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International mobility encompasses the selection and relocation of employees for international assignments, as well as the logistics, activities and events that occur before, during and after these assignments. International moves can provide development opportunities, enhance corporate culture and allow the transfer of expertise and sharing of knowledge between colleagues from different countries.
This factsheet outlines considerations for both the employer and the employee in preparing and planning for an international assignment, such as impact on family and career aspirations, documents required, legal and security risks and duration of the assignment. It also looks at the different elements of remuneration and the benefits that might be included in an international assignment package. The factsheet concludes by offering a helpful checklist of steps to follow in order to facilitate a successful move abroad, focusing on aspects of talent, reward, process and technology.
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International mobility is an increasingly common feature of working today. With many organisations operating on an international basis there is the increased demand for employees to share their expertise and knowledge with colleagues in different countries, pooling this knowledge for the benefit of the organisation. In addition, international assignments can be part of employee value proposition, supporting staff development and career growth, helping attract and retain talent.
Working on an international basis for a period of time brings definite benefits to the career and development of an individual. However, there is also a significant amount of disruption for the employee and their family. If these disruptions are acknowledged and carefully managed by the organisation, the benefits for both the employer and the employee will be enhanced. It is essential, therefore, that all the issues are carefully addressed before an employee actually starts on an international placement.
What is international mobility?
A key role for HR departments in multinational enterprises is managing internationally mobile staff in order to achieve business objectives. An element of this involves the assignment of expatriates - groups of managers and experts who transfer between HQ and subsidiaries or between subsidiaries usually on enhanced terms and conditions.
The traditional approach to expatriation where employees are sent out from headquarters to share good practice or culture has been described as ethnocentric and has tended to focus on white middle-class males. However there’s evidence that this profile of the internationally mobile population is changing1 to include:
- more people from outside both the home and host country ‘third country nationals’
- more women
- greater emphasis on dual career couples.
These changes have been accompanied by increasingly higher education levels within the working popular involved in international assignments. Many will be educated to MBA level and be expecting future career progression.
The term 'international assignment' tends to be used quite broadly to describe any of the following situations.
- Frequent business trips of less than 31 days duration per single trip, usually covered by the organisation’s business travel and 'per diem' expenses policy.
- Short term assignments over 31 days but less than 12 months. The employee may become technically employed by the host country subsidiary, with certain additional benefits according to the circumstances of the individual. Career management remains the province of the home country, while performance management may be shared.
- Long term assignments usually two years or more. In this situation, it is more likely that assignees will be put on local terms and conditions.
The requirement for an expatriate (on a long term assignment), rather than employing a national to fill a post or handle a project, needs to be clearly identified from the start, not least for the purposes of obtaining work permits. Acceptable reasons for using an expatriate will vary from country to country but may include:
- filling a post where no local staff are qualified
- training local nationals to take over roles previously occupied by expatriates
- transferring technical expertise
- giving employees international experience in preparation for more senior roles
- providing development opportunities for employees as part of talent management and succession planning initiatives
- facilitating knowledge sharing between employees in different parts of the organisation
- creating an international corporate culture and encourage employees to develop an international mindset.
Managing the processes is a complex aspect of HR with various phases:
- Pre-assignment – the selection of a candidate and the planning involved in advance of an international move.
- Relocation – the logistics of the international move.
- On-assignment – the activities and events that occur throughout the assignment.
- End of assignment – career management, logistics and the end of assignment options.
Preparation and planning
Approaches to international assignments
Home-based – the employee remains on their home base contract of employment and their home gross base salary. The employee is tax ‘equalised’ to their home country which means that hypothetical tax is deducted from their gross salary on a monthly basis and they are paid a net figure. The company usually pays the actual tax liabilities.
Host-based – the employee moves to a host contract of employment or equivalent terms and receives a local salary which is subject to host taxes.
HQ approach – international assignees are equalised to the HQ country irrespective of their home and host locations.
Regional hubs – international assignees are equalised to a regional hub. It could be either the tax rate of one location within that region, or a blended average of a number of countries.
Type of international move
Once it’s decided that an international move is appropriate, the type of policy which will govern it must be agreed. The policies differ according to the assignment duration, objectives of the assignment and the anticipated career and business development possibilities following the assignment. Policy types include but are not limited to:
- Long term assignment – usually between one and five years in duration.
- Short term assignment – usually between three months and one year in duration.
- Commuter assignment – employees travel back and forth between the home and host location on a regular basis, and the assignment duration can vary.
- Permanent transfer – the employee is transferred to the host location indefinitely.
Business trips are not usually classified as international assignments. However HR needs to be wary of frequent business trips that have become ‘stealth’ assignments.
HR policies and documents
Assignment policies – the policy governs the terms and conditions and sets out the employee’s entitlement for the duration of the assignment. It should also cover selection, development and career planning for assignments and what happens at the end of an assignment.
Cost estimate – an estimation of the costs involved in an international assignment which can be used for approval for the assignment and for budgeting purposes.
Assignment letter/contract – this is usually issued as an addendum to the home or host contract of employment (depending on the company’s approach) and details the relocation assistance and benefits and allowances that apply to the employee while on assignment. It covers the employee’s and the employer’s responsibilities for the period of the assignment. As a minimum the assignment letter should provide information on:
- the assignment duration
- which country’s law applies for the duration of the assignment
- the home country
- the host country
- the remuneration package at the start of the assignment
- any specific terms and conditions relating to the return to the home country.
Income statement – also known as a ’balance sheet’ or ’build up‘. This details the remuneration that the employee can expect to receive while on assignment. This is typically used on tax equalised assignments.
Risks for the employer to consider
Legal – to provide clarity in case of legal dispute, the assignment letter should state which country’s jurisdiction applies during the assignment - the home and host locations may have different employment law restrictions.
Regulatory – the regulatory requirements in the home and host location may differ so employers should take professional advice.
Health and security – appropriate security and welfare requirements must be considered as the nature of the host environment may be very different.
Tax – all payments should be tracked and the number of days spent in each location should be recorded to ensure that correct information is recorded for tax purposes. Both parties need to be clear about tax obligations of the organisation and the employee.
Immigration – all necessary work permits and visas for the employee and their family should be in place before the assignment begins.
Social security – depending on the assignment type and whether there is a reciprocal agreement in place, the employee may be able to remain in their home social system.
Total cost reporting – all costs relating to the assignment should be tracked in both the home and host locations.
Impact on the employee accepting the assignment
It’s important that employees make an informed and realistic decision on whether they would be suited to an international move and the country that they are considering working in. They should also consider:
- the impact on family
- dual careers
- education considerations
- separation from home
- career aspirations.
Selection for an international role involves a wider range of considerations than selection for a home-based position. For example, adaptability, cultural sensitivity and separation from home are qualities that must be considered by both the organisation and the employee. Other desirable attributes include flexibility, leadership abilities and a positive approach. See our factsheet on international resourcing and selection.
Employees should thoroughly research the country that they will be living and working in. A variety of third party providers have created country profiles that are useful reference material on the political, social and economic history and practical information of each particular country. Some organisations provide intercultural and language training and organise an orientation trip to further prepare their employees for living and working in another country.
- Cultural and language training – the duration and number of lessons should be agreed and whether a global, regional or local vendor will be used.
- Relocation allowance – in some circumstances a relocation allowance is applicable to cover the miscellaneous/incidental costs involved with going on an assignment (for example soft furnishings, set up costs and car hire). It is usually a percentage of the employee’s gross base salary subject to a cap. It can be paid at both the start and end of an assignment.
- Travel – the class and method of travel should be decided and the process of booking travel should be clear and consistent.
- Shipping – the volume entitlement may be based on the duration of the assignment and/or family size and the method of transporting the items, for example, by land, sea or air.
Remuneration, benefits and allowances
In most cases, the philosophy of international mobility is the employee should be no better or worse off as a result of their assignment in home country terms. Employers should consider:
- Salary – depending on the assignment approach, either a home gross base salary or a local net could be applied.
- Pension – whether the employee remains in their home pension scheme, joins an international plan or joins the host pension scheme. Some countries do not allow foreign nationals to join their pension scheme.
- Shares – is the organisation going to offer tax equalisation assistance on any liability arising on the grant, vesting, exercise or sale of shares or share options? Will tax advice be provided to employees in respect of share plans?
- Cost of Living Adjustment (COLA) – a contribution towards protecting the home country purchasing power of goods and services for individuals on an international assignment. Organisations should consider whether this is something they are going to provide and what type of index to use. Data to calculate the COLA is normally purchased from a specialist expatriate provider.
- Per diem – for short term assignments, a daily subsistence allowance may be payable to contribute towards the additional costs of going on an assignment such as transport, food and laundry.
- Territorial premium or Location premium – a territorial premium could be payable in circumstances where the conditions in the host are deemed relatively more challenging than the home country. A location premium is based purely on the conditions of the host country with no reference the home location.
The benefits an organisation may offer in assignment packages include:
- Accommodation – How would the accommodation allowance be set? Dependent on seniority or family size? Furnished/unfurnished? Will utilities be reimbursed?
- Medical cover – Which medical insurance provider will be used? Is a full medical examination required? How will maternity care be covered?
- Travel – Class of travel to the host location? Home leave travel? Rest and recuperation? Compassionate leave? Method of transport – train, plane, car?
- Leave – Would annual leave and public holidays be as per the home or host entitlement? Would maternity/paternity leave be as per the home or host entitlement? Home leave entitlement – how many return trips per annum and what class of travel? What is the policy on compassionate leave? Will rest and recuperation leave be offered?
- Children’s education – Boarding/international/local school? Will the full amount be reimbursed or a percentage? Which costs will be met – applications, tuition fees, registration fees, field trips, transport, food, equipment? What would the maximum age of the children be? Third country schooling applicable? Applicable for unaccompanied assignments?
- Insurance – What insurance will be offered - personal accident cover, life insurance, motor insurance, buildings and household contents, travel? Will employees be insured in both the home and host locations?
- Transport – global policy for car allowance? Or as per the home/host country entitlement? Are employees entitled to the reimbursement of car hire expenses?
Checklist of steps which facilitate a successful assignment
Following the steps given below will help ensure that international moves within an organisation are managed as effectively as possible.
Selection decisions – selection should not only relate to performance in the home country. A variety of qualities and attributes should be considered.
Performance management – assignment objectives must be clearly stated and performance reviewed regularly.
Career managementand retention (repatriation, reintegration and succession). Both the employee and the organisation should think about what will happen at the end of the assignment well in advance.
Assignment remuneration - which elements are included in the package and is any additional compensation for disruption or an increase in total compensation as a result of the assignment. Remember that in a host based approach, cost of living and local tax rates may be very different.
Assignment benefits – should assignment benefits to be equitable and consistent or should they differ by family size, grade, role or business function?
Variable compensation – how do bonuses and stock options fit in to the remuneration package? If employees are being rewarded for long term performance, how do international assignments fit into this approach and how would payments be delivered?
Risk – it is essential to be compliant to avoid fines, penalties and additional fees. Risks can be mitigated by implementing streamlined and consistent processes.
Cost management – costs should not be the only factor in determining whether an international assignment is appropriate. However, international assignments incur a considerable financial investment so costs need to be managed effectively. Professional advice should be sought on tax savings and minimising costs.
A variety of software options are available to assist with managing and coordinating the international assignment process.
Useful contacts and further reading
CARP, J. (2009) Drafting employment documents for expatriates. Bristol: Jordans.
MATTHEWMAN, J. (2011) The rise of the global nomad: how to manage the new professional in order to gain recovery and maximize future growth. London: Kogan Page.
RENNIE, A. and McGEE, R. (2012) International human resource management. CIPD Toolkit. London: Chartered Institute of Personnel and Development.p>
REUVID, J. (2009) Working abroad: the complete guide to overseas employment. 30th ed. London: Kogan Page.
SPARROW, P., BREWSTER, C. and CHUNG, C. (2016) Globalizing human resource management. 2nd ed. London: Routledge. Chapter 7: Managing the international labour force.
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CERDIN, J-L. and BREWSTER, C. (2014) Talent management and expatriation: bridging two streams of research and practice. Journal of World Business. Vol 49. No 2, pp245-252.
DOHERTY, N. and DICKMANN, M. (2012) Measuring the return on investment in international assignments: an action research approach. International Journal of Human Resource Management. Vol 23, No 16, September. pp3434-3454.
HAHM, E. (2011) Think global act global: integrating international assignments into talent management programs. Workspan. Vol 54, No 1, January. pp33-34,36-39.
KURSON A. and ROSSIER-RENAUD, A. (2011) The right metrics for expat integration. Workspan. Vol 54, No 11, November. pp60-65.
MULLANEY, E. (2012) Talent mobility: a global approach to talent management. Workspan. Vol 55, No2, February. pp32-36.
Special report: global mobility. (2016) HR Magazine. July. pp37-49.
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