Every city in the world has its own unique characteristics that factor into its overall quality of living (QOL). As you might imagine, a war-torn, politically unstable, or overly-polluted region of the world is more likely to have a low quality of living score, and businesses will subsequently shy away from assigning their employees in these destinations. On the other hand, cities rich with natural resources and modern infrastructures are more likely to be prime destinations for many businesses and travelers alike. There are many factors that contribute to a city’s overall quality of living score, including everything from political stability to sanitation to sustainability to school systems...and so much more.
For municipalities, quality of life data can serve as a great benchmarking tool. Meanwhile, global HR professionals can use this data to reinforce their compensation planning decisions, especially for employees who are about to undergo an international relocation. But how exactly are each of these professionals using this quality of life data to guide their decisions? What exactly are they looking for? And, perhaps most importantly, how do they know what criteria to focus on?
Here you’ll find an overview of all things quality of living, including insights on some of the most common ways that global HR professionals, mobility experts, and municipalities around the world are using this data to their advantage.
QOL Usage for Global Mobility and HR Professionals
Leveraging cost and quality of living data to calculate compensation packages by region or by city is nothing new for global mobility and HR professionals. Year after year, thousands of global HR professionals rely on worldwide quality of living data to make sure their expatriate employees are properly compensated when they go on international assignments. Of course, those compensation packages must also take into account local taxes, housing prices, and other critical data necessary for a smooth international relocation. These calculations are important to both compensate employees competitively, and to forecast budgets accurately.
But unlike some of the more quantifiable factors mentioned above, quality of life implications are not only monetary, but can also impact employees’ and their families’ entire way of life. This can make compensation package calculations a bit trickier.
An employee working in a high-ranking quality of life city like Melbourne, Australia, probably wouldn’t be excited about relocating to a remote town, in a hardship location. Salary data tells us that employees in Melbourne, Australia are likely to be paid higher due to the local market compensation trends and a higher cost of living, whereas, employees relocated to cities with a lower quality of living will want some extra incentives to take on these less-than-ideal assignments.
That “something extra” often comes in the form of a hardship allowance (also known as “location allowance”). This allowance is calculated as a percentage of the base salary (typically between 0 and 40% of the base salary). In Mercer’s latest Worldwide Survey of International Assignment Policies and Practices, participants were asked whether they provide quality-of-living allowances when international assignees are being sent to host cities with lower quality-of-living. The results concluded that 49.7% of respondents worldwide provided systematically a quality of living allowance for long-term assignments to hardship locations and an additional 14% did so on a case by case basis.
But how do you determine what’s fair for every single international relocation that your company needs? For the vast majority of global HR managers, that guidance can be found by digging a bit deeper into the quality of living data.
Custom QOL Calculations and Criteria Analysis
Modern technology and tools have vastly improved the way in which we are able to analyze and manipulate data to suit our needs. For example, Mercer calculator tools allow QOL data users to intuitively select a home-versus-host location, then easily compare and contrast a potential international assignment location to any other cities in the database. For added convenience, customers can also remove certain criteria and re-rank the parallel locations based on the factors most important or applicable to them, whether that is climate, ease of communications, availability of transport, or whatever else.
Most quality of living reports can also be custom-built to address specific needs. Looking at specific sets of criteria versus all criteria can be especially useful for HR professionals to determine appropriate compensation based on their prevailing workforce demographics. For example, if a company is sending new graduate employees to a specific region, it might weight a city’s educational system lower than if you were assigning more seasoned and older employees with children. For expatriates with young children, the company might take it a step further and highlight the similarities and differences between certain schools in France versus the US versus the United Kingdom. This can help to ensure that each new school has roughly the same curriculum, allowing the children to stay on track fundamentally even as the family remains mobile.
How Cities and Municipalities Are Improving QOL
Quality of living information can also provide invaluable insights for mayors, governors, developers, and other organizations involved in city planning and development. Using this data, city leaders, public officials, and others can address fundamental questions like, “How can we improve?”, “What does our city look like compared to neighboring cities?”, and so on. Whether their ultimate goal is attracting tourists, pinpointing which initiatives are falling short, or identifying where their future efforts should be focused, worldwide quality of living data provides objective information on the living differences between cities across the world.
Whatever the needs of the city or municipalities, the ability to manipulate the data allows these organizations to better target the criteria that’s most important to them. A city may then launch initiatives or partner with data vendors to address a very specific set of criteria, such as focusing on how a local population in the Middle East feels about its current recreational facilities through best practices. Targeting specific criteria allows city officials to plan for the future and to design a roadmap more quickly, impacting their QOL score positively in the process. Changing an entire city’s quality of living score is no easy feat, and as you will see, is sometimes decades in the making.
To encourage employment mobility, and to stay ahead of your competition (wherever it’s located), you’ll always need the most reliable and up-to-the-minute data available. Using this data, you can calculate consistent expatriate allowances, ensuring each and every international relocation goes as smoothly and fairly as possible. If you’re interested in gaining the competitive international advantage, Mercer’s latest Quality of Living Reports are now available, offering you a number of unique insights and strategies you can use to build your global workforce of tomorrow.