Category Archives: Policy Development

Expat Lump Sums – Trap or Panacea?

Author:
Mary Lou Stockton – Global Tax Network

A US company sends an employee on assignment to the UK.  The company informs the employee that they will pay X amount for his UK housing.  The employee wants to spend more, because he wants a larger, nicer flat.  He feels the allowance is not enough for the type of flat he wants considering his family needs, including the fact that his wife wanted to live near other Americans.  

The HR Director works with the business manager to determine whether the company would pay more in this case.  The employee is told that he will have to reimburse the company for excess housing cost through payroll.  The employee contends that he should get a tax deduction on his hypo tax for the excess housing that he funded.  The issue went to the tax accountant and finally to the company VP for resolution.  The VP asks why he is being asked to resolve assignment allowance issues and tells HR that they should “handle it”.  The HR Director considers transferring to something less complicated, like nuclear engineering or cell biology.

It does seem expats take a disproportionate percentage of HR’s available time, and require much more administration than one would expect.  The trend in HR today is towards “self-service”.  Why do we need such detailed and centralized control of assignment expenses and allowances?  

Why can’t I just give assignees some extra money to handle the costs of an international assignment?

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Hey HR! Here’s What Employees and Families Really Need When Relocating Internationally

Guest Author:
Rachel Yates – Definingmoves.com

[Editor's Note:  We are very excited to share with you the assignee's spouse perspective on international relocation, from someone who has lived through five such moves.  Rachel Yates edits a website, Defining Moves, devoted to assisting relocating families around the world. ]

I read the post from May, 2011 by Warren Heaps about global mobility policies for the 21st century on this site, and found it to be fascinating, mainly because I am part of the changing demographics Warren described. On paper, we are the traditional relocating family; husband as assignee, spouse as the accompanying partner, and two dependent children. We have relocated through three continents over the last 10 years, and we have struggled. And we are most definitely not alone.

So what do relocating individuals and families really need from HR?

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Ten Ways to Simplify Administration of Your International Assignment Program


Jennifer Stein – Global Tax Network

[Editor's Note:  We are happy to welcome Jen Stein as a Guest Author.  Jen is the Managing Director of the Global Tax Network Chicago office.  She has more than 15 years of experience in expat and foreign national tax preparation and consulting, starting her career with Arthur Andersen, and then Ernst & Young, where she served for over 14 years.]

International assignment administration is complex. Sometimes it’s useful to take a step back and review basic components.  The list below, while not exhaustive, is a good starting point to help review your international assignment process and procedures.  Adopting one or all of these components may make your life easier when administering international assignments.

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Is There a Crystal Ball for Talent Planning and Global Mobility?

Guest Author:
Nikki Goodstein – Cisco Systems

[Editor's Note:  We are happy to welcome Nikki Goodstein as a Guest Author.  Nikki is a leader in Compensation & Benefits at Cisco Systems, Inc. and has a depth of experience designing and implementing global mobility programs. Before establishing the strategy and redesigning the program at Cisco, she led Global Mobility at The Coca-Cola Company. Nikki began her international HR career at Johnson & Johnson as part of their international compensation organization and has held HR roles in both the business as a generalist and in centers of excellence.]

Sorry, there is no talent planning “crystal ball,” but that does not mean you don’t need a plan!

Many companies with mature global mobility programs have evolved to measuring assignment success by leveraging available data across several key employment metrics:  performance over time, promotions/career opportunities, years with the company post repatriation, engagement scores reflecting manager performance, etc.  When consolidated into a dashboard, these metrics can help tell the story of success or challenges in your global mobility program.

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Managing Pay in a Global Enterprise


Author:
Warren Heaps – Birches Group LLC

You work for a global employer with on-the-ground operations across the world. Your duties include “managing global pay.”  Where do you start?  What are some approaches to consider?   If you’ve been wondering about this, keep reading.

Back in February, I wrote a post entitled “Think Globally, Act Locally”, in which I cited the example of how salary scale designs differ across markets with different characteristics.  But salary scales are just one aspect of the broad range of issues faced when managing pay globally.One of the most important steps in effectively managing compensation across a global enterprise is to have a formal compensation policy.

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Ten Tips to Develop a Global Code of Conduct – Part 1

Author:
Mariana Villa da Costa – Littler Mendelson

What is a Global Code of Conduct?  Everybody talks about them, and they have become a necessity for global businesses in today’s environment, but truly, drafting one can be a big mystery and a lot of work.  Who should draft them? A lawyer? Human resources personnel? The CEO?  What content should be included? What language?

These questions, and many others, will be answered with my ten tips to develop a Global Code of Conduct.  The first five tips are in this post; the remaining ones will follow soon in a follow-up post. Here we go:

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The Case of the Twisted Quota

Author:
Chuck Csizmar -
CMC Compensation Group

For many global companies with a direct sales force the design and administration of their compensation program is in a constant state of flux.  It always seems to need a further bit of tweaking, as dissatisfaction follows in the wake of any plan design.  Why?  Every uncomfortable participant who’s on the receiving end, from senior management to the employee pounding the street, feels that they know what’s wrong.  The verdict is that not enough money is offered for successful performance.

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The Easy Road to Global Compensation Success?

 

Author:
Chuck Csizmar
– CMC Compensation Group

How many success stories start with the phrase, “I took the easy road”?

Most companies (@85%) with global operations tend to pay their internationally-based top level executives in accordance with some form of global compensation structure – in order to level the playing field for those with multiple country responsibilities.

However, for the rest of their international population it’s not as straightforward.

The Challenge

Companies with local national employees (hourly, professional, management) face a challenge and a risk when it comes to deciding how to reward (pay) in each of their operating countries.    Do they “do as the Romans do” and follow local practice, or do they seek to create a standardized global framework in an effort to equalize pay practices?

For those developing strategies to effectively pay employees across the globe, the headache is in dealing with a diverse collection of economies, cultures and competitive pressures – some of which may be moving in different directions.  However, the strategy of recognizing country-specific differences in pay methodology often comes up hard against the interests of corporate staff administrators, who traditionally look for the easy way, the simple way, the one-size-fits all way of dealing with far-flung employee groups.  For many companies and international compensation practitioners, it is actually the administrators whom you have to overcome.

The headquarters staff will ask, “What difference does it make?  Unless otherwise required by legislative action or representation, why can’t we be fair to all our employees in the same way?”  Here are a few metrics to illustrate what they wish to standardize:

  • Value (price) jobs irrespective of locale
  • The pay mix of base salary and incentives
  • Universal date for pay increases
  • Average pay increase percentages
  • Pay-for-performance vs. general adjustment increases

Why Not?

Why doesn’t one size fit all?  Why can’t you treat all employees in the same fashion – because they all belong to the same “XYZ Corporation”, right?  You should consider the following before taking out that cookie cutter.

  • Economy:  When you’re dealing with country-specific inflation rates that range from flat to 20%+, do you really want to offer the same percentage salary increases?  What if one country is in the grip of recession (US), while another remains relatively unscathed (Australia)?
  • Culture:  In some areas of the world, job and income security needs command paramount interest over pay-at-risk, so in the pay mix the base salary dominates the variable portion.  For example, while China has a very aggressive sales compensation environment, in India there is more interest in base salary and their CTC (cost-to-company) package than variable pay-at-risk compensation.
  • Competition:  Companies react to the cost of labor vs. the cost of living.  If the market they are in rewards in a certain fashion (pay mix, commission vs. bonus, quarterly vs. annual rewards, etc.), companies who provide a different approach risk lower employee engagement as well as a talent drain.
  • Representation:  National unions often dictate pay actions that could reverberate up the hierarchy as companies strive to maintain equitable treatment with their other employees.  Works Councils will have their impact as well.

On the other hand, varying your practices according to country-specific conditions could cause a degree of consternation with the back office staff and their computerized systems.  These are folks who like things neat and pretty.  In their defense though, senior management often asks for standardized metrics that may be difficult develop and compare:

  • Tabulating global statistics when definitions or methods vary
  • Identifying global trends based on diverse conditions
  • Balancing the impact of cross border movement

If you force international operating units to convert their practices to an uncommon format and methodology, the result could be more than just confusion and local administrative difficulties.  It could also mean the greater likelihood of overpayments in some quarters while paying less in others – all for the sake of sameness and common report generation. This would result in a combination of hurting employees while also hurting the business.

Remember that ease of administration is rarely an effective rationale for making good business decisions.

More About Chuck:

How to Develop Effective International Assignment Policies

Author:
Alan Freeman – LOF International HR Solutions

During a recent conversation a colleague shared some frustration she was feeling. “I’ve read lots of articles and attended conferences where we’re told what we “should” be doing with our International Assignments (“IA”) policies on the basis of what everybody else is doing with theirs. What I’m not hearing is how to go about structuring our program in a way that really makes sense for our company. Where do we start? Who should be involved? What steps are necessary?”

“True”, I said. “We hear a lot about best practices such as keeping the spouse happy, increasing flexibility, controlling costs, keeping exceptions to a minimum and conducting benchmarking studies to find out what everyone else is doing. That’s all well and good but if your company sells luxury consumer goods in the best department stores in the largest cities of the world, do you think that practices that work well for mining companies in rural West Africa or at 14,000 feet in the Andes Mountains will be relevant and useful?”

“Exactly – they wouldn’t!” she said, “so what should we do?”

Let’s start with The Prime Directive. Simply put, your IA policies and program exist to help your company achieve its business objectives by having the right talent, in the right places, at the right times, doing the right things. Clearly, your company’s business objectives define what the various “right items” will be. Is this another way of saying you must start by truly understanding your business? Yes, of course!

“OK, that makes sense” she said, “then what?”

Well, now it’s time to go about structuring your program. A process that has proven to work well follows these steps:

Assemble a Policy Development Team

To often, policy development is left up to a Global Mobility department or single HR staffer working in a vacuum.  This generally is not effective. Utilizing teams of key stakeholders provides greater breadth of ideas, broader input from key functions and business operating units, and greater understanding of and buy-in to the end product. The team must be led by someone with significant depth of IA program expertise and include Global Mobility, Tax, Accounting, Payroll, HR Business partners from units that utilize international assignments, etc. Bringing in expert consultants and specialty service providers, e.g. immigration, international tax, global security firms, etc. can pay large dividends as well.

Conduct Benchmarking

There are two types of benchmarking to consider. First, conduct internal surveys of line managers who make use of IAs, and current and former assignees themselves. These groups can provide a wealth of information as to what has been working and what has not. They further can often make great suggestions for new approaches worth considering.

Second, do take a look at market practices through both generally available surveys and, potentially, custom surveys more precisely focused upon your company’s industry and competitors. This can help generate ideas and help gauge competitive positioning. Be careful, however, to not only look at what companies are doing but also to ask how well those practices are working. It’s amazing how many times I’ve heard a colleague say “we do ____” and in the next breath, say “and I’d change that practice in a heartbeat if my management would allow me to!” Another caution about benchmarking is that it’s imperative to consider the policy package as a whole and how the many provisions work together in total. There is a definite tendency toward getting caught up on individual line items and, hence, “lose sight of the forest for staring at the trees”.

Draft a Policy Structure

Put together the first array of policy provisions that make sense given the demographic, geographic and time variables dictated by The Prime Directive. Make sure they integrate and work together in a consistent and holistic manner.

Model the Costs

The first question executive management is likely to ask when the new program is presented for approval is not, “how does it meet our business needs?” It’s assumed that it will. The first question is, “what’s it going to cost?” If you are reengineering an existing IA program you’ll need to show the difference in costs between the proposed and existing programs.

Fortunately, there are many applications and providers that make cost modeling relatively straightforward.

Test Your Ideas as You Go

One of the worst ways to achieve buy-in on your ideas is to keep them to yourself and spring them on someone only at the end. If you communicate as you go through the process, sharing what you’re thinking about and soliciting inputs, that engagement frequently gives the other a sense of having had input and influence on the final product. Those who feel they had input are much more likely to respond positively. Their inputs may well have a lot of value as well.

In a larger corporate environment this could be done via periodic progress update meetings.

Finalize and Implement

In pursuing the steps above, you’ll ultimately obtain approval to proceed. Prepare the necessary communications and implementation materials. If you are reengineering an existing program, you’ll have already determined whether current assignees will be “grandfathered” under their old terms, converted to the new terms, or converted with some sort of buy-out provision.

When you have it all in place, move ahead.

Continually Evaluate and Improve

Finally, when you implement your new program, be sure you’ve also built in metrics and processes for determining how well it’s working on an ongoing basis. You can’t have anticipated everything that will ultimately be encountered and change happens! Be ready to be flexible and make program adjustments “on the fly”.

More About Alan:

LOF International HR Solutions web site

Alan on LinkedIn

email Alan