Rising costs urge shorter assignments: Companies call expats home
Some expatriate packages might need revision on the down side as some countries' cost of living might have reduced in the last few months
While calling back their expatriates, companies must have a structured repatriation program in place to retain this talent within the organization
Finding the right balance between business need for international presence, cost pressures and employee aspirations.
Globalization is no more a concept. It is a reality. Organizations are facing a dichotomy today, on the one hand they require global presence and that still means that they need to post employees internationally and on the other hand the economic impact of having employees working abroad is putting pressure on the cost side. Expats and expat assignments have come under the microscope in most Indian companies.
Companies have seen the benefits derived from expatriates during the boom times. Qualified skill and cost advantage have been the main drivers for Indian companies to send their employees abroad. But today, the demand of these skills has decreased due to the economic downturn and the cost advantage has also reduced significantly due to a steep increase in wages in India and other perks and policies incorporated during the boom times.
Where is the return on investment?
Organizations are undoubtedly taking a very close look at the return on investment for each expat assignee. HR Teams are doing a complete evaluation of each expat assignee and are supporting the business to make a decision on whether to maintain that position or not. The reasons for maintaining an expatriate abroad can be short term or long term. In the short term, companies might be able to generate profits by posting an employee abroad and billing the client for a premium based on skills and availability of talent. In the long term, companies might be posting employees abroad for business development or for setting up operations, with no immediate revenue but with the view and strategy to generate profitable business from that location.
Companies should also reflect on the fact that the return on investment is not always financial. Providing opportunities for employees to opt for expatriate assignments also contribute to career advancement and employee engagement & retention.
Companies need to look at each expatriate and understand the benefits of maintaining this role, both from the short and long term perspective. So, before calling expatriates back home organizations need to do the cost benefit analysis. Here are some ideas on how to reduce the cost pressures while maintaining presence of expatriates abroad.
Decreasing the expatriates cost
Market correction in expatriate compensation
In the compensation front, HR departments need to keep a close look at the market situation and cost of living adjustment in the host countries. Some expatriate packages might need revision on the down side as some countries’ cost of living might have reduced in the last few months (cost of rent, availability of products and services at more affordable prices, etc). HR departments should be carrying out compensation evaluations and benchmarking surveys to ensure that they are paying right. Another big impact of the compensation package for companies is the exchange rate fluctuation and its impact on the bottom line. This factor needs to be included as a variance in the compensation calculations.
Opportunity to revise policies
Since cost considerations are assuming priority for organizations, HR departments should also review all Global Mobility Policies to ensure their applicability and alignment with the current economic situation. Normally these policies provide benefits to employees like travel to the home country for themselves and family, schooling economic support, health insurance, and other perks related to settling down in the new locations etc. In some host countries, these facilities are provided free of cost for people that are ‘working’ in that country. So some of these so called ‘benefits’ are a duplication of something that is provided by the governments as benefits for tax payers. For example, in most European countries health and schooling is provided for free for people working in the country. So companies can look at reducing or stopping the perks related to health or education of children, as this is covered by the taxes the company pays in that country.
Alternatives to full time position as Expatriates
Companies need to look at different possibilities of performing the work assigned to the expatriate in the most economically efficient manner. Here are some options that can combine the best of offshore and onsite possibilities.
Off shoring the position
If the work is such that it can be done, tracked and monitored from the home country, the position can be moved to the home country with infrequent trips to the host location when business requires. The benefit here is that the company is saving on a fix allowance that should have been otherwise paid monthly to the expatriate. Additionally, with today’s availability to technology, companies can minimize the requirement of travel with planning and effective communication.
Localizing the position
The organization may think of localizing the position to control the cost of an expatriate assignment. This means that either the expatriate becomes a ‘local employee’ abroad or the organization hires somebody locally to play those roles in the foreign country. Choosing one option or the other will be a decision based on the requirement of the role and the availability of talent in the host country.
Making the assignment a short term position
The organization can make the assignment a time bound one such that an employee is sent to the host location for a fixed period of time based on the strict requirement of the work. The expatriate can travel abroad to complete a series of task that can include training, hand holding and mentoring of the local team and return to do the monitoring from offshore.
If the position is not required anymore: Plan the transition
HR Departments need to support the business in evaluating the requirement of the position (skills, knowledge, sphere of influence) and need for that position to be in the host country as compared of performing the work remotely from the home country. If the position is not required onsite anymore and you need to call your expatriates home, plan their transition carefully.
Ensure business does not suffer. Companies can look at different options to transition an employee back to the home country based on business requirements and client specifications.
Maximize employee retention and satisfaction. Take care of the career aspirations of your expatriate when you are calling them back home. Normally, their skills and understanding of the company have increased radically due to the exposure and experiences gained during the international assignment, and capitalize on their talent by giving them a role that can maximize the use of that exposure.
While expatriate assignments and assignees have come under the microscope given the surge in costs, organizations need to be pragmatic and view the situation in a way that balances both the requirements of the organization and aspirations of the employee. Expatriate assignments have been and will continue to be a path towards career enhancement of high potential individuals. Therefore, it is important to look at alternatives to minimize the cost of those assignments and giving those opportunities for your employees. While calling back their expatriates, companies must have a structures repatriation program in place to retain this talent within the organization. HR departments will need to support businesses to maintain this sensitive and delicate balance between surging costs and repatriation of their expat assignees.