INTERNATIONAL PENSION AND BENEFITS FORUM 2014 NAVIGATING GLOBAL MOBILITY RISKS

Mark Price

Principal International Consulting Group

Ellyn Karetnick

Head of Global Mobility – Talent UK

MERCER 2

Navigating Global Mobility Risks Agenda

• Evolution of Global Mobility

• Critical Elements

• Where is the Risk Sitting / Average Risk Profile

• Balancing Outcomes

• What's Good / Bad?

– General Risk Management Framework

– Retirement

– General Mobility Process

– Risk / Medical

– Allowances and Other Assignment Provisions

• Allowances – What are Companies Doing?

• What Does it All Mean?

23 June 2014

MERCER

Navigating Global Mobility Risks Evolution of Patterns…Changing Dynamics

‒ Home country nationals

‒ Repatriate

‒ Employment guarantee

‒ Employee only consideration

‒ Cost protection

‒ One policy

‒ Internal process

‒ Focus on cost

‒ Total net

‒ No gender diversity

‒ Little or no integration

‒ Global talent sourcing

‒ Localise or move on

‒ Employability value

‒ Family considerations

‒ Cost equalisation

‒ Policy segmentation

‒ External vendors

‒ Focus on cost and value

‒ Total reward

‒ Gender diversity

‒ Global talent management

Emerging View Traditional View

3 23 June 2014

MERCER

Navigating Global Mobility Risks Critical Elements (1)

4 23 June 2014

MERCER

Navigating Global Mobility Risks Critical Elements (2)

5 23 June 2014

MERCER

Navigating Global Mobility Risks Where is the Risk Sitting?

Risk / Medical, Allowances, Compensation, Preparation & Conditions

Process

Retirement

General Risk Framework

6 23 June 2014

MERCER

Navigating Global Mobility Risks Average Risk Profile

7

1

2 3

4

5 0

GENERAL RISK MANAGEMENT FRAMEWORK

GLOBAL MOBILITY PROCESS

CORE BENEFITS – RISK/MEDICAL PLANS

CORE BENEFITS – RETIREMENT

COMPENSATION

ALLOWANCES AND ASSIGNMENT PROVISIONS

ASSIGNMENT PREPARATION AND CONDITIONS

23 June 2014

MERCER

Navigating Global Mobility Risks Balancing Outcomes

EMPLOYER EMPLOYEE

Experience

Compensation

Social Protection

Delivery

Cost / Risk

8 23 June 2014

MERCER

Navigating Global Mobility Risks General Risk Management Framework

• Mobility and general risk management: Lack of Corporate

level policies!

– Governance or Corporate risk management

– Policy on mobility risk management

9

1

2 3

4

5 0

GENERAL RISK MANAGEMENT FRAMEWORK

− Travel: Policy in place

− Home: Contents and Personal

Property policies

− Cargo: Policy in place and

reviewed

− Travel: No monitoring or reviews

− Home: Vacant homeowners policy not review

or not in place

− D&O: Cover not in place or not reviewed

− Kidnap: Kidnap, extortion and detention

insurance – either no policy or not reviewed

− KPI: High percentage – no policy to cover key

persons or protection of financial investment

23 June 2014

MERCER

1

2 3

4

5

CORE BENEFITS-

RETIREMENT

0

Navigating Global Mobility Risks Core Benefits – Retirement

• Prevalence of the home versus host approach – Lack of ongoing monitoring post decision when terms of

assignments change

• Individual winners and losers analysis not undertaken

• Salary augmentation in lieu of retirement plan

– Ad-hoc approach and no Corporate guidelines

10

‒ Plans: Policy clear on home versus

host / applicability of domestic

vehicles

‒ Social Security: Clarity on position,

policy and ongoing review

‒ IPPs: Concern over general policy on

eligibility & ongoing monitoring

‒ Winners/Losers: No analysis of impact

on benefit accumulation as a result of

assignment

‒ Salary Augmentation: Entirely ad-hoc

approach to augmentation

23 June 2014

MERCER

Navigating Global Mobility Risks Global Mobility Process

11

1

2 3

4

5 0

GLOBAL MOBILITY PROCESS

• Overview of general policies and processes

• Corporate level documentation of all aspects of mobility

‒ Policies in place and reviewed

(Corporate and HR)

‒ Governance processes are in place

‒ Strong process around international

programmes

‒ High level of expatriate categorisation

and ongoing review of segments

‒ Strong processes around compensation

‒ Circa 20% have no policy in place

‒ Some have not reviewed expatriate

categorisation for some time or have no

segmentation

‒ Communications and support seems to

be generally a weak area

‒ Concern over repatriation policies which

are not aligned or no policy at all

23 June 2014

MERCER

‒ Host country request and local assignment management

‒ Mobility packages negotiated with line management

‒ Lack of consistency and equity

‒ Assignments not effectively tracked

‒ Multiple local providers

‒ Lack of cost control

Ad-hoc approach

Move to centralisation

‒ Central team co-ordinating assignments

‒ Consistent expat

packages with

home and host

countries

‒ Policy guidelines

‒ Effective tracking of

assignments

‒ Consolidation of

global providers

‒ Cost monitoring

Strategic focus

‒ Global centre of expertise with regional co-ordinators

‒ Policy aligned with business strategy

‒ Differentiation by type of assignment and level

‒ Well established co-sourcing model with providers

‒ Budget shift from less essential to critical assignments

‒ Cost optimising

Navigating Global Mobility Risks Alternatives to Traditional Models

23 June 2014 12

MERCER

Navigating Global Mobility Risks Core Benefits – Risk and Medical (1)

13

1

2 3

4

5 0

CORE BENEFITS-

RISK/MEDICAL

• Focus on international risk and medical plans

– Reviews and design of risk seems to be lower priority than medical

• High medical inflation and changes in plan designs has meant a

refocus on medical

• General lack of pre-assignment screening tools for employees /

dependents

‒ Strong understanding of home /

host / exceptions policy

‒ International Medical & Business

Travel plans are in place and

regularly reviewed

‒ Circa 25% have no international medical

plan

‒ Significant percentage have not reviewed

current International Disability plan

‒ Nearly 50% either not reviewed Security &

Evacuation plan or have none in place

23 June 2014

MERCER

Navigating Global Mobility Risks Core Benefits – Risk and Medical (2)

• MEDICAL – Is the policy fit for purpose?

– Does it cover forecast treatment liabilities in high cost locations?

– Is level of cover monitored against local market mandated requirements?

– Do medical and security assistance planning needs link to cover?

Does provider have capabilities in all locations and are there robust plans in

place for an evacuation / repatriation?

• RISK – Does cover meets employee contracted rights?

– Deferment period – is this in line with company absence policy?

If someone is absent for 6 months before income replacement commences,

how will they be paid?

Does the company pay salary or is there a gap?

Maximum sum insured (per individual / catastrophic loss) – is it adequate?

– Review of policy exclusions

Age limits – if cover ends at age 65, could be excluding employees

Are your new locations covered under insurer war risk clauses?

14 23 June 2014

MERCER

Navigating Global Mobility Risks Allowances and Other Assignment Provisions

• Focus on transportation and housing (home and host country)

• Quality-of-living allowance

• Spouse or partner support and education allowances for children

15

0

1

2 3

4

5

ALLOWANCES/ASSIGNMENT PROVISIONS

‒ Robust policy around housing benefits

in the host location – some questions

around housing data

‒ Adequate support / policy and data

around levels of allowances

‒ QOL policies are strong and regularly

reviewed

‒ Generally guidelines on tax services

for and advice to expatriates

‒ Tendency for weak process application or

high level of exceptions for host location

travel and to/from host location

‒ Majority provide no assistance for

purchase of host country housing

‒ Over a third have no policy in relation to

home country housing

‒ Nearly a third have none or weak policy

for spouse / partner support

23 June 2014

MERCER

Navigating Global Mobility Risks Allowances – What are Companies Doing?

• Reviewing programmes / policy in line with categorisation

• Frequency of updates – data availability and accessibility

• Challenges around methodologies – what is right for company culture

• Caps – policy, governance, exception management

• Local Plus and Localisation – limiting benefits, phase out approaches

• Overall reduction in allowances but with greater flexibility for employer

• HOT AREAS

– Housing: dynamic vs. static – bespoke needs, online platforms

– Quality-of-living: become a talent issue, deal breaker

16 23 June 2014

MERCER

Navigating Global Mobility Risks What Does It All Mean?

17

• Implement greater governance over global mobility as a whole

• Introduce or review your global mobility process

• Improve response lead times on global mobility queries

• Ensure accurate, validated international compensation data is applied

– Housing, cost-of-living, hardship, other

• Tighten reward elements offered to expatriates

– Historic per diem structure, one-off lump sums, local plus

• Increase oversight of risk management

– Understand general risk insurances

– Compliance is more than just immigration and tax

23 June 2014

MERCER

Navigating Global Mobility Risks Resource Links

18

• General:

http://www.imercer.com

• Housing:

http://www.imercer.com/uploads/GM/housing/index.html

• Cost-of-living:

http://www.imercer.com/products/2014/cost-of-living.aspx

• Hardship:

http://www.imercer.com/content/hardship.aspx

• Scanner Risk Assessment:

http://www.imercer.com/uploads/Europe/HTML/landing_pages/mobility-

scanner-main/mobility-scanner.html

23 June 2014