MERCER WEBCAST GLOBAL MOBILITY LOCAL PLUS APPROACHES

GLOBAL MOBILITYLOCAL PLUS APPROACHES9 October 2013

MERCER WEBCAST

Karen CygalNew York

Mike ShoreBoston

MERCER 1

Local plus approaches Agenda

Defining local plus approach

Local plus: A growing trend?

Purpose of the local plus approach

Components of the local plus approach

Local plus approaches by location

Going forward: Food for thought

MERCER 2

Local plus approachDefining an elusive concept

A few common characteristicsLocally delivered pay/ benefits + some items not typically provided to local staff

Used for permanent transfers, localising expatriates , locally hired foreigners

Sometimes viewed as the “magic elixir” of expatriate compensation, striking a balance between local packages and expensive expatriate packages

BUTLocal plus package components vary by employer, by type of move

Host country conditions can make applying local plus policy challenging

Purposes vary: Simplify, contain costs, align with local practices, or decentraliseexpat management?

MERCER 3

Local plus: A growing trend?Do you have international employees on a local plus package?

Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey

MERCER 44

Local plus: A growing trend?Do you have a formal local plus policy?


MERCER 55

Local plus: A growing trend?How did local plus population change in the past two years?

For the same period, 33 to 35% of companies reported an increase in the number of international employees not on a local plus approach


MERCER 66

Local plus: A growing trend?How will your local plus population change in the next two years?

For the same period, ~40% of companies predict an increase in the number of international employees not on a local plus approach


MERCER 7

Purpose of the local plus approachIn which cases do you offer a local plus package?

WorldwideFor permanent transfers 40%For certain assignment locations 38%For internationally hired foreigners 38%After a maximum duration on expat package or when localising 33%For locally hired foreigners 31%For certain position levels 27%For certain assignment types 14%For self-initiated assignments 13%For all international assignees 13%On an exception basis only 9%For returnees 6%When local package > B/S calculation 5%Other 4%


MERCER

Most important Important Less important

8

Purpose of the local plus approachSome key drivers

Americas Europe Asia-Pacific

Cost reduction

Market competitiveness

Pay philosophy

Simpler administration

Leverage lower host taxes

Decentralise expat management


MERCER

Local plusCompared to balance sheet and pure local

9

Balance Sheet Local Plus Local

Equity vs. Home Location

Equity vs. Locals

Equity among foreign nationals N/A

Ease of Administration

Global Consistency

Applicability to All Locations

Typical Cost of Package

Ease of Repatriating/Seconding

Higher Varies Moderate Lower

MERCER 10

Components of a local plus approachWhat “plus” do you provide to your local plus assignees?

WorldwideTax preparation/filing assistance 77% Host housing 71% Relocation services 65% Medical benefit 59% Dependent education 59% Home leave 55%


Showing components that at least 50% of respondents include in local plus packages

MERCER 11

Components of a local plus packageEquivalent benefits Equivalent packages

CHINAHONG KONG

Net pay structures vary worldwide, so a global policy of equivalent benefits is not appropriate. Plus policies need to vary to account for these pay differences.

MERCER 12

Components of a local plus packageEquivalent benefits Equivalent packages

CHINAHONG KONG

Net pay structures vary worldwide, so a global policy of equivalent benefits is not appropriate. Plus policies need to vary to account for these pay differences.

HKD

RMB

MERCER 13

Local vs. local plus comparisonSingapore (USD)

050,000

100,000150,000200,000250,000300,000350,000400,000450,000

52 53 54 55 56 57 58 59 60 61 62 63

IPE Position Class

(USD

)

Local - Base Salary Local Plus - Base Salary Local - Salary plus Allowances Local Plus - Salary plus Allowances

Source: Mercer APCBF Consumer Goods Forum Survey 2013

Total Fixed Cash - Local Plus vs. Local

Base Salary - Local Plus vs. Local

+26%

+22%

+15%

MERCER 14

Local vs. local plus comparisonHong Kong (USD)

050,000

100,000150,000200,000250,000300,000350,000400,000450,000

52 53 54 55 56 57 58 59 60 61 62 63

IPE Position Class

(USD

)


+20%

+25%

+30%



+4%


MERCER 15

Local vs. local plus comparisonChina (USD)

050,000

100,000150,000200,000250,000300,000350,000400,000450,000

52 53 54 55 56 57 58 59 60 61 62 63

IPE Position Class

(USD

)


+31%

+30%+25%

+26%

+17%

+21%




MERCER 16

Salary levels within Asia (USD)Is local plus feasible in all markets?

Para-professional Professional Specialist

MERCER 17

Local plus approach by locationFor which top 5 countries do you have the most employeeson a local plus approach?

Top host locations Multiple answers possible


MERCER 18

Local plus approach by locationChina, Hong Kong, Singapore

Direct/ Local Foreign Hire

LocalisedExpatriate

Int’l Permanent

Transfer ReturneeFixed-term

Assignment

China

Hong Kong

Singapore

Prevalent Less common / limited Never or rarely provided

(Senior positions)

Most Prevalent

MERCER 19

Local plus approach by locationPrevalence of allowances/benefits

China Hong Kong Singapore

COLA/ Goods & Services

Mobility / Foreign Service Premium

Hardship

Housing

Education

Home Leave

Social Security / Pension Enhanced MPF or supplemental

CPF or cash in lieu

Medical Enhanced or Int’l Plan Local Local

Usually cash, but less than “full” expat housing amount

Prevalent Less common / limited Never or rarely provided

MERCER

Expatriate type UAE

Direct/Local Foreign Hire

Localised Expatriate

International Permanent Transfer

Fixed-term Assignment

There is a local market for foreigners in the UAE: the challenge is to be competitive with this local marketLocal package for foreigner in the UAE includes housing, car, and sometimes schooling and home trips

Local plus approach by locationExamples

20

MERCER

Going forward: Food for thoughtRelative home/host parity – may need to proceed with caution

Host net income

Hom

e ne

t inc

ome

Low High

High

CAUTION: Local salary will need to be adjusted

upwards significantly

Relative parity

CAUTION: Expect repatriation difficulties

Relative parity

21

MERCER 2209 October 2013

A local plus approachItems to consider

Local plus packages can either:

– Bridge economic gap between the home and host location

– Create a competitive package for foreigners in that country

Can use local plus packages to reduce overall package costs, but:

– Financial firms (some of the longest-running users) often use local plus packages to minimise taxes for their non-US employees

– Local plus can cost > traditional balance sheet for low-wage to high-wage transfers (for example, India to Switzerland)

Don‘t define low wage only by country; also use position level

MERCER

Structured approach to assessing feasibility of “localised” package Net-to-gross calculation

23

Net –to-gross comparisons help determine the economic gap between current compensation and the proposed package

MERCER 24

Going forward: Food for thoughtBuilding a local plus policy: Reconciling multiple challenges

Country Specificities

Administrative simplicity

Cost

MERCER

Going forward: Food for thoughtBuilding a local plus policy

Move beyond “local plus = cost savings”

Global policy must be clear but flexible

Holistic approach integrates talent management perspective and policy segmentation

Increased interest in and use for Local Plusabandoning home-based balance sheet

approach

=> Find the right mix of approaches

25

MERCER

Mobility and survey resources on imercer.com

Mercer’s Total Remuneration Surveys: www.imercer.com/trs

Mercer 2013 Alternative International Assignments Policies and Practices Survey: www.imercer.com/aia

Comprehensive mobility resources: www.imercer.com/mobility

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MERCER 27

Questions

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Mike [email protected]

Karen CygalNew [email protected]

Documents

MERCER WEBCAST GLOBAL MOBILITY LOCAL PLUS APPROACHES