By Olivier Meier, Mercer
We tend to view expatriate compensation through the prism of the opposition between home and host-based pay. In other words, should we rely on the traditional balance sheet approach or localize the employees? Over time, companies have been exploring the continuum between these two opposites and looking for compromises such as “expat light” packages or local plus approaches. The second traditional area of focus of expatriate remuneration is about finding the right mix and payment level for the allowances and benefits – sometimes in isolation from the wider reward context. While these two aspects of expatriate compensation remain important, mobility managers cannot ignore the wider trends affecting rewards.
Mercer’s Global Talent Trends 2019 study highlights the main concerns of management related to reward. These concerns stems from the major changes affecting the global workforce: fast technological changes leading companies to find talent with digital skills, new generations entering the workforce, and more generally the growing diversity of the international workforce as well as the emergence of international gig workers. Mobility management won’t be spared by these changes.
HR's Rewards Priorities for 2019
|More diverse rewards
|Drive pay for performance
|Reward for high demand skills
|Career moves as rewards
|Pay band level equity
|More compelling EVP
|Align reward with org structure
|Gig worker reward strategy
|Decrease compensation costs
Source: Mercer’s Global Talent Trends 2019 study
The participants’ answers reveal several fundamental trends that are reshaping reward approaches and are directly or indirectly affecting mobile talent reward:
Greater individualization: Mobility managers have relied on policy segmentation to address the growing diversity of international moves. Policy segmentation remains highly relevant but companies needs to go one step further and define specific assignee value proposition based for different expatriate groups or personas (e.g. millennials, silver assignees, single parents, large families, minorities, global nomads, and one-time movers.)
The objective is not to create a policy for each group or even discard existing segmented policies but rather to understand how current approaches answer the specific requirements of each person and how they should be communicated. Many policies component remain valid but might require a degree of flexibility or be presented differently to each group.
The move to greater reward individualization also influences the way performance is measured and rewarded. The question of performance management can be more complex for international assignees as it driven by the specific objectives of each assignment type as well as the conditions in the host and home locations. In many cases, traditional performance measurement doesn’t involve assignment-specific goals – e.g. training the local workforce or successors. This could lead to scenarios where the performance of the assignees might be judged as good while in reality the assignment was not a success because skills were not effectively transferred to the local workforce. From a process perspective, the exchange of information and lack of coordination between the home and host location might lead a very superficial assessment of the performance.
Clarity and transparency: Individualization brings benefits only if goes hand in hand with transparency and clarity. The logic behind the remuneration approaches used should be clear and so should be the purpose of each items included in the assignee packages. Many candidates for assignments dismiss themselves because of lack of perceived support (e.g spouse support or support for women assignees and minorities) or role models even though management would be willing to provide that support. Similarly, assignees sometimes complain about issues and costs that are already covered by the expatriate package – this is always a risk when relying too much on lump-sums whose purposes is not clear or quickly forgotten.
Broadening the scope of reward: Organizations focus more and more on the overall Employee Value Propositions (EVP) and not just on pay components. An EVP includes the sum of the benefits the employees will derive from their employment with the company: pay, benefits but also career progressions, learning opportunities and purpose. Well-defined EVP are part of the overall employer branding.
Talent mobility has a role to play to support career development and provide incentives for employees looking for learning experiences and a different lifestyle. However, companies need to ensure that there is no disconnect between the official message about global mobility (“assignments are good for your career”) and the reality (some employees might benefit from an international assignment but other might see their career stalls after an assignment.)
The advent of the skill-driven economy: The traditional reward approach is based on the idea that employees are moving from grade to grade up the career ladder and enjoying pay based on a fixed salary structure. The advent of fast digitalization and new ways of working are changing this logic. New digital skills are in huge demand and in a context of skills scarcity, companies need a greater flexibility to pay according to skill relevance. The perception that new generations are digital savvy and sometimes unrealistic expectations (what recruiters call jokingly the purple squirrel syndrome) lead companies to reassess their reward approaches. The concept of career progression itself is evolving as companies are adapting to a more volatile workforce moving more quickly not just between jobs but also between forms of employment.
The rise of the gig workers: As more and more international gig workers are entering the mobile workforce, mobility mangers needs to adapt. In a gig economy, organizations are paying for skills rather for jobs as such. This implies understanding the relevance of the skills of potential candidates and their experience (skill depth). Furthermore, remuneration of gig workers is impacted by the duration of the tasks performed, the business requirements (and urgency), and the global competitive environment (skill supply).
HR teams are not equipped to follow the careers and evaluate the performance of this new category of professionals. This raises questions about the relevance and consistency of performance review and career management processes. One of the main goals of gig workers is not to be promoted within the organization but to increase their employability and capacity to win additional gigs.
Redefinition of jobs and organization structures: Organizations are turning into platform for talent, managing the ebb and flow of workers and aiming to become more agile. They are moving from an environment where many new assignee types will require more agile mobility approaches or at least to build the international assignment packages on top of more agile reward approaches.
Some companies have started responding to the limits of traditional reward approaches by taking measures to break down job grades into subgrades to offer more frequent promotions or on the contrary by fostering a flatter organization allowing a greater participation of all employees in decision processes. Others have implemented more frequent salary reviews, shorter and more intense developmental moves, and training programs. These fixes might be insufficient if they are not followed by more fundamental changes within organizations.
Decreasing compensation costs:
Cost containment has always been on management’s priority list, but companies increasingly realizes that simple cost cutting must give way to a more strategic approach. From an expatriate remuneration perspective, this means that cost cutting focused purely on reducing items in the expatriate packages is not sufficient if it doesn’t also identify major cost drivers: base pay but also more strategic considerations such as lack of choice of candidates, not taking advantage of the different types of mobility (shorter assignments, commuters, locally hired foreigners), operational costs of the mobility function, and top talent attrition.
From a compensation point of view, leveraging the different compensation options (from home-based to local) is important but other considerations must be taken into account. Rather than immediately changing approaches, controlling exceptions to existing policies is a useful first step. Avoiding on-going cost commitments is another important step: always bear in mind potential long-term consequences of compensation adjustments on the future cost of mobile employees before tampering with base salaries.
All the major changes highlight the need for mobility managers to take a more strategic role in managing assignees’ reward and not just focus on individual package items. They also illustrate the importance of broad reward skills for mobility professionals (one of the top skills listed by mobility professionals as part of their upskilling plan according to Mercer’s survey, "How Global Mobility is Responding to New Dilemmas.")