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GLOBAL MOBILITYLOCAL PLUS APPROACHES9 October 2013
MERCER WEBCAST
Karen CygalNew York
Mike ShoreBoston
MERCER 1
Local plus approaches Agenda
Defining local plus approach
Local plus: A growing trend?
Purpose of the local plus approach
Components of the local plus approach
Local plus approaches by location
Going forward: Food for thought
MERCER 2
Local plus approachDefining an elusive concept
A few common characteristicsLocally delivered pay/ benefits + some items not typically provided to local staff
Used for permanent transfers, localising expatriates , locally hired foreigners
Sometimes viewed as the “magic elixir” of expatriate compensation, striking a balance between local packages and expensive expatriate packages
BUTLocal plus package components vary by employer, by type of move
Host country conditions can make applying local plus policy challenging
Purposes vary: Simplify, contain costs, align with local practices, or decentraliseexpat management?
MERCER 3
Local plus: A growing trend?Do you have international employees on a local plus package?
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER 44
Local plus: A growing trend?Do you have a formal local plus policy?
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER 55
Local plus: A growing trend?How did local plus population change in the past two years?
For the same period, 33 to 35% of companies reported an increase in the number of international employees not on a local plus approach
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER 66
Local plus: A growing trend?How will your local plus population change in the next two years?
For the same period, ~40% of companies predict an increase in the number of international employees not on a local plus approach
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER 7
Purpose of the local plus approachIn which cases do you offer a local plus package?
WorldwideFor permanent transfers 40%For certain assignment locations 38%For internationally hired foreigners 38%After a maximum duration on expat package or when localising 33%For locally hired foreigners 31%For certain position levels 27%For certain assignment types 14%For self-initiated assignments 13%For all international assignees 13%On an exception basis only 9%For returnees 6%When local package > B/S calculation 5%Other 4%
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER
Most important Important Less important
8
Purpose of the local plus approachSome key drivers
Americas Europe Asia-Pacific
Cost reduction
Market competitiveness
Pay philosophy
Simpler administration
Leverage lower host taxes
Decentralise expat management
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER
Local plusCompared to balance sheet and pure local
9
Balance Sheet Local Plus Local
Equity vs. Home Location
Equity vs. Locals
Equity among foreign nationals N/A
Ease of Administration
Global Consistency
Applicability to All Locations
Typical Cost of Package
Ease of Repatriating/Seconding
Higher Varies Moderate Lower
MERCER 10
Components of a local plus approachWhat “plus” do you provide to your local plus assignees?
WorldwideTax preparation/filing assistance 77% Host housing 71% Relocation services 65% Medical benefit 59% Dependent education 59% Home leave 55%
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
Showing components that at least 50% of respondents include in local plus packages
MERCER 11
Components of a local plus packageEquivalent benefits Equivalent packages
CHINAHONG KONG
Net pay structures vary worldwide, so a global policy of equivalent benefits is not appropriate. Plus policies need to vary to account for these pay differences.
MERCER 12
Components of a local plus packageEquivalent benefits Equivalent packages
CHINAHONG KONG
Net pay structures vary worldwide, so a global policy of equivalent benefits is not appropriate. Plus policies need to vary to account for these pay differences.
HKD
RMB
MERCER 13
Local vs. local plus comparisonSingapore (USD)
050,000
100,000150,000200,000250,000300,000350,000400,000450,000
52 53 54 55 56 57 58 59 60 61 62 63
IPE Position Class
(USD
)
Local - Base Salary Local Plus - Base Salary Local - Salary plus Allowances Local Plus - Salary plus Allowances
Source: Mercer APCBF Consumer Goods Forum Survey 2013
Total Fixed Cash - Local Plus vs. Local
Base Salary - Local Plus vs. Local
+26%
+22%
+15%
MERCER 14
Local vs. local plus comparisonHong Kong (USD)
050,000
100,000150,000200,000250,000300,000350,000400,000450,000
52 53 54 55 56 57 58 59 60 61 62 63
IPE Position Class
(USD
)
Local - Base Salary Local Plus - Base Salary Local - Salary plus Allowances Local Plus - Salary plus Allowances
+20%
+25%
+30%
Total Fixed Cash - Local Plus vs. Local
Base Salary - Local Plus vs. Local
+4%
Source: Mercer APCBF Consumer Goods Forum Survey 2013
MERCER 15
Local vs. local plus comparisonChina (USD)
050,000
100,000150,000200,000250,000300,000350,000400,000450,000
52 53 54 55 56 57 58 59 60 61 62 63
IPE Position Class
(USD
)
Local - Base Salary Local Plus - Base Salary Local - Salary plus Allowances Local Plus - Salary plus Allowances
+31%
+30%+25%
+26%
+17%
+21%
Total Fixed Cash - Local Plus vs. Local
Base Salary - Local Plus vs. Local
Source: Mercer APCBF Consumer Goods Forum Survey 2013
MERCER 16
Salary levels within Asia (USD)Is local plus feasible in all markets?
Para-professional Professional Specialist
MERCER 17
Local plus approach by locationFor which top 5 countries do you have the most employeeson a local plus approach?
Top host locations Multiple answers possible
Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey
MERCER 18
Local plus approach by locationChina, Hong Kong, Singapore
Direct/ Local Foreign Hire
LocalisedExpatriate
Int’l Permanent
Transfer ReturneeFixed-term
Assignment
China
Hong Kong
Singapore
Prevalent Less common / limited Never or rarely provided
(Senior positions)
Most Prevalent
MERCER 19
Local plus approach by locationPrevalence of allowances/benefits
China Hong Kong Singapore
COLA/ Goods & Services
Mobility / Foreign Service Premium
Hardship
Housing
Education
Home Leave
Social Security / Pension Enhanced MPF or supplemental
CPF or cash in lieu
Medical Enhanced or Int’l Plan Local Local
Usually cash, but less than “full” expat housing amount
Prevalent Less common / limited Never or rarely provided
MERCER
Expatriate type UAE
Direct/Local Foreign Hire
Localised Expatriate
International Permanent Transfer
Fixed-term Assignment
There is a local market for foreigners in the UAE: the challenge is to be competitive with this local marketLocal package for foreigner in the UAE includes housing, car, and sometimes schooling and home trips
Local plus approach by locationExamples
20
MERCER
Going forward: Food for thoughtRelative home/host parity – may need to proceed with caution
Host net income
Hom
e ne
t inc
ome
Low High
High
CAUTION: Local salary will need to be adjusted
upwards significantly
Relative parity
CAUTION: Expect repatriation difficulties
Relative parity
21
MERCER 2209 October 2013
A local plus approachItems to consider
Local plus packages can either:
– Bridge economic gap between the home and host location
– Create a competitive package for foreigners in that country
Can use local plus packages to reduce overall package costs, but:
– Financial firms (some of the longest-running users) often use local plus packages to minimise taxes for their non-US employees
– Local plus can cost > traditional balance sheet for low-wage to high-wage transfers (for example, India to Switzerland)
Don‘t define low wage only by country; also use position level
MERCER
Structured approach to assessing feasibility of “localised” package Net-to-gross calculation
23
Net –to-gross comparisons help determine the economic gap between current compensation and the proposed package
MERCER 24
Going forward: Food for thoughtBuilding a local plus policy: Reconciling multiple challenges
Country Specificities
Administrative simplicity
Cost
MERCER
Going forward: Food for thoughtBuilding a local plus policy
Move beyond “local plus = cost savings”
Global policy must be clear but flexible
Holistic approach integrates talent management perspective and policy segmentation
Increased interest in and use for Local Plusabandoning home-based balance sheet
approach
=> Find the right mix of approaches
25
MERCER
Mobility and survey resources on imercer.com
Mercer’s Total Remuneration Surveys: www.imercer.com/trs
Mercer 2013 Alternative International Assignments Policies and Practices Survey: www.imercer.com/aia
Comprehensive mobility resources: www.imercer.com/mobility
26
MERCER 27
Questions
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Mike [email protected]
Karen CygalNew [email protected]