NFTC International HR Conference Report – Part II


Author:
Warren Heaps – Birches Group LLC

Alan Freeman and I both had the pleasure recently to attend the Houston International HR Conference sponsored by the National Foreign Trade Council (NFTC).  This is the second in a series of posts summarizing the proceedings of the conference.  We hope this will allow our readers to benefit from the learnings of the conference, even if you were not there personally.

Here are some highlights of some presentations at the conference that touched on various aspects of Expatriate Program Management.

Reducing Expatriate Program Costs
Expatriate program costs are an important topic for discussion whenever international HR folks get together.  A presentation by Morgan Crosby and Harry Gram of Airinc focused on two areas that have a big impact on program costs – Housing and Alternative Policies.

Expatriate Housing
Housing is one of the most costly elements included in an expatriate package.  It’s not uncommon for rental amounts to reach $4,000 to $5,000 per month, or more, and that’s not including the associated tax gross-up costs.  In assignment locations with a broad range of acceptable housing for expatriates, the reason for such high costs is often the standard used.  By standard, we mean the size and quality of the property, and most importantly, the neighborhood.

Morgan gave an example for London, where a company could save about 15% per year by substituting high quality housing in the London suburbs for apartments in the most prestigious locations such as Belgravia and Knightsbridge.  This usually means that expats will have to commute a bit longer to work, and occassionally, it may mean they will be further away from international schools.  But the housing in the alternative locations is perfectly acceptable and compares favorably to many different home country housing standards.

Alternative Policies
Another opportunity for cost savings is the use of reduced or modified policies in certain situations.  Many companies are introducing development programs to offer staff the opportunity to gain international experience early in their careers.  These employees are often very willing to take assignments with fewer of the ‘bells and whistles” associated with full expatriate packages.

Companies can respond to this by offering “reduced” expatriate packages.  For example, a lower housing standard; reduced relocation assistance; and efficient purchaser COLAs.  And, since the target population for these development programs are frequently young people, they often do not have school-age children, and some may be single, reducing the cost for spousal benefits and education assistance to nil.

Summary
There is an ever-increasing effort to reduce the cost of expatriate programs. These suggestions are just two of the alternatives companies may consider when looking to generate savings.

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5 responses to “NFTC International HR Conference Report – Part II

  1. Rather than dictate where and how expats should live, I would suggest a policy which puts control in the hands of the assignee, ie the company creates a housing allowance component to the salary package, but the assignee is free to spend as much (or as little) as they wish. On occasion we have chosen to live in more modest accomodation, but were happy to do so because it was our choice. We’ve also had friends who have chosen to spend more. Same with education costs – let the assignee decide whether to spend more or less than the allowance.

  2. Mary Mimouna

    Thank you so much for providing summaries of this conference for those of us who were unable to attend.

  3. Nikki Goodstein

    Hi Warren – hope you are well!
    I’d enjoy hearing people’s thoughts on effectively managing lower priced/lower cost developmental assignments. In our environment, I am concerned about ‘misuse’ to save money. Instead of a developmental assignment ‘type’ we created an 18 month assignment – reducing costs primarily by reducing time as well as some allowances. How do other companies face this challenge?

  4. Hi Warren,

    I agree with Judy, instead of deciding a location just allocate a housing budget and let the expat family choose the type and location of housing.

    One reason for doing this is obvious if you have been an expatriate in a country where access to public schools are determined by your address. In Atlanta for exanple, we choose the Buckhead area, one of the most expensive area because the best primary school offering international baccalaureate curriculum was in this district so we could have more options.

    The “reduced” expatriate packages for young managers are great unless you need an executive like a CEO or a seasoned muticultural manager who can manage conflicts with cultural sensitivity.

    Reducing the costs makes sense if you have a system to evaluate the value an expat brings to the company beyond the bottom line : people with a huge network of international and local partners, deal makers, rain makers, etc.

    I would be happy to learn how global companies evaluate the value of expats and the ROI as well as how repatriation is managed to retain top talent.