Companies trying to
establish a global presence or maintain an existing one are faced with
a dilemma. They realize the need to develop and/or expand their expatriate
presence abroad and seize opportunities. At the same time, overseas
assignments represent a tremendous cost center.
Recruiting and managing an expat workforce brings
two conflicting needs into play: the employee’s compensation
and the employer’s need to keep expat expenses to an acceptable
level. Each poses a challenge in itself and, when combined, presents
an even bigger challenge.
While a recent study indicates that an overwhelming
number (95 percent) of multinational companies surveyed are optimistic
about the economy and plan to send more employees on overseas assignments,
more than half (58 percent) expect to reduce the size of expat
packages to help defray the overall cost. In fact, the cost of
posting a manager in another country is estimated to be about three
times that individual’s stay-at-home pay and benefits.
However, to remain competitive given the current fluctuations
in the U.S. economy and shifts in international markets, multinational
companies need to attract and support the best and brightest to
staff their overseas operations. In terms of recruitment and retention,
compensation has always been a key factor—either as an impediment
or an incentive—for expats to accept and retain assignments
abroad. Findings from a recent MetLife Study of Employee Benefits
Trends revealed that benefits and compensation remain a strong
motivation of retention and loyalty. Of the 80 percent of employees
surveyed who reported being highly satisfied with their benefits,
72 percent reported feeling a strong sense of loyalty to their
employer, and 57 percent noted that benefits are an important reason
they remain with the company. Indeed, multinational companies need
to ensure that the systems they have in place for global compensation
management and administration are up to task.
Clearly, competing in today’s international economy requires
a physical global presence—not simply a virtual presence—to
conduct business in strategic global locales. Recruiting talented
employees to accept overseas assignments is a challenge on a variety
of fronts, compensation being among the foremost. Employers, on
the other hand, are seeing the costs associated with expat assignments
escalating.
Since compensation is a key factor in the retention of current
expats and the recruitment of prospective ones, companies should
look toward other areas to help reduce related costs. Many of these
costs are "hidden" or simply not tracked—until
they add up and impact the bottom line. In fact, according to a
recent Global Assignment Policies and Practices survey
from KPMG, only 14 percent of companies reported that their expat
employee programs are designed to control costs and ensure an appropriate
return on investment (ROI).
The solutions provided in the second part of this article series
addresses how multinational companies can not only effectively
manage and administer global compensation, but also to track and
recoup associated costs that can drive up the expense of expat
assignments.
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