managing localisation and local plus€¦ · benefit and a decreased benefit. • mixed practices...

MANAGING LOCALISATIONAND LOCAL PLUS

2 3 – 2 4 A P R I L , M A D R I D

C O P Y R I G H T M E R C E R 2 0 1 5

• Localisation — a growing trend.

• From localisation to Local Plus (localisation — how).

• Pitfalls and best practices.

• Questions.

W H AT W E W I L L C O V E R T O D AY


P O L L 1H O W D O Y O U D E F I N E A L O C A L A P P R O A C H ?

1. Compensation delivered in local currency from local payroll.

2. Compensation and benefits equivalent to those of localnational employees.

3. Compensation and benefits that are as close as possible to thoseof local national employees, but with additional allowances/benefitsnot provided to local nationals.

4. Other.


L O C A L I S AT I O N — A G R O W I N G T R E N DD E F I N I T I O N S

LOCAL-PLUS• Pay according to the local compensation and

employment terms and conditions … plus …• Additional allowances/benefits elements.

LOCAL• Pay and benefits according to the local compensation

and employment terms and conditions.

LOCALISATION• Process of putting foreign employees on a “as local

as possible” compensation and benefits structure.

HOME-BASED• Based on home compensation structure and aiming

at the equivalent standard of living in the hostlocation as in the home location.

RA14

RA14 I removed a dotRossier-Renaud, Anne, 14/04/2015


COLAGoods andServices

Housing

IncomeTaxes

Housingallowance

Incrementaltaxes

Assignment —LocationCosts

Assignment —Location CostsPaid by Companyand From Salary

Home-CountryEquivalentPurchasingPower

IncomeTaxes

Goods andServices

Housing

Home-CountrySalary

Reserve ReserveReserve

Goods andServices

Housing

IncomeTaxes

Goods andServices

Housing

IncomeTaxes

Reserve

Assignment cost differentials

Premiums

L O C A L I S AT I O N — A G R O W I N G T R E N DD E F I N I T I O N S — T H E H O M E - B A S E DB A L A N C E S H E E T A P P R O A C H


0 1 2 3 4 5 6 7 8 9 10

Local++• Local compensation.

+ Purchasing poweradjustment

+ Housing allowance+ International school+ International

pension plan+ International health

plan• Local employment

conditions.

Local+• Local compensation.

+ Purchasing poweradjustment

+ Housing allowance+ International school

• As necessary andphased out.

• Local employmentconditions.

Local• Local

compensation.• Local benefits.• Local

employmentconditions.

Purely LocalFull ExpatPackage Level

L O C A L I S AT I O N — A G R O W I N G T R E N DH O W M U C H L O C A L


L O C A L I S AT I O N — A G R O W I N G T R E N DF R O M P A R I S T O S I N G A P O R E , I P E 5 5 , M + 2

EUR

0

50000

100000

150000

200000

250000

Home-BasedBalanceSheet

Local PLus Local

Host Hypo Tax Incremental

Intl School

Housing

COLA

Hypo Tax&SS&FA

Net Base Salary

RA12

RA12 Inconsistent axis legend number format with graph on page 13, thousands delimitedRossier-Renaud, Anne, 14/04/2015


L O C A L I S AT I O N — A G R O W I N G T R E N DH O W C O M P A N I E S A R E P A Y I N G T H E I RI N T E R N A T I O N A L A S S I G N E E S

• Most common way today: Balance sheet approach = home salary +allowances (employees on limited-duration international assignments arepaid using the home-based approach, enabling a similar standard of livingat host location).

• Rapidly growing trend: Local-plus approach =local salary + benefits not provided to local national employees.

But local-pluspackages are seeingeven more growth.

Balance sheetexpat packagesare growing.


22%

20%

23%

14%

9%12%

No

Yes, a general trend for our international assignments

Yes, for certain types of assignments (e.g., trainees, developmental)

No, but we are seriously thinking about this option

Yes, but only for intra-regional assignments

Other

Source: Mercer 2012 Worldwide International Assignment Policies and Practices Survey and 2013Alternative International Assignments Policies and Practices Survey

• 67% of Europeanrespondents have foreignerson a Local Plus approach.

• Half reported that thenumber increased.

• 63% reported that theyexpect the number toincrease.

Do you send employees on local orLocal Plus terms and conditions?

L O C A L I S AT I O N — A G R O W I N G T R E N DL O C A L A S A N A L T E R N A T I V E —E U R O P E A N R E S P O N D E N T S


P O L L 2W H A T A P P R O A C H ( E S ) D O Y O U U S E ?

1. We only use a home-based approach.

2. We only use a local (or Local Plus) approach.

3. We use both home-based and local (or Local Plus) approaches.


Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey

Worldwide

For permanent transfers 40%

For certain assignment locations 38%

For internationally hired foreigners 38%

After a maximum duration on expatpackage (localisation) 33%

For locally hired foreigners 31%

For certain position levels 27%

L O C A L I S AT I O N — A G R O W I N G T R E N DI N W H I C H C A S E S D O C O M P A N I E S O F F E RL O C A L P L U S P A C K A G E S ?

RA11

RA11 Removed Assignment types titleRossier-Renaud, Anne, 14/04/2015


P O L L 3I N W H I C H C A S E S D O Y O U O F F E RL O C A L P L U S P A C K A G E S ?

1. For permanent transfers.

2. For certain assignment locations.

3. For internationally/locally hired foreigners.

4. After a maximum duration on expat package (localisation).

5. Other?

RA10

RA10 For this question, we need multi choice answers, is this possible?Rossier-Renaud, Anne, 14/04/2015


F R O M L O C A L I S AT I O N T O L O C A L P L U SW O R L D W I D E S A L A R Y C O M P A R I S O N 2 0 1 4A N N U A L T O T A L G U A R A N T E E D C A S H ( E U R )

0

100,000

200,000

300,000

400,000

500,000

600,000

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

IPE Position Class

Brazil China (Shanghai) India Germany UK USA

Blue collarProfessional

Specialist

Manager

Director

VP

(EUR)RA13

RA13 Inconsistent axis legend number format with graph on page 7, NOT thousands delimitedRossier-Renaud, Anne, 14/04/2015


USAGlobal 39%

HQ Europe 44% ChinaGlobal 38%

HQ Europe 30%

SingaporeGlobal 32%

HQ Europe 35%

UKGlobal 26%

HQ Europe 29%

Hong KongGlobal 18%

HR Europe 11%

UAEGlobal 18%

HQ Europe 21%

SwitzerlandGlobal 10%

HQ Europe 15%

Source: Mercer 2013 Alternative International Assignments Policies and Practices Survey

BrazilGlobal 5%

HQ Europe 9%

F R O M L O C A L I S AT I O N T O L O C A L P L U ST O P L O C A T I O N S W H E R E M U L T I N A T I O N A L SH A V E L O C A L P L U S ( % O F R E S P O N D E N T S )


Plus Elements Brazil Singapore

Housing

Utilities

Dependents’ education

Transportation

Medical benefit

Pension Plan

COLA/Goods and Services

Mobility premium

Hardship premium N/A

Immigration assistance

Tax and social security assistance

Home leave support

Relocation assistance

Language training

Source: Mercer 2014 Local Plus Surveys

Common

Less common/limited

Never or rarely provided

L O C A L - P L U S P A C K A G E C O M P O N E N T SP R E V A L E N C E P R O V I S I O N O F“ P L U S ” E L E M E N T S


H O W D O Y O U E S TA B L I S H T H E B A S ES A L A R Y F O R A F O R E I G N E R O N A L O C A LP L U S A P P R O A C H ? — S I N G A P O R E

One-wayinternationaltransfer

Internationallyhiredforeigners

Locally hiredforeigners

Localisedexpatriates

Internationalassignee of alimited long-termduration

N = 35 N = 37 N = 23 N = 32 N = 24

Based on localpay structurewithout adjustment

51% 43% 57% 41% 21%

Based on localpay structure withadjustments

20% 30% 26% 25% 21%

Home salaryconverted in hostcurrency

9% 5% 4% 9% 17%

Case by case 20% 19% 13% 19% 37%

It varies -- 3% -- 6% 4%



One-wayInternationalTransfer

Internationallyhiredforeigners

Locally hiredforeigners

Localisedexpatriates

Internationalassignee of alimited long-termduration

N = 35 N = 37 N = 23 N = 32 N = 24

Based on localpay structurewithout adjustment

51% 43% 57% 41% 21%

Based on localpay structure withadjustments

20% 30% 26% 25% 21%

Home salaryconverted in hostcurrency

9% 5% 4% 9% 17%

Case by case 20% 19% 13% 19% 37%

It varies -- 3% -- 6% 4%

Based on localpay structurewith adjustments

70%Based on a higher localcompensation percentile thanlocals would get 30%

Based on a calculation toprotect/equalise/compare withemployee's previous (i.e. homeor hiring country) net pay

C O M P E N S AT I O N A P P R O A C HH O W D O Y O U E S T A B L I S H T H E B A S ES A L A R Y F O R A F O R E I G N E R O N A L O C A LP L U S A P P R O A C H ? — S I N G A P O R E



Tax and social securityassistance

Relocation assistance

Immigration assistance

One-time payments

Dependent educationHousing

Medical benefitTransportation

Ongoing payments(with phase-out option)

P R E V A L E N T “ P L U S ” E L E M E N T SS I N G A P O R E O N E - T I M E A N D P H A S E D - O U TC O M P O N E N T S


Component Different from full expats Phase-out schedule Fixed schedule

Examples• Decrease of 10–70% of the

housing budget vs. full expatriateprovision.

• Full allowance for the first 6–12months only.

• “Less expensive” category ofhousing.

Examples• Three years: 100%, 50%,

25%.• Five years:

• One to three years: 100%.• Fourth year: 60%.• Fifth year: 30%.• Sixth year: 0%.

• Over three years: reduced by33%; or five years, by 20%.

Examples• Two years.• Three years.• Five years.

• Some can be subject toextension.

• Subject to criticality ofthe role.

• Mix between full expatriatebenefit and a decreased benefit.

• Mixed practices — phase outover time OR paid asongoing benefit.

Examples of phase-out:• Three years: 100%, 50%,

25%.

Examples• Two to three years.• Maximum five years.• Until the child has

finished education.


P R E V A L E N T “ P L U S ” E L E M E N T SM A N A G I N G T R A N S I T I O N T O P U R E L O C A LS T A T U S — S I N G A P O R E


E L E M E N T S N O T P R O V I D E D I N L O C A L P L U SP A C K A G E S F O R F O R E I G N E M P L O Y E E SS U M M A R Y F O R S I N G A P O R E



W H AT C O U L D G O W R O N G W I T H AL O C A L - P L U S A P P R O A C H ?

• The local-plus approach is introduced for the wrong reasons.• The “plus” is perceived as negotiable and/or the number of

exceptions grow.• The “plus” become permanent, making the local-plus package more

costly over the long term than anticipated.• Base salary becomes inflated.• The specificities of each host country could threaten the consistency of

the local-plus policy.• Communication challenge: strong resistance from assignees due to

negative perception of the local-plus package.


D E S I G N I N G A L O C A L - P L U S P O L I C YC O N S I D E R A T I O N S

• One globally consistent policy.• Global principles and local flexibility.• Buyout with temporary “plus”.• As local as possible — limited “plus” elements.• Policy inclusions: Authorisation, cost analysis, compensation

approach, benefits, visa/work permits, health insurance, tax,financial planning, etc.

• Need for a decision tree for business leaders.• What other documentation is required?


Questions/Answers

managing localisation and local plus€¦ · benefit and a decreased benefit. • mixed practices...

Documents