2013 EMEA EXPATRIATE MANAGEMENT CONFERENCE 11-12 APRIL 2013

BUILDING PRACTICAL LOCALISATION POLICIES

12 APRIL 2013

Emmanuel RIVERE, Head of the Global

Mobility Practice for France, Mercer, France,

Paris

Sandrine MATHELIN, International Mobility

and Compensation Manager, Yves Rocher,

France, Paris

MERCER

Table of content

• Localization : definition

• Why a localization policy ?

• Targeted population

• Core principle

• Typical policy rules

– Contract

– Compensation

– Benefits

• Accompanying terms

• Key success factors for a localization policy

• Appendices

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Localization Definition

….

Expatriation

« Conventional » approach Localization

Compensation

Benefits

Legal

Localization +

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Localization policy Why a localization policy ?

• Facilitate the transfers within the group

– Reinforce the group’s international identity & culture

– Use international mobility as a tool for career

development

– Adapt to a globalized world

• Send employees abroad at lower costs than standard

expatriations

– i.e to subsidiaries that cannot bear standard expatriate

costs

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Localization policy Targeted population

• Transfers upon employee’s request

• End of expatriation

• Career management for :

– Juniors

– Locally hired foreigners

• Permanent transfers

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Core principle

FORGET THE HOME COUNTRY !

Compensation

Benefits

Contract

Typical policy rules

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Typical policy rules Contract

Principle

Terminate the home country work contract

Risks / Challenges

Potential legal issues

Comments

- No remaining link with the home country entity

- Signature of a local contract (unlimited duration) in compliance with immigration

- No terms for reintegration

- According to the home country legal framework, estimate the risks in case of dispute with the employee

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Typical policy rules Compensation

Principle

Host local market salary

Risks / Challenges

Is there any challenge here ?

Comments

- Two markets (depending on the location) : - « Pure » local market

- Local market for locally hired foreigners

- The employee is fully responsible for his/her taxes (No tax equalization, protection, …)

- Local bonus plan

- Local benefits in kind (if any)

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Typical policy rules Compensation

Progressivité des salaires par marché

(salaire de base)

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

47 48 49 50 51 52 53 54 55 56 57 58 59 60

Mercer Position Class

Ind

ex (

Base 1

00)

Argentina China (Beijing) Czech Republic Mexico France

PC 47-48 Junior

Executive

PC 55

Expert / Specialist

PC 60

Senior executive or top executive

Market salary

progression

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Typical policy rules Compensation

WARNING

-Exhange rate

-Compensation structure

-Benefits

-Tax burden

-Local cost of living

Paradox :

-Juniors, who localize easily, despite of the salary levels

-Seniors : More difficult Beneftis

Total cash, marché général (brut, €)

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

47 48 49 50 51 52 53 54 55 56 57 58 59 60

€

Po

sit

ion

Cla

ss Argentine

Chine

Rep tchèque

Mexique

France

Total cash (€), All industries, median market

€

Position class (IPE)

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Typical policy rules Benefits : Health, disability, retirement, unemployment

Principle

Host local coverages

Risks / Challenges

Critical, for employees coming from high level to low level social scheme

countries

Comments

- Benefits are the most challenging part of the localization

- A preliminary study is fully required

- Immediate Risks (Health / Disability) vs Differed risks (Retirement)

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Typical policy rules Health & Disability coverages

• High disparity in the health& Disability coverages : Statutory coverage + Private

insurances

• Health and disability market levels can be divided into 3 groups :

Statutory health

coverage

Private health

coverages Examples

Group 1 Weak / insufficient Weak / insufficient Niger, Albania

Group 2 Weak / insufficient Good level / Mature Brazil, China

(High disparity)

Group 3 Good level / Mature Good level / Mature

France, Belgium,

Expats coverages

guarantees

Very big area – High disparity of the overall coverage (statutory coverage + private insurances) – Strongly dependent from the region (Asia, South America, etc…)

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Low expectations

Neutral expectations

High expectations

• The below matrix can help in assessing the expectations from the employees depending on the countries combination :

Typical policy rules Employees expectations : how to define the needs ?

Host country

Home country

Group 1 Group 2 Group 3

Group 1

Group 2

Group 3

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Typical policy rules Retirement

• Same approach than the health & disability coverages

– From a qualitative perspective, less diversity in terms of retirement coverage types :

- Defined contribution (DC)

- Defined benefits (DB)

– From a quantitative perspective, complexity is still there.

• Mercer divides the retirement coverages into 4 groups :

Description Examples

A Robust retirement coverage, leading to good retirement conditions on

a long term basis Denmark

B Good retirement coverages, but requiring some improvements Australia, Netherlands,

Sweden, Canada

C Good retirement coverage, but not reliable on a long term basis as is USA, Chili, Brazil, France,

Germany, Poland

D Retirement coverages requiring improvements, sometimes weak, and

not reliable on a long term basis as is

India, China, South

Korea, Japan

Source : Melbourne Mercer Global Pension Index

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• The below matrix can help in assessing the expectations from the employees depending on the countries combination :

Typical policy rules Retirement

Host country

Home country

Group A Group B Group C Group D

Group A

Group B

Group C

Group D

Low expectations

Neutral expectations

High expectations

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• According to the country of localization, the rights can be partially or totally

acquired. If the rights are acquired, it means that the localized employee will benefit

from the rights acquired in the home country.

• In case of acquired rights in the home country, the localization will have an impact

on the future only.

• If rights not acquired in the home country, the localization will have an impact on the

past as well.

Typical policy rules Retirement : acquired rights

Estimated

level of

retirement

Country A – Home country Country B – Host country

Estimate Comments Estimate Comments

Before

localization 60

Beyond the statutory retirement coverage,

the company has a supplementary

coverage. Rights are acquired.

60 The rights are acquired : the localization has no

impact

After

localization 30

Because of the localization, the rights

acquired in the home country will not be

accumulated

50

The host retirement coverage is mandatory. On

top of it, the host subsidiary has a very competitive

supplementary coverage.

TOTAL 30

The employee would have got a

pension of 90 if he had stayed in the

home country

110

Rights acquired in the home country + host

coverages = the employee benefits from a

higher pension than if he had stayed in the

home country.

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Benefits (Health, Disability, Retirement) Common approach in case of localization

• The biggest challenge in terms of localization comes from the Benefits

area : where does the employee come, where he is being localized

– Does the host coverage meet the home country standard ?

– Are the local subsidiary practices good enough ?

• Case by case study required, through the following methodology :

1 3 4 5 2

Home country

coverages analysis

Host country

coverages analysis

Recommendations

Adjustments Implementat

ion

• Some deeper analysis might be required, depending on the employee seniority (Top executive)

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Localization policy Suggested Accompanying Terms

Provided one shot / first year :

• One way flying ticket

• Moving

• Cross-cultural training

• Relocation

• Tax assistance

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Localization policy Conclusion

Typical localization package :

• Host market salary, no other premium nor incentive

• Benefits :

– Gap analysis to be performed…

– … On an individual basis if required

• Benefits in kind

– No BIKS

– Potentially, one-way accompanying benefits

Key success factors for a localization policy

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Localization policy Key success factors

• Global Mobility Policy : localization segment formalized

• Clear eligibility criterias

• Strong communication and training :

– HR community, DHRs

– Managers

– Host locations

• Strong internal sponsorship

– Group DHR

– Board

QUESTIONS & ANSWERS

APPENDICES

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• Expert in information systems, he has also directed the choice and then the implementation of the dedicated applications for expatriate management: Packages calculations, assignments / assignees administration, costs and exceptions tracking. (Direction of the request for proposal, implementation, roll out over several continents, training of the operational). He has also directed the conception of the Back office tool for the French hub. Then, he has strongly contributed to the optimization of the operational processes through the Lean – Six Sigma methodology.

• Before Société Générale, Emmanuel was member of the project team in charge of implementing PeopleSoft HRMS (HCM) on the EMEA area for Ernst & Young.

• He is fluent French, English and Spanish.

Curriculum Vitae Emmanuel RIVERE

• Emmanuel is Principal, based in Paris and team member of the EMEA Global Mobility Centre of Excellence to assist firms in global mobility consulting issues and challenges.

• He is the leader of the Mobility Consulting business for France.

• Before joining Mercer in March 2009, he has directed during 3 years, at the Corporate level, the International Mobility projects for Société Générale in Paris: design and implementation of the new compensation policies, transition and change management, roll out (France, USA, UK, Hong Kong).

MERCER

Sandrine Mathelin, Remuneration and International Mobility Group Manager Groupe Yves Rocher

Sandrine has been Group Remuneration and International

Mobility Manager since March 2011 for Yves Rocher

Group, a French family owned business with 7 major

brands dedicated to beauty and well-being.

Before joining Yves Rocher Group, Sandrine was

International Mobility Manager for Vallourec during 4 years.

Previously, she worked as Compensation and Benefits

and/or International Mobility manager in international

companies such as Technicolor, SHV Gas, McKinsey &

Company.