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Is it becoming more difficult to relocate employees overseas? Rebecca Lewis looks into relocation trends and discovers what companies are doing to make assignments as seamless as possible.
As companies continue to expand, merge and acquire new businesses globally, the need to shift employees to help maintain business objectives has become a huge focus for HR professionals.
Country-specific challenges, such as controlling costs, complying with local regulations, difficult housing issues and pension schemes, will continue to loom large for relocation managers as we move into a more mobile 2013.
These relocation issues not only pose a series of challenges for HR managers, but also the employees, whose daily lives and jobs are affected by a shift overseas. Because of this, executive relocated staff are demanding more flexibility within relocation programmes, forcing companies to think outside the box.
But despite the demand from assignees for more flexible contracts, more companies than ever are standardising their policies on a global level. According to the Brookfields Global Relocation Trends Survey, 83% of organisations reported this standardisation – the highest ever – up 9% from 2011.
Companies are also continuing to diversify their international programmes, with nearly all companies (96%) having long-term international assignment policies in place and most (86%) having short-term policies. One-way permanent moves (44%) and localisation policies (35%) are also becoming increasingly more common – but the trend towards flexible assignments
has stalled (7%)
This is most likely because these types of policies – based on a core of required benefits with flexible optional benefits – can be difficult to administer.
“There is pressure for our relocation programmes to be flexible yet fair to both the company and the international assignee,” says NC Prakash, head of HR for Rohde & Schwarz (AMEA). “There are definitely much more complex preferences than before to consider.
We are seeing varying needs from international assignees, however there are essential practices so that fairness is maintained.
This idea of “fairness” can be hard to manage, especially when HR managers are trying to keep every employee happy when agreeing to relocate.
Brent Tignor, regional human resources manager for Stepan Asia Pacific, says the company tries to slot every assignee into one of three “cookie cutter” relocation programmes.
Programme A is for existing and new senior management, programme B is for professionals, experienced new hires and PhDs, while programme C is for inexperienced new hires.
The decision on which relocation programme an employee falls under is based on the level of their position, which is decided upon an internal grading system. For example, a grade 12 and above would be someone who fits into programme A, while a grade eight would be a new hire or someone fresh out of university.
“It is generally tied to experience level but with some exceptions. You could have someone who has been with us for 40 years but they’re a grade eight because they stayed within that band,” Tignor says.
“When you decide where they are slotted into we can then say, ‘these are the benefits that are included in this particular relocation’. ”
The changing face of assignees
According to the Brookfield study, which surveyed HR professionals and managers of relocation programmes worldwide, it’s not only the type of benefits and packages being offered that are changing, but also the assignees themselves.
While there are more female assignees being noted (20% in 2012, up 2% from the previous year) the average age of relocated staff also appears to be changing. The age group most represented for executive relocations remains the 40-49 bracket (34%), but there has been a marked jump in 20-29 year-olds taking up international assignments.
“This year’s important increase in the youngest age group provides an additional sign of improving economic conditions and optimism as companies send out younger international assignees,” the report noted.
Although married international assignees are still the majority, there appear to have be fewer over the past couple of years. This year’s survey found just 60% of international assignees are married – the lowest figure over the past four years and a full 7% below the historical average.
This trend is likely because families remain cautious about economic conditions, are more concerned about preserving their two-income status.
“As economic realities continue to remain in flux for many employees with families, it is possible that companies’ current international assignment programmes are not adequately meeting the needs of employees with spouses, causing them to decline international assignment opportunities,” the report stated.
The hesitation to move overseas could also be because more typically “hardship” countries are popping up on companies’ radars.
The survey noted 25 countries listed as assignee designations – the most ever recorded – including six new locations of Malaysia, Spain, Indonesia, Argentina, Kazakhstan, and Colombia.
And of course, different countries bring many different challenges. The 2012 Trends in Global Relocation: Biggest Challenges Survey by Cartus found the greatest challenges for HR departments and relocation managers are controlling assignment costs (61%) and complying with laws and regulations of the host country (51%).
The need to control cost is an imperative for global businesses, but doing so puts direct pressure on benefit levels, which can affect assignees. When cost issues affect employee’s ability to do their job or live comfortably – such as not being able to open a bank account – it becomes an even bigger problem.
“At Rohde-Schwarz, we try as much as we can to help them be sufficiently prepared for the move so they can focus on the job,” Prakash says.
“It is always a balancing act to ensure that it makes business sense as well.
We provide the necessary financial support for the employee to move and tide them over during the time they look for accommodation to settle in.
The third most common difficulty is to with housing, something Tignor has experienced with at Stepan.
The US housing bubble means shifting staff away from America can cause employees and their families to run the risk of losing a large sum of money on their house. The company can step in at times through a purchase policy, where they are able to buy the house.
“That is typically not offered … but if someone is in a particular bind the company might agree to buy the house or cap the losses at X amount. Without this, that person might not be able to move,” says Tignor.
According to Cartus, housing issues affect 41% of respondents, particularly with housing and rental costs increasing – or simply remaining much higher than at home – in host countries.
A survey by ECA International found Hong Kong, Caracas in Venezuela and New York City to have the highest rental prices respectively, with Moscow and Tokyo rounding up the top five. Singapore sits at eighth place, down one spot from the previous year.
While companies relocating staff to Singapore will be pleased rental costs have remained modest – averaging $6890 for an unfurnished three-bedroom apartment – there is another problem more unique to the Lion City.
“For permanent packages, how do you handle someone’s retirement plan?” Tignor asks. “This problem is particularly unique to Singapore because if you come over here with only an Employment Pass, you are not subjected to CPF.”
He concurs some people do not want to be subjected to CPF, but the company urges all relocated employees to apply for Permanent Residency, which will make them subject to CPF, thus covering their retirement policies while in Singapore. Leaving their home country behind – and potentially their pension schemes – leaves many relocated employees in “no man’s land”.
“It takes time for people to become PRs, but you can’t make people do it. You can say it’s an expectation and say, ‘we will not give you this unless you become PR’, but its really hard to make people do,” Tignor says.
“We want to use it as a motivation… it’s about looking after employees and saying we want them to have savings and retirement.”
If an employee does not qualify for PR status, then the company is not able to provide anything else from a retirement perspective.
Additional challenges faced in relocations include moving staff to an area with limited infrastructure, structuring compensation, safety and security and schooling.
“We make resources available… to prepare [assignees] with the necessary knowledge on local culture, practices and difference in living standards to ensure they better assimilate into the new environment,” Prakash says.
Rohde & Schwarz places importance in making sure families are well assimilated, particularly in less developed countries, guiding them on administrative processes and offering them financial support, he says.
“Some tweaks are necessary in cases – for example, not all assignees move with their family but want support to keep in touch. For some, not compromising too much of their current lifestyle in the new environment is key,” he adds.
“This need for flexibility translates to us having good pre-assignment dialogues with international assignees to understand their concerns and working through it.”