Author:
George Bashaw – Atlas Global Benefits
In early May, I wrote a blog on the Dubai Health Authority’s (DHA) efforts to implement employer mandatory health insurance. Since my blog, the Director-General of the DHA has put the funding scheme on hold until 2010.
Instead of paraphrasing a nice article in the Khaleej Times, you may find it here if you would like more information on the topic.
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Posted in Benefits, Expatriates, Insurance, International Benefits
Tagged Benefits, Dubai, dubai medical insurance, expatriate, health, international hr, UAE
Author:
George Bashaw – Atlas Global Benefits
With pressure from the C-Suite, HR is walking a tightrope to reduce cost and provide equal or better benefits. Multinational pooling is one option to consider for a company that has multiple international locations. This blog is Part 1 in a series of suggestions to reduce cost without sacrificing the quality of benefits.
Multinational Pooling
Multinational pooling is a contract in which a corporation with two or more locations can spread insurance risk by joining a larger pool of insureds. This contract is facilitated by a pooling network which has a network of providers in various countries. Pooling can be used to spread risk for a number of employee benefits including medical, life, and disability insurance.
Many pooling networks require a minimum of ten employees per country. Therefore, pooling can be a great way for smaller companies to provide consistent benefits, reduce administration, and save money.
How Can Multinational Pooling Reduce Cost?
Since the pool consists of a large group, the risk is experience-rated instead of fully insured. The nature of an experience-rated contract eliminates some of the administrative costs and margins of a fully insured plan.
Providing the experience is good (determined during due diligence), the premium may be less. If the corporation decides to participate in a pool and the experience is favorable, a dividend payment is received at the end of the year. If the experience is poor, it may be mitigated by stop loss insurance, or the balance will be carried forward and can be recovered by future dividends.
Additional Benefits of Multinational Pooling
Underwriting small groups is always challenging. By pooling with a larger group, there are better guarantees, limits, and benefit offerings. This allows smaller groups to meet a common objective: consistency in benefits. Additionally, the pooling arraignment will likely provide enhanced financial reporting, consistency in communications, lower acquisition costs, and reduce the burden on HR.
What Else?
Multinational pooling is not for everyone. Due diligence with a few pooling networks can determine the pros and cons. As this is a complex, technical area, it’s always best to work with a benefits professional with experience in this area.
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Author:
Chuck Csizmar – CMC Compensation Group
Once your company decides to send an employee overseas on expatriate assignment the danger of imminent waste looms large. The problem usually begins with management not understanding or even choosing to ignore the real costs of the international assignment. The money pit is then worsened by having only a weak business reason to support the assignment. If you lack a compelling business justification for why an employee is needed overseas, it is likely that you won’t be able to measure whether their assignment will be a success or not.
Below are some of the major reasons for the cost spiral of money slipping out of your hands; however, this is by no mean an all-inclusive list. I have no doubt that you can provide your own reasons as well.
For some companies it is easier for a manager to have an international assignment given a green light than it is to have a piece of hardware or software approved for purchase. Where is the business case? Where is the justification via projected financial return that management should be held accountable for? Is anyone being held accountable that an ROI is achieved?
You should think twice before agreeing to pay out 2-3 times annual salary to provide for an expatriate assignment. “It’s in the budget” is never a good business reason.
Once an employee realizes that they are the only, or preferred choice for the assignment, you lose all negotiating leverage. I recall one fellow who insisted that he and his family live in Inner London (meaning: uber expensive) – though the office was 35 mi. north – or else he wouldn’t take the assignment. Do not expect someone holding leverage to be reasonable and accommodating when discussing terms & conditions of what you will pay for.
Strive to develop a stable of qualified candidates. It would also help if you remember that the ability to perform the job should not be the only criteria for selection. A bad cultural “fit” would be a painful and expensive experience for everyone.
Note: an employee with an attitude of doing you a favor, versus appreciating the career opportunity being offered, is a bad bet.
Unless you enjoy living in a “let’s make a deal” world, you would be advised to lay down an international assignment policy, and then adhere to it. You will still be challenged by the employee / spouse to make improvements in their conditions, but without the support of a policy you will be hard pressed to stand your ground.
Note: make sure all terms & conditions have been confirmed *before* the plane departs. Once you have an expat on the ground in the host country you have lost whatever leverage you might have had. From there you *will* agree to term revisions, because senior management will conclude that having already made the investment you have to keep the expat happy or risk the assignment.
Even an otherwise contented expatriate will be rattled if every night they come home to complaints about life in the host country. Such a situation will distract the employee from concentrating on their assignment, and eventually you will face the need to further revise terms (increase costs) and / or the employee will throw in the towel and the assignment will be deemed a failure.
Be sensitive to potential family issues and include everyone in cultural orientations. The family is the expat’s support group, and if they are unhappy . . . well, you know the rest.
This way no one would understand the full extent of the costs involved. During five years spent overseas on assignment, neither Corporate nor local Finance was able to explain the full cost of my assignment. They had assigned expenses into so many diverse costs centers and budget line items that the confusion never cleared. Imagine the drip – drip – drip of your money if no one is even asking!
If no one is watching the costs of the assignment, those costs cannot be controlled. It would be like handing over a blank check – with no guarantees of gaining anything in return.
Finally, watch out for the manager who tries to “save money” by circumventing HR assignment policies. These creative thinkers consider that short cuts save money, but typically those “cuts” do little more than alienate the expatriate (and / or family) by treating them as second class citizens. Bad idea.
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Posted in Expatriates, International Benefits
Tagged expatriate, expats, flexible assignments, International Assignments
Author:
Alan Freeman – LOF International HR Solutions
We recently addressed a colleague’s question that echoed one we hear fairly often. “We have an operation in Country A and want to hire our first employee in Country B. He is a national of Country B, will continue to live there while working for our company, essentially all his work activities will be conducted in Country B and he will not be an expat. Can’t we simply put him on a Country A contract, enroll him in Country A social insurance and our company benefits schemes, pay him through the Country A payroll and all will be well?”
Indeed, it is a true story (I am NOT making this up!) that a senior executive once told me that he intended to hire seven employees in France under UK contracts and payroll from the UK. His rationale?, “We don’t want to have the extra burden of setting up new administrative capacity in France and, besides, I don’t want to get tangled up in those restrictive French employment laws.”
While the desire to avoid the costs and efforts of establishing operations and additional administrative burden in “new” countries is understandable, it is not wise. Here’s why.
What are the key issues?
In most countries, a person resident in the country and performing services in the country is considered an employee in that country. It doesn’t matter where the payroll is paid, where the contract is issued, or what country the employing entity is located in.
In our example above, the likely circumstances would be:
Is there a simple solution?
Yes. Local employees must be employed on local terms and conditions, in accordance with local market practice, by a local employer-entity, and paid via local payroll services that ensure compliance with employment, social insurance and income tax regulations. Oh, and by the way, if per chance the target employee doesn’t already have the appropriate immigration status, Work Permit and Residency Visa requirements come into play as well.
Exactly how the above can be accomplished is dependent upon what’s possible and appropriate in each country. It isn’t overly difficult or expensive to “do it right the first time” and it is much less expensive and disruptive to the business than not doing it correctly.
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LOF International Human Resources Solutions, Inc.
Author:
Chuck Csizmar – CMC Compensation Group
In recent months I have dealt with several US clients who faced an overseas challenge of high employee separations coupled with difficulty in recruiting qualified staff. These companies were at a loss to understand the cause of their problems, as each felt that they were already paying out a great deal more for employees then they were accustomed to in the US.
A quick study revealed that, while the client’s international employees were indeed receiving a great deal more than their American counterparts, in many areas they were in fact being given no more than the minimum benefits mandated by statutory requirement. How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what the local government says you must?
One client bemoaned having to grant four weeks of vacation upon hire, because it was the law, only to find out that everyone else was granting five or more weeks. By ignoring competitive practice they were paying the price by struggling to build a quality staff. They had earned a reputation in the local market as a “minimalist employer”.
When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to back at home. Every country is a separate and unique entity, with differences in HR policies, practices, and statutory requirements, each of which must be acknowledged and addressed in order to maintain a successful operation. On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – usually coupled with social charge and benefit distinctions as well.
Operating under the guidance of US employment law and US-based corporate practices is a failed strategy. Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed.
If you decide that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its US counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their packages might compare with US or other country counterparts. If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.
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Posted in Benefits, Compensation, Cross Cultural Insights, International Benefits, International Employment Law
Tagged global compensation & benefits, Global HR policy, International Human Resources, international operations, minimum benefits, statutory requirements
Author:
Warren Heaps – Birches Group LLC
Many of you will already know that last week, the second Africa Forum conference, sponsored by the African Development Bank, Birches Group LLC and ORC Worldwide, was held at the lovely Sarova Whitesands Resort and Spa in Mombasa, Kenya. The conference was attended by representatives from leading employers in Africa, with delegates from Kenya, Tanzania, Uganda, Sudan, Democratic Republic of Congo and South Africa. I was lucky to be one of the organizers and presenters at the conference, so I thought I would share some of the proceedings with you.
Keynote Address
The conference opened with a wonderful conversation with Dr. Sipho Moyo, Residential Representative for the AfDB in Tanzania. Dr. Moyo spoke about what managers look for from HR in terms of support, ideas and insight.
Overview of African Markets
The keynote address was followed by an overview of African markets. The presentation included statistics capturing the impact of the global economic crisis on Africa, through reduced GDP growth rates across the region, higher inflation (double digit levels in over 25 countries), and reduced trade. There was also a discussion about the nature of the labour markets in Africa, and the key role leading employers across all sectors, including international public sector organizations, play in the market. Finally, some summary market data was shared for all countries in Africa, with a special look at Kenya, Mozambique, Malawi and Nigeria.
African Cafe I
The next session was a series of small group discussions. Three topics were selected by the group – Market Intelligence, Impact of the Global Economic Downturn, and Incentive Pay. Each topic was featured as a discussion group, and participants rotated through all three topics, thus having a chance to participate in all of them. These were lively, interactive discussions, where participants were able to raise issues, share their experiences and learn from the experience of others.
Focus on East Africa
Since the event was held in Kenya, we turned next to an in-depth look at the East African market, focused on Kenya, Tanzania, Uganda, Rwanda and Burundi. There was comparative data to highlight the similarities and also the unique features of each labour market in the region.
Building a Pan-African Workforce
A lively discussion followed led by Awinja Wameyo of AfDB, about the challenges the bank faces in building a workforce for their operations across 25 countries in Africa. Topics of particular interest to the group included recruitment of professionals from the African diaspora, and the desire for diversity, and how best to achieve it.
Market Intelligence
Day Two began with an in-depth look at market intelligence, and how the Birches Group surveys are tailored to address many of the challenges faced in small, volatile markets, with such a wide range of practices. Birches Group staff demonstrated the Indigo survey portal for the group as well.
We also spoke about the comparative framework — how to best determine the right approach to matching positions in the African market to survey benchmarks consistently.
African Cafe II
Next we had another series of discussions on topics chosen by those in attendance at the Forum: Intra-Regional Assignments, Performance Management and Talent Sourcing. It was a wonderful chance to share insights and learn from each other.
Untying Knots
Following lunch, we kicked off the final afternoon of the Forum with a stimulating presentation about Performance Management and Pay Design. Gary McGillicuddy spoke about the Birches Group Community approach to performance management, which uses multi-rater feedback and the answers to three simple questions to manage evaluations effectively and efficiently. Gary also spoke about the “Wedding Cake” of pay design, demonstrating that in an organization, time-based, competency-based and performance-based compensation systems can coexist to drive overall organizational effectiveness.
Employer Branding
The closing presentation was an overview of employer branding. Curtis Grund of ORC Worldwide shared his personal experiences as well as a summary of the leading practices in employer branding. Curtis also looked at some employer website to highlight best practices.
In Summary
The Africa Forum 2009 was a great opportunity for human resources professionals in Africa to discuss critical issues, learn about trends, and most importantly, share information with each other and form what we hope will be an ongoing network for sharing and collaboration.
We expect that Africa Forum will be repeated, next time in Southern Africa. Stay tuned for more information about next year’s Forum. We are grateful, also, to the African Development Bank, for lending it’s name and providing resources to make the Forum a reality.
Conference Presentations
If you were unable to attend the Africa Forum, but would like to receive copies of the presentation materials, please let me know by using the Contact Us link. Just indicate your interest in receiving the Africa Forum materials.
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Author:
George Bashaw – Atlas Global Benefits
On January 1st, the Dubai Health Authority (DHA) initiated the first phase of employer mandatory health insurance for expatriates and UAE nationals working in Dubai. All expats new to Dubai must obtain a Health Benefit Contribution (HBC) compliant insurance policy.
Background
The population of Dubai has exploded from 300,000 to 1.5 million since the Department of Health and Medical Services (DoHMS) was created over thirty years ago. Considering the growth and significant demographic changes in Dubai, the DoHMS has done an adequate job (World Health Organization ranks the UAE 44th). Did I say something in “Dubai” is “adequate”? The two words are mutually exclusive. In Dubai, they simply strive for the best. Therefore, the DHA was established to accomplish this goal by 2015. What does this mean for you?
Existing Plans
If you manage an existing health plan in Dubai, it is valid until it expires. Upon renewal during 2009, the new plan must be HBC compliant. By January 1st 2010, all corporate health plans must be HBC complaint.
Payment and Administration
Who pays the HBC? The employer pays the tab. The HBC is a flat-rate for all employees, including UAE nationals and expatriates. There is another hitch. All HBC policies must be sold by authorized insurance companies. Since most employers will provide benefits above the notional standard, there is a group of authorized insurance companies waiting to sell you a top-up plan.
Choosing a Clinic
Not so fast. All employees must choose a primary clinic to complete enrollment. They can do so by visiting an OCP (Outpatient Care Practice)clinic in person, on the web www.dha.gov.ae, or through their employer. Want the good news? The employer may choose a default OCP clinic.
Employer Responsibilities
Just so there is no confusion on the rules, I copied this from the DHA website:
Still have questions?
You are welcome to visit the DHA but I would rather you just ask me.
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Posted in Benefits, Expatriates, International Benefits
Tagged Developing Markets, DHA, dubai employee benefits, dubai expatriates, dubai expats, Dubai Health Authority, Dubai Health Benefit Contribution, dubai health care, dubai health insurance, dubai mandatory health coverage, dubai medical insurance, emerging markets, expatriate, expats, HBC, Insurance, International Benefits, UAE expatriates, UAE expats
Author:
Warren Heaps – Birches Group LLC
This former communist country has undergone a rebirth recently, but still faces economic and and social challenges. These factors, in turn, have a strong influence on the local labour market practice.
Brief History and Background
Mongolia became an independent country in 1911. By 1924, however, a Soviet-influenced government was established, and flourished until the early 1990s. A new, democratic constitution was adopted in 1992, and democratic elections were held in 1993. Since then, Mongolia has been making the transition to a full market economy.
Over the last several years, Mongolia has enjoyed a robust growth rate, with GDP increases from 7.3% in 2005 to 10.2% in 2007. Much of this growth has been driven by the mining sector, with large operations focused in cooper, gold and other commodities. There also has been increasing foreign investment in other sectors, such as software development, telecom and food.
The global economic crisis and collapse of commodity prices has resulted in a slowdown in Mongolia. GDP growth for 2008 dipped to 8.9%, and the Asian Development Bank predicts a further drop to just 3.0% for 2009. From January, 2008, to April 30, 2009, the local currency, the Tugrik, has depreciated against the US dollar by about 22%, putting additional pressures on the Mongolian economy, which imports 80% of its oil, and many other basic commodities and raw materials. Projected inflation for 2009 is about 9.5%.
Overview of the Labour Market
Birches Group recently completed the annual survey of the market in Mongolia. The information that follows is based on the recently published survey results.
Total compensation levels in Mongolia range from about $7,400 for unskilled support staff positions such as Messengers and Drivers, to $36,000 for Managers and other senior level professionals.
Total Compensation in Mongolia
Let’s focus in on Working Level Professionals, i.e., college graduates with 3 to 5 years of experience in their respective fields, such as Finance, HR, Procurement, Engineering, Sales and Marketing. In the graph, this group corresponds to the second column in the Professionals category.
For a Working Level Professional in Mongolia, the median total compensation ranges from about $14,000 to $22,000. However, as the “footprint chart” illustrates below, there is a much wider range of compensation in the market – from around $9,500 to over $30,000.
Market Footprint – Working Level Professional
The footprint chart shows the full range of the market, from the 25th percentile of the minimum or entry level salary to the 75thpercentile of the maximum, as well as the MRP or “market reference point” which illustrates the average rate for incumbents in the job. By viewing the market with this perspective, employers can gauge not only the market references, but also get a good idea about the span of pay (from min to max) in the market.
What else besides salary?
As is common in developing countries, the typical package in Mongolia for a Working Level Professional includes not only salary, but allowances, incentives and in-kind benefits. Let’s take a closer look at the market practice for these items.
At the 50th percentile, the average breakdown of total compensation is as follows:
Composition of the Compensation Package
Composition of Compensation Package
The chart above indicates a base salary of $15,926, representing about 84% of total compensation. The rest is made up of allowances (6.5%), short-term incentives (4.5%) and in-kind benefits (5.2%). The most common allowances are meal and beverage allowances, and cash allowances such as 13th month, mobile phone allowance and seniority premium.
For in-kind benefits, the chart below shows the categories provided; recreational activities and meals are the most common.
In-kind Benefits
In Summary
Mongolia is a dynamic market which has experienced good growth in recent years. While there is much slower growth occuringnow, employers with businesses there still must keep abreast of market changes. Rich survey data is one of the best ways to ensure that your compensation packages remain competitive, cost efficient, and responsive to your employee’s needs.
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Posted in Compensation, International Benefits
Tagged Asia, Compensation, Developing Markets, emerging markets, Mongolia, salary surveys
Author:
Mariana Villa da Costa – Littler Mendelson
The current worldwide economic crisis is putting businesses under increasing pressure to control costs. In spite of the challenging economic environment, however, companies are continuing to do business globally and even more small and medium enterprises are starting up international operations. Along with this growth of international business operations comes the globalization of employment. In addition to traditional “expatriate” assignments, more and more organizations are looking for alternative types of assignments which better address their needs, and have the potential to reduce costs as well.
Below are some ideas on how to tailor your approach to international assignments in today’s environment.
Examine Your Population
For companies going global, look for early-in-career professionals who are seeking international assignments for their own professional development. This group is typically younger, and often anxious for the opportunity. A lot of expenses associated with expatriate assignments are related to family members. Since these assignees are often single, or married but have not yet started a family, many of these costs can be avoided. Companies can create a developmental policy specifically for this situation, with allowances that are scaled back.
“Volunteers” are a similar group – those employees that raise their hand to go overseas for personal reasons, or those with a lot of geographic flexibility. Older employees, without the burdens of young children, are often in this category. An added bonus – these are often the most experienced technical talent in an organization, and can be deployed effectively for technology transfer and other training missions.
Introduce Flexibility
Expats are always keen to get cash and manage their own expenses. Many companies have introduced lump-sum options in lieu of traditional expatriate allowances. This allows costs to be capped, and also offers flexibility to the employees. It is widely known that if the company gives the employee US$ 5,000 for housing, it is likely that the entire amount will be used for monthly rent. On the other hand, if the cap for total housing expenses is US$ 20,000, the employee will allocate his expenses more wisely.
Keep in mind, however, that in some locations, lump sums will not be very tax-effective, and could actually result in higher costs.
Proactively Manage Your Assignments
Another issue facing companies is so-called “permanent expatriates.” These are employees occupying important positions in highly desirable locations of the foreign operation for many years, who for a variety of reasons have not been reclassified as locals. The company needs to establish, in their internal policy and in the international assignment agreement, clear guidelines that outline when such a localization would take place, and then follow the guidelines. Our experience shows that many organizations have policies for localization, but few companies actually use them!
Use Tiered Policies
Many companies use a tiered approach to international assignments. Depending on the type and reason for the assignment, the terms and conditions for the expat package vary. For example, local or “local plus” packages are used for development or volunteer assignments; expat “lite” might be used for moves in markets where talent is widely available or early localization is desirable; and full expatriate packages would be used for senior level executives and leadership positions. Regardless of the pay approach, though, companies must always be mindful of the career planning issues of managing expatriates.
Consider International Pay Scales
For employees in managerial positions, and executives that are going to a foreign location to develop and assess business, and that likely will undertake future assignments, the use of a single global pay scale is another idea. The design of such a scale needs to account for the rates in which the company competes for this key talent. In addition to pay, benefits and some allowances might be included as well.
Summary
Managing a global workforce prudently can be an important factor in the success or failure of a company doing business internationally. Therefore, it is wise for companies to cultivate and develop new strategies to ensure their international compensation program is strategically aligned to their business, and also designed with costs in mind.
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