Lorraine Jennings – Practice Leader, Talent Mobility
Global instability – from terrorism to Brexit – is having an enormous impact on expatriate workforces. Just how will that uncertainty affect workforce planning and mobilising decisions and what are the best strategies for managing your people away from home?
The world appears sparingly precarious right now – events including the murderous Bastille Day rampage in Nice, the failed military coup in Turkey a day later and Britain’s shock vote in June to exit the European Union have brought into sharp focus an accelerating trend. Global instability, fanned by financial disruption, terrorist attacks, social unrest, mass migration and health emergencies such as the Zika virus, has become the new norm.
Despite this growing volatility, moving executives and high potential employees as part of their career development plan to different parts of the world remains a vital part of a competitive business strategy. Yet few organisations are prepared for the complex challenges that world events pose in managing expatriates, including ensuring their safety and calculating the cost of revised remuneration packages.
The Brexit vote is a good example of how unexpected global ructions can have remuneration managers scrambling to catch up. The GBP depreciated between 8-12% against major currencies, because of the Leave vote’s effect on foreign exchange markets and analysts are forecasting further volatility in the near future. The ongoing fallout from Brexit makes new assignments to Britain far less attractive, because of concerns over the economy and a corporate exodus to Europe.
For organisations with large expatriate workforces, global instability demands a rethink of mobility policies to ensure employees are fairly compensated – or even having the appropriate infrastructure when assigning employees to difficult locations. This may include identifying safe-harbours, Fly-in Fly-out or Rotator policies, calculating new hardship or quality of living allowances and revising cost of living between various countries. These tasks are time consuming and may be expensive but are essential to maintain an agile workforce with the right people in the right place. After all, replacing expats who leave your organisation because they feel under-compensated or unsafe is even more costly and time consuming.
Where To From Here
Accurate and up-to-date data is vital to calculate revised expatriate packages and policies that encourage mobility and fairly compensate employees, while balancing the rising cost to organisations of deteriorating living standards, increased safety challenges and higher expenses in many countries.
Best-practice cost-of-living calculations analyse more than 200 products, including transportation, food, clothing and health and personal care, then use a blended international spending pattern to compare prices in the expat’s home and host city.
For quality-of-living or hardship allowances, managers need to evaluate a range of local factors such as crime rates, air pollution, traffic congestion, climate and housing standards. In many countries terrorist attacks and social unrest have made personal safety a critical factor that may require secure housing, guarded office premises and relevant location-specific incentives. For example, an executive moving to South America or West Africa, despite political unrest, food shortages and a high risk of kidnapping, can be paid up to three to four times more than their home country salary.
These are complex calculations but Mercer has fast and effective tools to calculate expatriate packages. A single-source, web-based application and built-in calculators enable customisation of reports for all aspects of expatriate compensation. The cost-of-living calculator, for example, allows employers to calculate allowances for more than 370 locations, surveyed by professional researchers and updated twice a year. Whereas, the quality-of-living index, evaluates living conditions in more than 440 cities, analysed according to 39 factors in 10 categories. Along with Mercer’s mobility specialists, our system will help optimise your organisation’s investment in an agile workforce.
Despite technology advances, the rise of a globally connected workforce, and indeed, global turmoil; it is essential that employees are deployed with the appropriate governance structure, mitigating risks associated with challenging locations, including focus on expatriate compensation volatility and monitoring locations for safety, security and health concerns. Companies should continue to maintain focus and determine appropriate strategies and actions required for all types of assignments.