Global mobility is a must for growing businesses that want to be competitive in their respective industries, but there are other factors that come into play when your company expands overseas, says Medha Rishi, GPHR, vice president, Global Benefits at Woodruff-Sawyer & Co.
The use of expatriate employees, individuals who are sent to work and live abroad for a defined period of time, can play a key role in helping to quickly get a new international business unit up and running.
At the same time, companies need to consider the expenses involved. For example, expatriate employees, along with any family members joining them, require the same health care coverage and other benefits that an employee at the home office would expect to receive.
These factors must be considered as companies draft plans to expand overseas.
“You need to look at what will be required to launch this business unit and which personnel are the best fit for the job,” Rishi says. “Then it’s a matter of coming up with a cost-effective plan to make it all work.”
Smart Business spoke about best practices to consider when sending employees to work in another country.
What are some initial considerations when looking at the use of expatriate employees?
If you’re going to ask employees to uproot their families and move to another country to help open up a new business unit, you need to be sure you have a solid plan in place to do it effectively, and also consider the nature of the business unit itself.
Traditionally, when a company wants to open a new office overseas, it will send talent already familiar with its product or service offerings so they can train the new local employees to follow the same culture and business model.
In some cases, these assignments require a great deal of work and can extend for as long as four to five years or lead to multiple assignments.
This has been an increasing trend in the last several years. Other assignments may not require as much time and the work can be completed using short-term assignees. This can be beneficial so that the assignment is not as life-altering or disruptive for the employee taking the assignment.
Another consideration is the professional opportunity for international work and overall employee enthusiasm.
Global mobility itself can serve to define an employee’s career. Surveys have shown the majority of expatriate would agree to future international assignments with current employers.
Just as important to finding the right people who are familiar with a company’s product or service offering is finding those who are enthusiastic about personal and professional development in this way.
How do you determine the cost of benefits for employees working overseas?
Once you’ve determined personnel requirements, you need to look at the personnel cost in terms of salary and benefits. In addition to the basic salary and medical coverage, there are other needs that typically come into play.
Will there be an allowance for a car and/or a driver? What if there is a medical or evacuation emergency in which the employee will need to get out of the country quickly?
Access to local medical coverage still remains the predominant concern among expatriate, with almost two-thirds of expatriate households accessing medical care while on international assignment.
Tax consequences on the payroll side and whether there will be a host country or a home country tax equalization agreement are other important factors. So in addition to identifying the right personnel, seek an adviser in critical areas such as taxes, payroll, compensation and benefits to help shape the expansion plan. ●
Insights Business Insurance is brought to you by Woodruff-Sawyer & Co.
An employee who is sent to live abroad for a defined time period. An expatriate is expected to relocate abroad, with or without family, for as short a period as six months to a year; typical expat assignments, however, are from two to five years long.
Organisations use expatriate assignments as a means to send key staff abroad for high-potential career development and to co-ordinate global lines of business, as well as transfer organisational knowledge, expand into new markets worldwide, and/or manage an international subsidiary. However, expatriate assignments can be costly endeavors for organizations due to special compensation packages, housing and relocation costs, pre-departure training, and so forth. Research has consistently shown that cross-cultural and family adjustment are factors that contribute to the effectiveness of the expatriate’s presence abroad.
For individuals, expatriate assignments represent opportunities and challenges both professionally and personally. The assignments provide the novelty and excitement of moving to another country and operating in a different cultural environment. They can also provide an opportunity to acquire new language skills, develop cultural understanding, and see new parts of the world. However, adjusting to a new country can prove challenging for expatriates and their families.
Family considerations are often cited as a driving reason for employees to decline an expatriate assignment, or for the failure of an expatriate to complete the assignment abroad.
However, employees may also be unsure how expatriate assignments fit into their overall career development and relate to intra-organisational career success. Fearing their organisational commitment might be put into question, an employee may find that family not wanting to relocate or stay abroad is perhaps a more convenient (and therefore more frequently cited) reason. In order to overcome hurdles of expatriate adjustment, organisations should encourage open and ongoing communication between managers, HR and potential candidates when assignments are first arranged, and then continue follow-up when the expatriate is on assignment.