SAPA Conference – Montecasino

17th – 18th August 2011

WealthUnearthed

WHO IS AELMS?

• company founded in 1894

• part of AE&CI – now known as AECI

• world leader in explosives and initiating

systems manufacture and development

business units include…………..

• BEE partnership with TISO – 25.1% share in

AELMS

Southern Africa Business –

narrow reef

Southern Africa Business –

surface operations

and the Africa and

International Business

Units……

South America

EuropeSouth East Asia

Africa

expatriate pay

but why expatriation?

Is it to work in exotic

locations and travel

the world?

expatriate pay

there is the other

extreme………

expatriate pay

one of the main factors in any

expatriation assignment is………

expatriate pay - agenda

calculation methods,

delivery and

consequences

expatriate pay

The most common types of pay in use:

• Home country based

• Host country based

• Dual – higher of home or host

• Hybrid

• Select country based

• More than one approach

expatriate pay

ECA newsline - March 2008 lead article by Natarajan Sundar (independent

consultant)

“The most widely used method for determining

assignee pay is the „home country approach‟ (used

by 60% of companies globally and 75% of US

companies)”

“Globalisation is, however, putting this time tested

method under increasing scrutiny”

“As a result, companies are increasing adopting

hybrid or other arrangements……………….”

expatriate pay

52%

57%

61%

11%

10%

9%

6%

6%

12%

10%

8%

3%

5%

3%

2%

16%

16%

13%

2009

2007

1995/6

TYPES OF PAY IN USE – ONE APPROACH OR MULTIPLE?

Home country based Host country based

Dual (higher of home or host) Hybrid

Select country based More than one approach

expatriate pay – home build

upHOME

taxtax

X cost of

living

index

hardship

benefits

taxtax

HOST

net base

salary:

spendable

non-

spendable

benefitsbenefits

non

spendable

non-

spendable

60%

40%

TO GHANA UK RSA Australia Indonesia

Net £41,359 R 340,000 AUD 62,450 347,673,447

40% non-

spendable£16,544 R 136,000 AUD 24,980 139,069,379

60%

spendable£24,815 R 204,000 AUD 37,470 208,604,068

CoL index 112% 135% 128% 130%

Spendable £27,793 R 275,400 AUD 47,962 271,185,289

H/ship 20% £10,471 R 90,231 AUD 18,000 84,712,919

Net package £54,807 R 501,631 AUD 90,942 494,967,587

% of net 133% 148% 146% 142%

US$ $88,788 $73,769 $84,834 $59,396

expatriate pay

So what is a “hybrid”

approach as opposed to a

“home base” build up

approach?

expatriate pay – hybrid

TaxTax

X cost of

living

index

Hardship

Benefits

TaxTax

HOST

Base

salary

40% non-

spendable

BenefitsBenefits

RSA

Base

salary

40% non-

spendable

BenefitsBenefits

TaxTax

UK

60% 60%

expatriate pay – effects of

the two applicationsapproachFrom To Net pay Build Up

% of

home

base

Hybrid

% of

home

base

UK GHANA £41,359 $88,788 133% $88,787 133%

RSA GHANA R 340,000 $73,769 148% $81,987 164%

AUST GHANA AUD 62,450 $84,834 146% $77,242 133%

INDO GHANAIDR

347,673,447$59,396 142% $78,675 189%

expatriate pay

31%

33%

25%

22%

8%

5%

36%

40%

Overall

Home country base build-up approach

CURRENCY OF PAYMENT

All in home country currency

All in host country currency

All in a 'third country' currency

Package is divided into home country and host country currency elements

expatriate pay

HOW DO YOUR

EXPATRIATE SALARIES

COMPARE WITH THE

MARKET?

net salary lines

net salary lines

net salary lines

GHANA

INDONESIA

expatriate pay- reasons for

assignment failure

• Family issues 37%

• Lack of skills/competencies 23%

• Expectations of job not met 16%

• Local culture incompatibility 12%

• Isolation 5%

• Compensation issues 3%• Partner career issues 3%

• Security concerns 2%

expatriate pay – the changing

expatriate landscape

• Growth of new and developing markets – emergence of

BRIC countries as a top destination.

• Developing countries expatriating own employees

• The traditional expatriate stereotype has changed to

include dual income couples, single employees, same

sex couples, single parents

• Education, partner‟s careers, family adaptability have

been major reasons for failure and these issues have

become more important over time

• Talent and retention becoming critical issues

Other factors to be taken into account:

expatriate pay - tax

• Agreeing taxation policies and methodology is key

before any assignment

• Policies should differentiate laissez faire (pay own tax),

tax equalisation (company assumes tax liability) and tax

protection (company pays the tax difference between SA

tax and host country tax)

• To encourage mobility among assignees, tax equalisation

is best and ensures that the assignee does not seek out

tax friendly assignment countries

• Contractual arrangements (contracts) must set out the

tax requirements and obligations for both employer and

employee

expatriate pay - tax

• SA resident taxpayers must ensure they maintain tax filing in

SA and submit returns annually

• If the expatriate does not file returns in SA when tax directives

are being sought (such as pension payouts) there may be

issues

• Payroll – the SA payroll should mirror what happens on the

host country payroll

• To reduce reputational risk in the host country, the employer

should ensure that tax advisors are appointed to assist with

the taxation requirements in the host country

• Note: Double taxation agreements between countries and the

183/61 day rule

Overall, the remuneration method should:

• be effective in attracting and retaining staff, particularly those

in key disciplines

• have the ability to facilitate the transfer of international

employees in a cost effective manner across regions

• take into account equity and ease of administration

• be able to cope with changes in cost of living and exchange

rate volatility

expatriate pay

Get the basics right – the Policy

* A single, comprehensive expatriate policy that covers all

aspects of remuneration including pay calculation and

delivery, housing, return flights, education, loss of

spouses earnings, benefits etc is the VERY FIRST STEP

* The policy should be published on the intranet, or

equivalent

* Doing so provides a clear, transparent simple framework

and a clear point of reference

* It reduces expatriate queries and dissatisfaction

* Exceptions are dealt with in the context of the underlying

philosophies and the intent of the policy

* The policy MUST integrate with other business strategies

expatriate pay

expatriate pay

IS THERE A

“RIGHT WAY”?

SAPA Conference – Montecasino

17th – 18th August 2011

Thank you