One of the questions I help companies resolve with greater frequency these days concerns intra-regional moves and the advantages (and disadvantages) they offer over traditional expatriate moves.
For example, deploying Asian expatriates can be a cost effective approach to global staffing in Asia because local assignees can often be compensated differently from traditional Western expatriates entering Asia Pacific. That said, there are still some challenges to overcome with regard to compensation and the benefits to be provided, based on the nature of the assignment, the characteristics of the home and host country combinations, and the particular demographics of your assignees.
Are employees moving from a low to high tax, high cost environment? Are most employees single or accompanied? Are most employees line managers or more senior level directors and above? All of these factors, and more, play into the decision making process. There are many variables to consider when analyzing your program and contemplating changes.
Many companies in Asia address their talent attrition and talent development issues by deploying local staff throughout the region on alternative types of assignments that includes local-plus, permanent transfers, localization, and local-foreign hires. Deloitte’s Fueling the Asian Growth Engine report found that permanent transfer and localization moves have become standard practice among many firms in Asia, with 49% and 53% respectively having formal policies in place.
Permanent transfers, in particular, are not only on the rise but also the most common way for deploying talent within Asia as a way to manage assignment costs and because more Asian assignees are requesting intra-regional transfers as opposed to being tapped on the shoulder and asked to go. Indeed, ECA found that companies based in Asia are more likely to use a host-based approach to pay expatriates working in Asian countries in general than companies based elsewhere would. (ECA International, Mobility in Asia)
Local-plus: an approach in which expatriate employees are paid according to the salary levels, structure, and administration guidelines of the host location, as well as being provided, in recognition of the employee’s foreign status, with special expatriate benefits such as transportation, housing, and the costs of dependents’ education. It is worth noting that not all expatriates on local-plus receive the full range of additional benefits, these being at the discretion of the employing organization and largely determined by the location of the assignment (e.g. hardship versus non-hardship location), among other factors.
Permanent transfers (local-to-local): an employee who resigns from his/her home country office and is hired by the host-country office of the same MNC at the time of relocation, but for which there is no return to the home-country and no promise or guarantee of repatriation or re-assignment elsewhere; employees are expected to operate as a ‘local’ in the host country. Also known as one-way moves, intra-regional moves are more likely (than inter-regional moves) to be arranged on a permanent transfer basis, which removes the requirement to link salary back to the home-country (balance sheet approach).
Localization: involves the removal or absence of an assignee’s “expatriate” status from a policy standpoint, including benefits and allowances. In practical terms, it means that ties back to the home country from where an assignee has come from, or from where they may have originally been remunerated, are severed and the assignee becomes a “local” in the host-country. It almost always involves replacing a salary package (e.g. base salary, incentives, allowances, perquisites, social security, and retirement plans) with compensation comparable to that offered to locally hired employees.
Another Global Mobility Survey shows that 54% of companies with international assignment programs in Asia headquartered companies have a different set of policies for different types of assignments but this trend does not compare favorably to the global average of 64%. Conversely, 34% of companies in Asia vary assignment packages according to intra- versus inter-regional assignments. You may consider using a staffing model to help determine the assignment type and associated benefits to provide in order to support the assignment.
Many companies use the same policies and benefits they would use for international permanent moves, but when there are intra-regional assignments or transfers, various scenarios prevail, depending on the country pairs and the economies in each country. For assignments within a given region, the consensus is while it’s not necessary to provide a long term assignment package of benefits, more flexibility is required with regard to the method of compensation employed in order to attract and retain the best talent available.