2013 EMEA EXPATRIATE MANAGEMENT CONFERENCE APRIL 2013

Transcription

1 2013 EMEA EXPATRIATE MANAGEMENT CONFERENCE APRIL 2013

2 SHORT TERM, ROTATIONAL, & COMMUTER ASSIGNMENTS Specific Solutions for Very Specific Types of Assignment 12 APRIL 2013 Ed Hannibal, Partner Chicago

3 Today s agenda Current environment Short-term assignments defined The commuter Rotator workers Compliance, Compliance, Compliance Final thoughts

4 Current environment Talent Shortages Varying business needs / demands Demographics Dual Career Children Other Family (Aging Parents / Grandparents) Security Issues and Government Restrictions Compliance

5 How do you expect the number of assignments you make to change in the next two years? ( ) (data similar for Europe and Worldwide) Source: Mercer 2012 Worldwide International Assignment Policies & Practices Survery

6 SHORT-TERM ASSIGNMENTS DEFINED

7 What characterizes a short-term assignment? General consensus among multinationals Assignments expected to last 3 12 months Typically unaccompanied Furnished apartment, with kitchen, generally provided by company Company provides transportation assistance Assignees kept on home country payroll and benefits

8 Policy complexities for short-term assignees Different industry practice/experience with ST assignments Persuading employees to go on assignments unaccompanied Whether to treat ST assignees like LT assignees for incentives and allowances Pressure for consistent treatment among teams of different nationalities/salary levels Defining single, deciding whether to treat singles differently than assignees with family at home Ensuring consistent treatment, tax, visa compliance

9 Family status Unaccompanied Spouse/Partner Whole family 75 % 11 % 11 % 90 % 5% 4% 83 % 3% 13 % Source: Mercer Short-Term Assignment Surveys

10 Payroll Do short-term assignees remain on their home country payroll? Yes No 95 % 5% 88 % 12 % 91 % 9% Source: Mercer Short-Term Assignment Surveys

11 Short-term policy design How often do you pay for home trips for short-term assignees? Every 4 weeks 4% Never 4% NA 4% Every 6 weeks 7% Every 2 months 11% Every 12 months 18% Every 6 months 7% Every 3 months 45% Source: Mercer 2010 Short-Term Assignment Survey

12 Per diems Daily living allowance for groceries, meals out, recreation, transportation, incidentals Normally one fixed per diem established per location, but practices vary Customize allowance per what is provided at assignment location For example, does accommodation have cooking facilities? Is transportation provided?

13 Per diems Provide a per diem, provide COLA, or reimburse actual expenses? 2010 Per diem / allowance COLA Reimburse actuals 69 % 23 % 5% Source: Mercer 2010 Short-Term Assignment Survey

14 THE COMMUTER

15 Extending short-term policy design Commuters, early career, rotational assignments 14

16 The commuter (who and why?) An expatriate / assignee filling a temporary international staffing need for one to five years on a single-status basis (without full family relocation) Differentiate from the Commuter who has an indefinite end or was hired into a permanent position

17 The commuter: Where to start? What is the intent? Is this an accommodation? Is the business driving the decision? Does the company have multiple policy needs? How will this be communicated? Wrestling with the costs!

18 Commuter policy provisions Company-Initiated Home based salary, payroll, and benefits Furnished housing with kitchen Per diem or COLA (addressing employees need to support family at home) Local transportation or an allowance Tax equalization Foreign-service or Mobility premiums Hardship Danger Support Services (air shipment, destination services, language / cultural training) Trips home: Tickets in lieu for family (spouse only, etc)

19 Commuter policy provisions Employee-Initiated Home based salary, payroll and benefits Furnished housing with cooking facilities Reduced Per diem or COLA? Local transportation or an allowance Tax Equalization Foreign-service or Mobility premiums? Hardship Danger Support Services (air shipment, destination services, language and cultural training) Trips home (less frequent or economy)

20 ROTATOR WORKERS

21 Who are rotators? Rotators are employees who travel to and from their home bases to international locations on an ongoing basis to perform work assignments on a set schedule.

22 Context What s Changed? Rotators used to be Select industries: Energy, E&C and Mining Characteristics: Remote locations Extended work days/weeks Unaccompanied status No policy Rotators now Select industries still dominate, but not as much Considerations: More locations Recruitment/retention Governance and compliance Policy developmt/tax program

23 Rotational Survey Highlights Policy 57% of survey participants have a separate policy for rotational assignments. 1 in 5 employers have no policies for rotators Part of expat policy, 22% No, 22% Yes, separate policy, 57% Source: Mercer 2012 Int'l Rotational Assignment Survey

24 Typical Rotational Assignment Length Normally for length of project 49% 26% 12% 14% 1-2 Years 3-5 years Length of Project Other Source: Mercer 2012 Int'l Rotational Assignment Survey

25 Rotational Survey Highlights Schedules Many variations, but 28-on/28-off the most common Energy industry: every participant but two rely on this pattern Most work 7 days a week, 12 hours per day. Work schedule depends on work routine, business needs, and host country labour laws. It is based on the contract and our customer requirements. Some work 7 days a week, 12 hour days. Others work 6 days. Rotation schedules vary based on the commercial terms of the project, project requirements, and hardship or hazards encountered in the host location. Predominantly 28/28, with rare, position-based exceptions.

26 Rotational Survey Highlights Compensation: Home country pay most common by far Some industry variation in % of home country pay: Home Country 72% Mining E&C Energy 43% 71% 83% HQ Int'l 15% 15% For most, comp philosophy uniform: 82% same for onshore vs. offshore 83% same as for resident expats 72% based on nationality Rotational Regional Host Nationalitybased tiers 15% 9% 7% 7% Other 7% Source: Mercer 2012 Int'l Rotational Assignment Survey

27 Rotational Survey Highlights Compensation If rotators work extra days at assignment location, nearly half get extra comp 57% of employers compensate rotators for training or meetings in home location on days off 48% 37% 11% 4% Add'l comp (OT / premium pay) Same pay as for a day worked during their rotation No comp / benefit provided Add'l time off Source: Mercer 2012 Int'l Rotational Assignment Survey

28 Rotational Survey Highlights Foreign Service Premium Across all industries, most organization pay a FSP (84%) Mining E&C Energy 78% 100% 92% Most (83%) calculate it the same way for all rotators 79% of these calculate FSP as a percent of base salary - On average this value is 15% Many employers cite Incentive to take foreign assignment as the reason for providing FSP to rotators

29 Rotational Survey Highlights Day Rates/Daily Allowances Almost half of companies (48%) pay day rates/daily allowances -- often used to cover basic costs as well as premiums. Meals and Incidentals Hardship/Location Premium 55% 55% No 52% Yes 48% Incentive/Foreign Service Premium Rotational Bonus 18% 41% Lodging 9% Other 14%

30 Rotational Survey Highlights Hardship Premium Across all industries, most employers (91%) pay a Hardship Premium: Mining E&C Energy 83% 100% 100% Most (73%) calculate it the same for all rotators Five in nine (55%) pay the same hardship for rotators as resident expats in the same location 65% pay the hardship for days in assignment location only 58% do not pay a separate hazard/danger payment

31 Rotational Survey Highlights Benefits Almost all employers (96%) provide health insurance for rotators 59% expect rotators to contribute to the cost of health insurance 43% are covered by the home health insurance plan, while 54% are covered by an international plan Dependents are often no longer covered by the home health insurance or medical plans Are they covered by an international plan? 52% are no longer covered for medical 58% are no longer covered for dental insurance Rotators are usually eligible for corporate life insurance and pension / retirement / savings plans

32 Rotational Survey Highlights Vacation 7 in 10 participants responded that rotators are NOT eligible for vacation/personal time off. In cases where the rotator is eligible for PTO, the management is: 60% Rotator charges time off against home PTO allotment 40% Other, including: At management discretion PTO bank accrues and can be taken during rotator time off or charged as time off without pay They accrue a separate international PTO allotment

33 Rotational Survey Highlights Tax: Broad range of tax treatment practices for rotators Employee pays home country tax; employer pays "host" tax 26% Other 24% Tax Protection 9% Tax Equalization 39% Employee pays all taxes 2%

34 Rotational Survey Highlights Tax policies For employers that tax-equalize, two out of three (67%) withhold a hypo tax for all nationalities Only a quarter (24%) have a separate tax policy for rotators Almost two out of three employers (64%) pay home country tax-preparation fees Withhold hypo tax, all nationalities Rotator tax policy 24% Pay home country tax preparation fees 67% 64%

35 COMPLIANCE, COMPLIANCE, COMPLIANCE POTENTIAL CONTROL POINTS

36 Program administration Tracking Tax authorities are increasing their scrutiny of business travelers, short-term assignees, commuters and rotational employees Shorter-term mobile employees may create permanent establishment issues for employers Need to know each assignee s location at all times from a security, safety, and corporate duty-of-care perspective

37 Program administration Compliance and governance concerns One potential control point is combining the per diem data (compensation) and a calendar tool for short-term assignments, commuters, rotators, and business travelers Mercer is working with clients and major mobility software providers to incorporate per diem information into their tools Employers are looking to use calendar tools to pay per diems only after employees fill out their time in country See the sample Equus Solution 36

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39 Commuter pitfalls Critical to track these employees just like business travelers and short-term assignees Localization isn t just for expatriates anymore Know when to draw the line Travel abuses Revisit assignment costs

40 Rotators New compliance initiative With the broader use of rotator assignments, companies are: Conducting rotator program audits Formalizing the program: Benchmarking Policy development Standardizing practices An increase in the number of rotator assignments brings greater complexity in managing the population a situation creating major tax and compliance challenges for companies around the world. ~ Deloitte Rotator Assignment Survey of Energy Companies

41 FINAL THOUGHTS

42 Final Thought What is the foundation? The Short-Term Assignment Concept

43 Building up from short-term assignments International assignments that typically last three to twelve months Longer than a business trip, but shorter than an expatriate assignment Furnished accommodations with kitchen facilities are generally provided Short-term assignment per diems provided Private transportation is provided separate from per diem Trips home every 8 12 weeks

44 QUESTIONS ED HANNIBAL

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