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Expatriate Assignments Are on the Rise

The number of employees on international assignments has doubled over the last three years as part of the continuing trends toward globalization, according to a new survey conducted by Mercer.

Mercer’s 2008/2009 Benefits Survey for Expatriates and Globally Mobile Employees covers 243 multinational companies worldwide, including over 94,000 expatriates (compared to 50,000 in 2005/2006). Mercer conducts the survey every three years to provide an overview of expatriate policies in large multinational firms.

According to the report, 47% of companies surveyed said they had increased the deployment of traditional expatriates (employees on 1–5 year assignments) and 38% reported an increase in “global nomads” (employees that continuously move from country to country on multiple assignments).

“The desire to be globally competitive has driven growth in expatriate assignments. As companies launch new ventures overseas, they continue to bring experts from their other locations to lead projects on a short-term basis, rather than rely on local talent,” said Duncan Smithson, leader of Mercer’s international consulting business in the Midwest. “These seasoned professionals who move from assignment to assignment in the same multinational company transfer experience, knowledge and consistent approaches to conducting business.”

According to Mr. Smithson, “International assignments are part of multinationals’ global leadership development programs. Gaining experience in different geographies continues to be seen as an essential part of career growth in many international firms.”

Benefit policies
The majority of companies surveyed (86%) consider benefit provision for expatriate employees a medium or high business priority. However, 26% admit to having no overarching policy for providing expatriate benefits.

“International policies are essential for remaining competitive, maintaining geographical consistency and controlling costs,” said Dany Mathieu, principal in Mercer’s international consulting business. “Even in uncertain economic times, companies compete for the best talent and those that are lax will lose out.”

When asked to rate the success factors for their expatriate benefits plan, survey participants ranked supporting the company’s business and HR strategies the highest (63%). Being valued by employees and remaining cost effective were also deemed important factors (both 59%). However, the survey found that nearly two-thirds of companies (64%) have no specific procedures in place to measure the success of their expatriate benefit programs.

“Creating and maintaining benefit plans for expatriates is an expensive and complicated undertaking. By failing to assess the value of these programs to the company or to the employees themselves, many organizations miss the opportunity to improve their benefit offering and sharpen their competitive edge,” said Mr. Mathieu.

International retirement plans
The majority of companies surveyed keep their expatriates in host or home country retirement plans. However, 32% of companies offer international plans* – an increase from 23% in 2005. Close to three-quarters (73%) of companies with an international plan restrict eligibility to certain expatriates who cannot be kept in the home or host plan.

“More expatriates are going on multiple assignments across several geographies. Over time it becomes difficult for companies to justify the link to the office in the expatriates’ original home location when they have not worked there for many years. And swapping an employee from one host plan to another is often an unattractive option,” said Mr. Smithson. “Furthermore, based on the location, retaining expatriates in the home country pension plan may create compliance and regulatory problems.”

He continued, “In these instances, setting up an international plan is often the most attractive option for multinational companies that want to provide pension benefits to their globally mobile employees.”

Other benefits
The majority of respondents provide medical benefits for their expatriates, whether via international plans or via home- or host-country plans. However, more than 80% do not consider the local social security provision when providing these benefits.

Mr. Mathieu explained, “Some multinational companies have considered tailoring their medical plans to integrate with local social security provisions in order to achieve cost savings. However, it is debatable whether the potential cost savings justify the expense of doing this. The data suggest few have yet to implement such plans, although a growing number of organizations are exploring this approach.”

The majority of respondents cover their expatriates for death benefits (86%) and long-term disability benefits are provided by more than three-quarters of participating companies (78%). North American companies are more likely to offer benefits at a cost to the employee, typically by way of deductibles or co-payments.

*International plan: A retirement plan exclusively for Globally Mobile Employees (e.g., an offshore plan financed via a trust or insurance contract in an offshore tax sheltered location).

Copies of Mercer’s 2008/2009 Benefit Survey for Expatriates and Globally Mobile Employees are available from www.imercer.com/expatbenefits or by calling 800-333-3070.