A successful global mobility program needs to work well for both the assignees and the company.
But implementing an infallible expatriate policy that is both flexible and defined enough to serve as the foundation for any mobility scenario is a challenge, even for the most evolved global mobility programs.
Recent data from Mercer’s Flexible Mobility Policies Survey report shows that developing flexible international mobility policies continues to be a challenge for mobility teams.
After a first article detailing high-level flexibility trends, we are now discussing how to implement flexibility.
Common forms of flexibility
- Talent pool flexibility: Expanding the mobile talent pool and considering new types of candidates can facilitate assignments and help control costs. Will the organization rely on internal employees, or does external resourcing make more sense for any specific scenario?
- Location and working arrangement flexibility: This involves taking into account the chosen employee’s home country, host country, and his or her work set up upon international relocation. Consider whether assignees will be working from an office or a home/remote location, or whether it will be a rotational assignment versus full-time work. It is feasible to move jobs to people as opposed to people to jobs?
- Policy flexibility and segmentation: Policy flexibility could involve meeting minimum global guidelines and requirements, while also reflecting the needs and requirements of specific geographies or categories of employees. Increased flexibility can take the form of more segmented policies with different terms and conditions for different types of assignments (for example by differentiating between self-requested moves and business essential ones).
- Package flexibility:Package flexibility includes relying on flexible expat benefit options, having the possibility to reallocate allowances for new purposes, and implementing lump sums. It can also lead companies to offer assignees more choice in terms of mobility benefits (the “cafeteria” model) or allow employees to take cash amounts instead of benefits in kind.
Designing flexible packages
Relying on lump sums, allowing cash conversion or benefits swapping are three common ways to introduce flexibility in packages:
#1 Lump Sums
Lump sums are cash amounts intended to cover for more than one compensation-related item and that can be used as desired by the assignee. The survey results show that the prevalent practice among companies who currently have flexibility in their policies is to provide lump sum(s), as indicated by more than half of respondents. The main advantage of using lump sums, as reported by 90% of the respondents who currently use them, is that it reduces administrative efforts.
With 30% of participants reporting that their mobility function is under-staffed and 60% reporting that they have no technological support for administering flexible benefits,scaling down the required administrative efforts can definitely be an argument in favor of lump sums compared to other options of flexibility provision.
But lump sums also have their pitfalls. Tax ineffectiveness came as the first most indicated one (54%), followed by inequity and inconsistency (41%), safety and security risks (28%) and negative employee experience (26%).
#2 Cash Conversion
A cash conversion approach means allowing assignees to receive a benefit as cash instead of as a benefit in kind. Assignees can choose to fully replace some designed benefits with the equivalent in cash, or reduce their value and receive part of the full difference in cash.
Among the respondents, 42% of the participating companies indicated using cash conversions as a form of flexibility. This approach shares some of the limitation of the lump sum approach. Furthermore, clear guidelines need to be establish for the cash conversion.
#3 Benefit Swapping
Close to one-third of survey respondents reports offering flexibility in the form of benefit swapping, which is defined as the possibility/option for assignees to swap one benefit against another.
Among the companies who are thinking about introducing flexibility, 55% indicated that they want to enable benefits swapping for assignees. Benefits swapping can help personalize mobility programs – for example by allowing assignees to swap education benefits for child care or support for elderly parents. But it can also reveal a lack of relevance of some benefits (prompting requests to swap) or a lack of understanding of what’s being provided.
Let’s remember also that the different components of an assignee packages serve a purpose. Introducing too much flexibility can lead to problems for both the assignees and the company.
The risk of excessive flexibility
Excessive flexibility and an absence of clear guidelines could lead assignees to take risks in the host location (especially hardship locations). The absence of strict tax and immigration compliance monitoring as well as unsecured exchange of data between jurisdictions could also create problems for companies and individuals alike.
Duty of care and compliance should be the top priorities in a flexible program. In many instances, organizations should look beyond the minimum legal requirements. Flexible policies should consider the bigger picture. In practice, this means providing a fair treatment to international assignees, ensure that they are not being penalized, facing unreasonable costs, family issues, or other problems, or taking unreasonable risks for themselves, their family or the company.
HR teams also have concerns with flexibility related to work practices and career management. For example:
- Fair application of working conditions across all employees (46%)
- Ability to measure and reward contribution (36%)
- Career progression for flexible workers (32%)
Source: Mercer’s Global Talent Trends 2018 Study
Mitigating flexibility implementation risks
Flexibility should be introduced to solve specific business issues and not just to follow current trends. What business problems are you really trying to solve? Barriers to mobility linked to local regulations? Increasing the satisfaction of employees?
Back the business case with facts and develop performance indicators to measure the impact of greater flexibility. For example: employee satisfaction, time spent on managing specific tasks, employee retention and cost control. Define the decision-maker for each item in the policy (the mobility team, local HR or the assignee) and how each of these items will be delivered from a process perspective.
Set a limit to flexibility and define the minimum requirements that are non-negotiable and that the company must implement. In particular, flexibility does not have the same implications for all assignments: consider limiting flexibility for moves to hardship locations and some types of moves (e.g. moves involving families).
Make sure that employees can make informed choices through financial and tax education. Involve local HR teams and management in the process and help them understand the implications of duty of care. More generally encourage collaboration between teams to manage flexibility.
Some decisions and processes about compliance or types of moves might not fall under the purview of the mobility team alone.
Flexibility requires close team coordination, thorough planning and a long-term view.