment process. (11) In certain countries tax gross-up costs can be avoided if, in effect, the company makes payments directly to the educational institution rather than to the employee who would then make the payment. (15) Generally, children attending college are not eligible for reimbursement of educational costs. They are, however, usually reimbursed for one (40%) or two (40%) trips economy class to the foreign post and back. (19) Approximately 30% of companies provide some reimbursement of nursery school costs. (19) Approximately 60% cover all reasonable costs including boarding, if local schools are inadequate. 20% cover all reasonable costs, excluding boarding.

III.9. Performance Evaluations - (5) Few, if any, companies have structured mechanisms for evaluating their employees when on international assignment. (15) Develop global approach to performance management.

IV.1. repatriation (2) 27% of employers offer repatriation programs.(4) A recent survey of 125 repatriated managers indicated that 77% perceived their reentry position to be a demotion. (5) 75% of companies provide repatriation services - very few provide job guarantees or career development planning. Services offered are: return shipment of household goods (97%), home finding assistance (55%), expatriate career development (31%), repatriation counseling (28%), spousal career assistance (25%). (6) The repatriation process should begin approximately 6 months before the individual is scheduled to come home. (10) Encourage employees to think about repatriation as soon as they depart for the host country. Recognize that reverse culture shock exists and develop programs to facilitate readjustment to the home country. Hold debriefing sessions for the employee and spouse. (15) Where possible, identify potential positions before expatriate is sent abroad; start the repatriation process at least one year before return. Consider local division getting expatriate free for a period (e.g., HQ pick up salary for a few months). Manage exposure and visibility as expatriate begins to search for new positions. (16) Financial planning must be considered before the individual returns, as many repatriating individuals have substantial investment balances in either their company plans or outside vehicles.

SOURCES

  1. NFTC/Towers Perrin Study
  2. Marketscope/IOR
  3. 1995 Atlas Van Lines Annual Survey of Corporate Relocation Policies (domestic moves?)
  4. Runzheimer "Managing The International Assignment" booklet and notes from Runzheimer International Relocation Seminar
  5. Global Relocation Trends 1994 Survey Report, sponsored by Windham International and NFTC
  6. Mayflower analysis (which incorporates ERC research)
  7. William M. Mercer International Assignment Policy Comparative Analysis
  8. ERC International Assignment Preparation & Support notes
  9. June, 1995 Solutions magazine article "The Growing Sophistication of Relocation"
  10. ERC notes from presentations on the Essentials of International Mobility
  11. ERC article on International Taxes and Cost Containment
  12. Chapter 62 - International Employee Benefits, from The Handbook of Employee Benefits, 1992
  13. 1992 article "Developing a Global Pay Program"
  14. ORC 1992 survey on Use of Cultural Orientation Programs
  15. NFTC manual for expatriate compensation and benefits, 1995
  16. various magazines
  17. ERC relocation trends survey - 1995
  18. Corporate Leadership Council March 1995 Survey of Global Hiring and Recruiting Practices and Expatriate Programs
  19. 1995 Price Waterhouse Survey of Expatriate Tax and Compensation Policies
 
 
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