Minimizing Exceptions to Policy Without Demotivating Expatriates

By Steve Nurney

International assignment policies, although seemingly thorough and all-encompassing, sometimes fail to cover every contingency – particularly when the expatriate population is large or home and host destinations diverse. Any gap in the policy usually leads to the inevitable request by expatriates for exceptions to certain provisions. Mercer research has found a number of policy areas in a typical expatriate pay package that receive the most requests for an exception, including:

• Host-housing allowances to enable the family to live in larger or more costly accommodations 
• Waivers of the home housing norm (contribution) due to a weak real estate market or special family circumstances 
• Dependent education that would provide for a child’s attendance at a private school when local schools are adequate 
• Temporary living benefits to extend the family’s time for settling into the host location or repatriate back to the home country 
• Number of home leave trips to allow the assignee and family to visit elderly parents on a more frequent basis or enable the family to go elsewhere on home leave if there are no ties back home

Every organization can probably list all sorts of requests that assignees make – whether legitimate or frivolous. When HR creates a different rule for an individual assignee, the one-on-one solution may keep the expatriate and family content. However, such an accommodating response can add up to long-term problems for the company – both from a financial and employee relations standpoint – if not monitored and controlled.

While such exceptions can be expensive, HR recognizes that exceptions are sometimes the best response to a specific situation. It all depends on the reason. The following discussion provides practical suggestions for keeping exceptions to company policy from becoming the norm.

Consider the Risk of Saying “Yes”

Unless exceptions to policy are brought under control and established as genuine “exceptions to policy,” they will eventually become the rule. Too many and too excessive special cases can lead – and often do – to the following problems:

• Inequity among expatriates may result due to inconsistent policy enforcement. What managers occasionally forget is that word gets around and assignees sometimes compare notes. 
• The policy can suffer distortion, whereby the exception to policy becomes the new rule and the policy’s original intent is lost. In effect, the policy becomes the starting point for negotiation. 
• Financial overspending often occurs, particularly if the budget for international pay packages does not have enough built-in flexibility to include extra payments or expenses. 
• Administrative confusion can abound if HR and payroll (and, sometimes, line management) do not keep accurate records of the individual negotiations.

Take Concrete Steps to Avoid the Risks

Organizations in the process of initially setting up an expatriate program may understandably settle requests on a case-by-case basis until a formal policy is developed and communicated. But even in those situations, it is important to restrict the parameters involved in terms of time, money, location, and so forth.

Nevertheless, exceptions will, of necessity, always exist. With the recognition that all expatriates and their situations are never the same or even similar, it is still possible for HR to exert some control over special cases through the following steps:

• Ensure that the exception remains within the intent of the policy and does not force HR down an unplanned or unwelcome road. 
• If the exception prompts a windfall or luxurious lifestyle for the assignee, then deny it. 
• Consider with care the sensitive areas of culture and religion. 
• Make sound decisions based on fact and accurate information. 
• Establish monetary limits on implementing the exception. 
• Establish approval authority levels (see sidebar, “Pointers for Setting Approval Levels”). 
• Centralize the process and track requests through a dedicated database, thereby making it easier to see whether incidents occur more frequently in certain divisions, locations, job functions, and so forth. 
• Set criteria for accepting or rejecting a policy exception so that you avoid the accusation of favoritism or random decision making. Consider requiring high-level management approval for certain or all exceptions. 
• Post the policy on the company intranet so that local managers cannot claim that they “didn’t know any better” or secretly override existing provisions. 
• Build into the policy an “allowance” for exceptional circumstances, which assignees can use at their discretion. 
• Finally, if there are recurring requests for the same exception, consider reviewing the policy. Perhaps, it is dated and needs to be changed. Benchmarking competitive practices can help make or break the case for policy revisions.

Pointers for Setting Approval Levels

• Set approval levels that incorporate flexibility and a sense of ownership. 
• Require assignees to first gain the support of their supervisor, followed by the country manager, before asking HR to review the proposed exception. 
• Set up a steering committee comprised of the company's business leaders and head of corporate HR to guide expatriate policy. Make sure that the review of recurring exception requests is part of every steering committee meeting agenda. If the exceptions drive a legitimate recommendation to change assignment policy, use the steering committee to gain a consensus across business lines before amending the provisions. 
• Establish a task force of responsible and appropriate staff members (at a level or two lower than the steering committee) to screen and review all exception requests. The task force might consist of representatives from local host management, local HR, corporate HR, finance, and so forth. If the request is found to be legitimate, reasonable, and necessary, the task force will move it forward to the steering committee (if any), then to corporate HR for review and approval (or refusal).

Be Practical: Implement Firm Flexibility

Control of exceptions to policy, however, is not always easy to grasp. Traditionally, many organizations implemented a “one size fits all” policy to ensure equitable and consistent treatment among assignees, irrespective of their nationality and host location. But now that companies are expanding their businesses across the globe, more diversity among the employee population is inevitable. Complicating the scene is the multitude of country laws and customs to consider, both from an inbound and outbound perspective.

These geographic and demographic changes have brought new and very different scenarios to the desks of HR managers, directly impacting expatriate policy. When addressing these situations, remember that exceptions will always occur. The trick is to keep them minimal, make fair decisions, and watch the budget.

Steve Nurney supports internal and external users of Mercer's mobility data and systems, and assists multinational companies in developing effective global assignment programs, compensation practices, and supporting services.