By Adele M. Yeargan,
TheMIGroup, and Roger Herod, Organization Resources Counselors, Inc.
In the last few years, there
has been a significant increase in the number of employees being sent on short-term
international assignments, which typically last from three to 12 months. Management
of these types of assignments has become a major challenge for many companies,
as different departments and business units frequently initiate them. Recently,
520 worldwide multinationals, including 50 Canadian companies, participated
in a survey of company policies for employees carrying out short-term international
assignments. This survey was conducted jointly by Organization Resources Counselors,
Inc., TheMIGroup and The Society for Human Resource Management’s (SHRM)
Global Forum. Survey participants had more than 30,000 employees on short-term
assignments, making this the largest survey ever conducted of policies for these
types of international assignments.
Three quarters of the companies
surveyed reported that the number of their international short-term assignees
was increasing. This is not surprising, given the globalization of manufacturing
and distribution systems in many companies. Participants reported that at least
70 per cent of assignments are either project driven or involved in the transfer
of technology, with approximately 25 per cent to 30 per cent being used for
development and training purposes.
Although employees can be
found working on short-term assignments in virtually every conceivable location
worldwide, the three regions with the highest numbers of assignees are Western
Europe (where 59 per cent of companies reported having assignees), Asia Pacific
(57 per cent), and North America (55 per cent).
Wide ranges of different
nationalities of employees are also being sent on short-term assignments, often
as part of project teams. On average, companies reported having at least five
different nationalities of employees on these types of assignments.
From the survey results,
it appears that almost 80 per cent of employees on short-term international
assignments do not bring their families. However, special assistance is provided
with housing and living costs in the location where they are assigned. In many
cases employees are provided with furnished apartments with self-catering facilities,
as well as some form of daily living allowance.
Policy Issue Challenges
Typically, companies tend to use the same general policy approach for short-term
assignees. Employees normally remain on their home compensation and benefits
plans while on assignment and continue to be paid through their usual payroll.
There is, however, a wide range of practices between companies in the types
of incentives, level of living allowances and even the number of times they
will pay for trips home for employees to visit their families. Incentives
The survey results show
(See Figure 1) a significant difference between companies as to whether it is
necessary to pay Foreign Service Premiums and Hardship Allowances to short-term
assignees.
Type
of Allowance
Provide
Do Not
Provide
Provide
on a Case
by Case basis
Foreign
Service Premium
36% do
provide
50% do
not provide
14% provide
on a case by case basis
Hardship
Allowance
52% will
pay for designated locations
48% will
not pay
Reasons for paying Foreign
Service Premiums to short-term assignees, which typically run from 10 per cent
to 15 per cent of monthly base salary, vary. Some companies find it necessary
to pay premiums because of competitive practice within their industry; others
do so because the employee is separated from his or her family, while others
do so to be consistent with their regular expatriate policy. Nevertheless, 50
per cent of companies find that their employees are willing to undertake these
types of assignments without any additional financial incentive.
The issue of Hardship Allowances
is equally contentious. Consistency with regular expatriates working at the
same location is the main reason why half the companies pay Hardship Allowances
to short-term assignees also. The other 50 per cent of companies will usually
argue that, as the short-term assignees normally leave their families at home,
they are far less exposed to “hardship factors” than expatriates who
have their families living with them at the host location.
Living Allowances
Provision of daily living allowances or per diems is another a policy area where
companies use a number of different approaches. The most popular approach is
to establish one fixed daily allowance to cover the cost of food, recreation
and incidentals for all short-term assignees at the same location (almost 70
per cent of companies). However, at least 20 per cent of companies establish
individual allowances for each employee, which can often represent only the
difference in cost between the employee’s home location and the host location.
A number of companies report
that they reimburse actual day-to-day living expenses for their assignees. What
is the most effective approach? That depends on the number and type of short-term
assignees that a company is trying to manage. Companies with large numbers of
assignees typically tend to establish one fixed per diem for all employees at
each location because of the complexity of trying to manage a myriad of individual
arrangements.
Trips Home
There is also a wide variation in practice relating to trips home while on assignment.
The median appears to be about one trip home every 12 weeks for employees whose
families have remained at home. As almost 80 per cent of employees do leave
their families at home, this is a critical policy issue and it is surprising
that many companies do not appear to have established clear guidelines.
Different Multinational
Practices
Responses from participants in North America, Europe and Asia Pacific were in
general very similar. However, there were a number of significant differences
between European multinationals and the other participants. The survey results
show that European multinationals have:
A higher proportion
of unaccompanied assignments (91 per cent versus 79 per cent worldwide average)
A higher tendency to
pay incentives (49 per cent versus 36 per cent of worldwide participants
and only 31 per cent of North American participants)
A higher tendency to
pay hardship premiums (61 per cent versus 52 per cent of worldwide participants).
Assignment Administration
One of the challenges for companies in managing the growing numbers of short-term
assignees is to ensure that employees receive appropriate support. However,
in many companies, administration of short-term assignments is apparently handled
on an ad hoc basis by different departments. Human resources departments, business
units, finance departments and travel departments were all mentioned as typically
being involved. Two respondents actually said “nobody” in their company
was responsible. As a result, relocation support services provided to assignees
unfortunately are often inconsistent and frequently inadequate.
Services that companies
need to make sure are properly provided include:
Tax compliance advice
(tax regulations for short-term assignees vary by country and need to be
carefully monitored)
Visa and immigration
coordination
Accommodation arrangements
Community orientation
(help with shopping, transportation, etc.)
Security briefings (especially
when employees are sent to locations where there is a high level of crime
or political unrest)
Government compliance
(local permits, police registration, etc.)
Insurance cover for
travel and personal property, as well as health insurance
Cultural and language
training in certain locations.
Tax Compliance
Ensuring that employees do not run afoul of local income tax regulations is
one of the most difficult challenges in managing short-term international assignment
programs. Monica Sabo, Tax Partner with Deloitte & Touche in Chicago, says,
“Short-term assignments are fraught with more potential tax traps and misunderstandings
than almost any other type of assignment.
A common belief is that
if an assignment in the host country lasts for less than six months, or 183
days, then no tax liability arises in that country. In fact, that generally
only works for countries where there is a treaty with the home country. Time
periods in treaties may also be less than 183 days and may also be based on
any 12-month period, rather than being on a calendar year basis.”
Relocation Services
Provision of relocation services varies considerably between and within companies.
(See Figure 2.)
Type
of Service
Never
Provided
Always
Provided
Provided
on a Case by Case basis
Orientation
and Settling in Assistance
28%
17%
55%
Security
Briefings
29%
20%
51%
Cross Cultural
Training
34%
12%
54%
Language
Training
28%
13%
59%
Security
issues can be just as great a problem for short-term assignees as for regular
expatriates, especially because many short-term assignees have little idea of
the potential “danger spots.”
In all locations, careful
attention needs to be given to the areas where short-term assignees are housed.
Make sure that furnished housing is arranged in areas that are safely accessible
at all times and where it is safe for assignees to wander around. It is far
safer to have housing arranged by a reputable relocation company than to give
employees a lump sum allowance and have them find their own accommodation.
Armando Lara, Vice President
Operations for Control Risks Group in McLean, VA, shared some excellent advice
for short-term assignees:
Inform your embassy
of your presence in the country and leave emergency contact numbers in the
event of a serious problem
Leave a detailed itinerary
and phone contact numbers with your employer and family members
Carry or leave with
your employer a photocopy of your passport in the event of loss or theft
Know whom to contact
in your company in the event of emergency situations.
Lack of any organized orientation
assistance can also create morale and productivity problems. One company sent
a group of technical staff to carry out a special project in London. The company
organized furnished accommodation and transportation assistance. As often happens,
the assignees worked long hours each day and also at weekends on the project.
Morale soon began to drop as the assignees couldn’t find convenient banks
or shops and two of them actually insisted on returning home. Eventually, the
company arranged a half-day orientation program for the group, which fixed the
problem, but not after the project had run well behind schedule.
Key Challenges
One question in the survey asked participants about the key challenges they
faced in coordinating these assignments. (See Figure 3.) The top five responses
from Canadian companies were illuminating.
Overall
Program Coordination – often finding out who is on short-term assignments
can be a major problem in large multinationals!
58% of
companies
Keeping
track of assignments to avoid potential tax problems in the country of assignment
51% of
companies
Deciding
what financial incentives and daily living allowances to provide
51% of
companies
Finding
suitable accommodation for employees
42% of
companies
Agreeing
on the number of visits home
36% of
companies
The
fact that almost 60 per cent of Canadian companies cited the issue of overall
program coordination as a key challenge highlights the strain that HR departments
are experiencing in trying to manage the complexities of their short-term assignees’ needs. The constant feedback heard time and again is that short-term assignments
require almost as much work as long-term assignments, especially up front in
order to get employees settled in quickly, safely and efficiently.
Despite all the coordination
issues involved, short-term international assignments clearly continue to grow
in popularity among multinationals. Indeed 49 per cent of the Canadian multinationals
surveyed predict increases in the number of short-term assignments in their
organizations. Cost is definitely a significant factor behind the growing numbers
of short-term assignments as they are generally seen to be much less costly
than traditional expatriate assignments. Nevertheless, managing them effectively
represents a significant challenge for human resources managers and business
unit managers involved in global business activities. CN
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