We have seen the reduction in traditional long-term assignments and one of the growth areas has been an increased number of one-way relocations, often known as international transfers or permanent transfers. The primary benefit of this type of ‘assignment’ or relocation is that it is much cheaper than a full international assignment. However, are organisations using the policy for the right reasons or is it being used simply to move assignees at a lower cost?
Traditionally, the international transfer policy has been used when an employee is required to fill a position in a new location. Fundamentally it is designed to provide relocation support and then the employee is treated the same as a local employee in the host location. At the time of the transfer it is not expected that the employee will move again or repatriate.
However, we have seen a number of our members express concern that businesses are ignoring Global Mobility (GM) advice and are using this method to move employees, that should really be treated as international assignees, in order to save cost. Whilst this may meet short term budgetary targets, is this storing up issues (potentially more costly) for the future? In addition, does it give the employee the protection they need?
Issues on the horizon
Potential repatriation costs – an employee and their line manager may have discussed the fact that a new role is for 3-4 years, or there may be immigration restrictions which mean the employee does not have the option to remain after a certain period of time. By sending an employee on a local package it removes the organisations obligation to repatriate or re-assign them to a new location. This means that, should the employee wish or need to come home after that time, they are liable for those relocation costs back to their original home location and the organisation does not need to offer a role in the original home location.
Medical Insurance – it is really important for the employee to understand the levels of cover provided to them in the new location so there are no unexpected surprises which leaves the employee with less cover than they were used to in their home location. At a time of crisis this can leave the employee feeling very unsupported.
Pension plans – moving an employee onto a new local salary means that they will no longer remain in their original home country pension scheme. For some, just starting out in their career, this may not be such an issue. For others, closer to retirement, this could have a detrimental impact that the employee may not fully appreciate. If the true plan is for the employee to return to their home location after a 3 year or 4 year period of time, then is it fair to force them out of their home country pension plan?
Social Security contributions – this is another area where an employee may not fully understand the implications until well into their new role in the new location. Ceasing social security contributions may impact the amount an employee can claim in their home location upon retirement if they have not met the minimum number of years for social security payments. Eligibility to some other statutory benefits may also be impacted if there have not been continuous social security contributions in the home country.
Additional tax costs – Without the correct tax advice up front, the employee may be unaware that various events such as selling a property or exercising stock options after they have left their home country may trigger an unexpected tax bill.
Lack of talent management – in some organisations relocating an employee on a local contract may mean a step away from Global Mobility and Talent. This may result in no overview of the employee’s career path within an organisation.
All these potential hurdles can have unintended outcomes and can leave employees often feeling very disengaged, resentful and potentially looking for roles with competitors. If organisations compare the cost of relocating someone and then losing them versus a full international assignment – are international assignments really that expensive in the overall picture?
So how can GM help line managers and the business to reduce or eliminate potential headaches for the future and ensure their top talent isn’t put at risk? My top 3 tips would be:
- A strong governance process – this is vital so the business has a clear justification for sending an employee to a new location and the right policy can be used to take into account the role they will be performing.
- Communicate – ensure the GM policies are clearly understood by the business so that they know there are different options available and that the policy then used to support the employee is fit for purpose. Also ensure they are aware of the potential long-term consequences of cutting cost in the short term. Will it give them the ROI they are expecting?
- Education – make sure the employee is fully aware of not only what support they will be getting as part of their relocation, but what the changes in employment contract mean in terms of their pension, tax and social security. If the employee is fully aware up front of the changes then the decisions they make are fully informed and they are less likely to come back to the business or GM with queries over differing expectations further down the line when it is too late.
If you are looking to write your own assignment polices or are reviewing your current suite of policies why not take the opportunity to delve into more detail at our Global Mobility Policies course on 23rd April 2018.