INTERNATIONAL ROTATIONAL ASSIGNMENT SURVEY KEY FINDINGS 19 JUNE 2012 Carolyn Kildare Calgary
Mercer s International Rotational Assignment Survey Demographic Information Select list of companies approached. Primarily in the Energy, Mining and Engineering & Construction Industries. Primarily North American Headquartered Companies. 50 participants. Energy Engineering & Construction Mining Conducted April-May 2012. 1
Survey Participants AECOM ConocoPhillips Jacobs Engineering Precision Drilling AMEC Cooper Industries KBR Rio Tinto Aker Solutions Diamond Offshore Drilling Kinross Gold Rockwell Collins Baker Hughes Encana Lafarge Rowan Companies Bechtel ENSCO Lockheed Martin Saxon Energy Services BG Group ExxonMobil McDermott Suncor Calmena Energy FMC Technologies MWH Global Technip Cameron International FTS International, LLC Newmont URS CB&I GE Energy Northrup Grumman Vermilion Energy Cemex Genivar Oil States International Xstrata Nickel Centerra Gold Halliburton Parker Drilling Cameco Corporation CH2M Hill Hercules Offshore Parsons Chevron Hunt Oil Company Peabody Energy 2
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 predetermined schedule. 3
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 some growth in other industries as well. Considerations: More locations Recruitment/retention Governance and compliance Policy development / tax program 4
Context New Initiatives Employers considering a broader use of rotator assignments. 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 that is creating major tax and compliance challenges for companies around the world. - Deloitte Rotator Assignment Survey of Energy Companies 5
Policy 57% of survey participants have a separate policy for rotational assignments. 1 in 5 companies do not have any policies for rotators. It is part of the expat policy, 22% No, 22% Yes, separate policy, 57% 6
Typical Rotational Assignment Length Length of assignments typically depends on length of project. 60% 50% 49% 40% 30% 26% 20% 10% 12% 14% 0% 1-2 Years 3-5 years Length of Project Other 7
Locations Primary reason for utilizing rotational assignments is location and job requirements. Afghanistan Algeria Angola Austrialia Azerbaijan Bahrain Bolivia Brazil Canada Chad Chile China Colombia Congo Ecuador Egypt Equatorial Guinea Ethiopia France Gabon Germany Ghana India Indonesia Iraq Israel Kazakhstan Kurdistan Kuwait Libya Malaysia Mali Mexico Mongolia Mozambique Netherlands Nigeria Norway Papua New Guinea Peru Philippines Romania Russia Sakhalin Island Saudi Arabia Spain Syria Tanzania Trinidad Turkey UAE UK Venezuela Vietnam Yemen 8
Schedules Participants seldom use a single rotational schedule. Business need most often drives the rotation schedule, but location and client requirements are also key considerations. 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% Business Need Location Client Requirement Local Management Position Policy Employee Choice Nationality Other 9
Schedules Many variations but 28/28 cited the most times of any schedule. Energy industry- every participant but 2 utilize. 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/or hardship or hazards encountered in the host location. Predominately 28/28. There are a few special cases where other schedules are utilized based on the position, but are rare. 10
Compensation Home country pay scale is most often used. Us of the home country scale varied by industry: E&C 83% home country Energy 71% home country Mining 43% home country For most the compensation philosophy does not differ: (82%) same for onshore vs. offshore (83%) same as for resident expats (72%) based on nationality Home Country Headquarters International Rotational Regional Assignment Location Tiered by groups of nationalities Other 0% 20% 40% 60% 80% 11
Compensation If working extra days at the assignment location, nearly half receive additional compensation. 57% compensate rotators for attending training or meetings in the home location on days off. 60% 50% 48% 40% 37% 30% 20% 10% 11% 4% 0% Additional compensation (OT or premium pay) Same pay as for a day worked during their rotation No compensation or benefit provided Additional time off 12
Foreign Service Premium Across all industries, most organizations pay a FSP (84%). By Industry: - Mining 100% - E&C 92% - Energy 78% 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 organizations cite Incentive to take foreign assignment as the reason for providing FSP to their rotator population. 13
Day Rates/Daily Allowances Almost half of companies (48%) pay day rates/daily allowances. These are often used to cover basic costs as well as premiums. Meals and Incidentals Hardship/Location Premium No 52% Yes 48% Incentive/Foreign Service Premium Rotational Bonus Lodging Other 0% 10% 20% 30% 40% 50% 60% 14
Hardship Premium Across all industries, most organizations pay a Hardship Premium (91%): Mining 100% E&C 100% Energy 83% Most (73%) calculate it the same way for all rotators. A slight majority (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. 15
Hardship Premium External data sources are most commonly used to determine hardship premiums. Data Provider's recommendation 39% Dept of State recommendations 23% Internal recommendations 14% Other 25% Often a combination of Dept of State and data provider 0% 10% 20% 30% 40% 50% 16
Why Hardship Premiums Differ between Rotators and Resident Expats 45% of respondents offer different premiums for rotators compared to resident expats. Some of the reasons offered included: - Offshore rotators hardship premium is locked to 10%. Resident expats hardship is dictated by the location. - Depends on external competitive survey and internal equity. - Rotators fixed amount, residents percentage based. - Depends on rotation schedule; FSP may be reduced if rotation schedule provides more time off than expat resident in same location. 17
Benefits Most organizations (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. Rotators are usually eligible for the company s life insurance and pension/retirement/savings plans. 84% cover all rotators for accidental death and disability. Those who cover some but not all rotators often cite third country implications, e.g. - Based on home country benefits plans. - Some TCNs are not in the ADD plans. 18
Vacation A majority (70%) of 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 19
Tax Companies have a broad range of tax treatment practices. Other 24% Employee responsible for all home country tax and organization pays assignment location tax 26% Tax Protection 9% Employee is responsible for all taxes 2% Tax Equalization 39% 20
Tax For those that tax equalize, 67% withhold a hypo tax for all nationalities. Most (76%) do not have a separate tax policy for rotators. Many organizations (64%) do cover the cost of home country tax preparation fees. 21
Key Challenges #1: Legal, tax, immigration and regulatory compliance issues in the home/assignment location #3: Payroll Administration #2: Attracting qualified candidates #4: Lack of tracking technology 22
Actions Taken to Monitor Compliance Third parties and internal systems play an important role in monitoring. 25% of respondents have not taken any compliance actions. Use company travel dept/third party to track and report Rely on external tax and immigration providers to track and report Employee must enter travel days into system Identification of a specific resource at the company's tax provider to assist Have not taken any action Other 0% 10% 20% 30% 40% 50% 23
Summary Rotators are a growing concern for many companies, with rotators in operations on all continents. Survey results highlight wide range in management policies for rotators. One in five companies have separate policies for rotators. Many include rotator policies within broader expat policies. Compliance/tax/regulatory issues cited as the biggest challenges for many. However, only one-quarter of survey participants had taken action to address compliance issues. 24