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NAVIGATING THE GLOBAL COMPENSATION
CHALLENGE FOR INTERNATIONAL MOVES
Adele Yeargan, Head of Global Mobility, AIG
Ed Hannibal, Global Practice Leader , Mercer
What We’ll Cover Today
• Talent Supply and Demand
• Basic Philosophy for Compensating International Assignments
• Challenges in Compensating Assignees from Developing Markets
(in this presentation, “DMs”)
• Solutions
• AIG; A Case Study
• Managing Future Talent Compensation
• Key Takeaways
2
TALENT SUPPLY AND DEMAND
Contradictions in Global Talent
Shortages and Surpluses Coexist
• Only 25% of Indian and less than half
of Brazilian and Chinese professionals
considered employable by global
standards
• Reverse “brain drain” – top talent
increasingly returning to emerging
markets
• 45 million new entrants in the global
job market annually
• Significant attrition at mid-career levels;
employees move 2–3 times per year to
advance career
• 300 million new jobs needed between
• Labor laws and visas – complexity limits
now and 2015
mobility and development
• By 2030, the US will need to add
around 25 million workers, and
Western Europe around 45 million
• 214 million migrants worldwide; 40%
move between developing countries
4
WEF Highlights of Talent Mobility Research Findings
Definition must expand to fit the new age of talent mobility
Talent Mobility:
tal·ənt mō·bil·ətē
The movement of
workers between
organizations or
among locations
of an
international
organization
5
Talent Mo
bil
The physic ity:
al
within or a movement of work
ers
cross orga
nizations,
industries
or countrie
s, and glo
or the pro
bally,
fessional
movemen
workers a
t of
cross occ
u
p
ations or s
sets. Mob
ility may b
kill
e tempora
permanen
ry or
t and may
also involv
moving pe
e
ople from
unemploy
employed
ed t
, moving jo
bs to peop o
allowing f
le or
or virtual m
obility.
The New Definition of Mobility
The Need for a New Global Mindset
Career mobility
Geographic mobility Position mobility
People move based on
their experience and
jobs.
People move where
the jobs are.
6
Positions move where
the talent is.
Global Mobility Program Development
Maturity Level on Mobility
• First foreign
operation
• Local
packages
• Equity stake
7
• Few foreign
operations,
not integrated
• ‘Adolescence’
• Adventurous
staff
• Local plus
packages
• Equity & nonequity
• Growing international
maturity
• More HQ staff
replaced by
TCNs, local
nationals
• Home-based
balance sheet
• Career path
focused
• Less equity focus
• Worldwide integration
and planning
• Global talent sourcing
with less emphasis on
nationality
• Home-based balance
sheet/globalist comp
approach
• Well-developed career
planning, repatriation
process
Building an Integrated Approach to Talent Mobility Strategy
Successful Outcomes Through Clearly Linked Programs
TALENT
The right PEOPLE…
Talent segmentation
in the right PLACES
and ROLES…
Talent identification
Identification of need and locations
Candidate profiles
Critical roles
Selection criteria
Key skill requirements
Selection process
TOTAL
REWARDS
at the right COST…
Contract type
PLANNING
for the right length of
TIME and RESULT…
Remuneration, benefits, allowances Assignment purpose
and support
Type and length of assignment
Funding arrangements
Assignment lifecycle management
Management of other related costs
Transition management
INVESTMENT
Audit Your Mobility Population!!!, HR service delivery, Outsourcing
8
BASIC PHILOSOPHY FOR
COMPENSATING INTERNATIONAL
ASSIGNMENTS
Context for Increasing Global Assignments
Global Mobility Key Drivers
Key drivers for international assignments:
• Skills gaps in international locations
• Management development
• Technology transfer
• Senior management role
• Training
Primary compensation design decision drivers:
• Operational need
• Cost
• Motivation to accept assignment
• Deploying key/core competitive resources
• Administrative simplicity
• Equitable treatment
10
Philosophy for Compensating Mobile Employees
The ‘Home Build Up’ or ‘Balance Sheet’ Approach
11
Context for Increasing Global Assignments
Why is it complex?
• Gross and net compensation varies between countries
• Purchasing power varies between countries
• Exchange rates change
• Tax structures differ
• Benefits and social security systems differ
• International moves disrupt employees lives
• Some locations are unattractive
• Language and culture differ
12
Philosophy for these Alternative Mobile Employees
Pay Approaches Vary from Traditional International Assignments
tax
tax
tax
x
Home
|
salary
x
$
Home
salary
balance
sheet
HQ
base
Extended business trips
$
Net
salary
International
scale
Hybrid/
expat
“light”
Global nomads/career expats
HQ secondments
Local
plus
Local
salary
Localized expatriates
Locally hired foreigners
Short-term assignments
“Prevailing wage” assignments
Commuter assignments
Long-Term assignments
13
13
Returnees
Permanent transfers
Context for Increasing Global Assignments
Where Expats Are Going (sorted by 2010 %)
Assignment locations
2000
2006
2008
2010
5%
10%
15%
22%
Western Europe
27%
29%
20%
19%
U.S./Canada
21%
17%
15%
18%
Asia Pacific
19%
16%
18%
15%
China
6%
9%
9%
9%
Latin America
8%
5%
4%
5%
Africa
3%
5%
9%
4%
Japan
2%
2%
2%
2%
Middle East
Source: Mercer’s/ORC’s Worldwide Survey of International Assignment Policies and Practices
14
Context for Increasing Global Assignments
Where Expats Are Going (sorted by 2010 %)
15
Source of Expatriates
2000
2006
2008
2010
Western Europe
33%
31%
28%
24%
Asia Pacific
3%
13%
12%
23%
U.S./Canada
28%
27%
23%
22%
Japan
27%
17%
15%
16%
Latin America
3%
3%
3%
4%
Africa
1%
1%
12%
2%
Middle East
1%
2%
1%
2%
China
0%
1%
1%
1%
Philosophy for Compensatin Mobile Employees
Transfers from Less-developed (developing) Countries
• Home country pay structure
• Moves from Developing Markets (DMs) to developed countries
• Moves from one DM to another
• Disparity of base pay levels between home and assignment location
• Pay disparity does not equal cost-of-living disparity
• Limitations of conventional pay approaches
• Repatriation to a developing country
16
Philosophy for Compensating Mobile Employees
Key Questions
• What are the job levels of transferees?
• What is the nature and length of assignments?
• What is the economic level of the home country?
• What is the economic level of the assignment country?
• What are the cost differences between the two countries?
• What is the salary structure of the home country?
• How well do host peers tolerate pay disparities?
• Should a lower standard of living carry over on assignment?
• Does a consistent compensation approach for all expatriates matter?
• How many such transfers are you likely to have?
17
Philosophy for Compensating Expatriates from DMs
Elements of Compensation
• Pay delivery practices:
• Local executive perks & benefits:
– Number of months’ pay
– Supplementary pension plans
– Variable pay
– Housing allowance/loans
– Other allowances
– Representation allowances
– Dual employment contracts
• Statutory requirements:
– Car and drivers
– Extra month’s bonus
– Profit sharing
– Vacation pay
– Transportation allowances
– Social security
– Termination indemnities
18
• Executive perquisites
Philosophy for Compensating Expatriates from DMs
Compensation Levels
Other
Benefits
& LT
Incentives
Short-Term
Incentives
Base
Pay
19
Guaranteed
Cash
Guaranteed
Cash
Base
Pay
Base
Pay
Total Cash
Compensation
19
Challenges in Compensation Assignees from DMs
Income Disparities Among Employee Levels
Developing location
Salary
level
Developed location
Entry level
Executive
20
20
Challenges in Compensating Assignees from DMs
Market Salaries/GM Salary as Multiple of Secretary
21
SOLUTIONS
Solutions
Local Salary + Expatriate Allowances/Benefits
23
Solutions
Differential + Position Allowance
Position
Allowance
Differential
Host Country
Peer Budget
Home Budget
Host-Country
Spendable
24
Differential
Home Budget
Host-Country
Peer Spendable
Equivalent
Peer
Spendable
Income
AIG
TRANSFORMING TO FACILITATE
(AND DRIVE)
A MOBILE WORKFORCE STRATEGY
Establish an Operational Foundation:
Global Compensation & Global Mobility
Implement a
Global Job Grade
Structure
Establish a Home of
Record Philosophy
Transition all
Assignees to one
Policy Worldwide
• A company-wide initiative to establish GJG
• Gave us a clearly defined structure for TDC (Total Direct
Compensation: Base, Short & Long Term Incentive)
• Defined Home of Record for all employees
• Where the employee was last employed as a local (if
applicable)
• All assignees transitioned to the new mobility policy
• Scorecard used to calculate the changes based on GJG & TDC
Create a Vision for Workforce Mobility
Design a CoE
Delivery Model
Execute the
• Design the optimal delivery model for Mobility at AIG
• Align and Integrate to the HR Vision
• Write business case with project plan, secure budget
• Deploy resources to manage change as well as “BAU”
Design Plan
Knowledge
Transfer,
Communications
• Perform RFP, Selection, Contracting, Implementation
• In-house team(s) transformed
• Regular stakeholder communications
Build the Policy Format for all Mobility
Programs
Assess the
• Constantly listen to business leaders and passionate stakeholders
• Look future-forward: what are the business drivers and initiatives
Business Needs
Beta Test Programs
Regionally and
Globally
Socialize, Secure
Leadership
Approval, Roll out
• Regional, country or project based tests provide insights, help refine final state
• Hard to perform Global tests, may need to “extrapolate” from smaller markets
• Build relationships with those who will champion change – sometimes your
harshest critics
• Align changes to other initiatives for support and momentum: i.e.: Global Policy
projects, Organizational Effectiveness restructuring, Geographic Optimization
Create a Framework that Can Easily Flex – the Mobility Program
should be as Dynamic as your Business Needs & be able to Manage Global
Complexities from Compliance to Employee Profiles to Talent Development
Policies
Standards
Guidelines
Procedures
MANAGING FUTURE TALENT
COMPENSATION
Segmenting Assignees: Four-box Model
DEVELOPMENTAL VALUE
Current Assignees by Category (Median Values)
Emerging/High-Potential Talent
Strategic Business Leaders
International learning/ development to
grow next generation of leaders
Fill mission-critical roles and deliver
specific, strategic business results
N=199
20%
N=251
40%
N=28
20%
N=37
30%
N=20
15%
N=21
60%
17%
21%
17% have a specific policy for this category
14% have a specific policy for this category
38%
48%
Career-Building Volunteers
Seasoned Technical Experts
International experience to fulfill personal objectives
(opportunistic, employee-driven moves)
Providing specialist skill/expertise to fill local gap
or to complete a specific project/task
N=108
10%
N=247
40%
N=14
10%
N=38
55%
N=8
10%
N=24
35%
13%
3% have a specific policy for this category
20%
19%
16% have a specific policy for this category
52%
BUSINESS VALUE
Source: Worldwide Policies and Practices Survey
31
Taking It to the Next Level
Intra-company Collaboration – Mercer Point of View
• Developing an integrated strategy for global talent mobility
• Guiding principles shape strategy, design, and measurement
PLANNING
Locations
Talent Supply
& Demand
Quantity &
Duration
Lifecycle
Management
Purpose & Skill
Requirements
TALENT
Segmentation
Key Roles
Performance
Requirements
Leadership
Capabilities
Employee Value
Proposition
TOTAL
REWARDS
Elements and
Purpose
Comparators &
Positioning
Performance
and Risk
Equity, Choice,
Flexibility
Communication
& Transparency
INVESTMENT
Governance &
Accountability
Affordability &
Sustainability
Administration
Oversight &
Advisory
Success
Measures
32
Case Study
Flex Policy Example
Pre-Move
Exec. Level
Intra-Regional
Local Plus
Relocation allowance
X
X
Home sale closing costs
X
X
Pre-move house- hunting trip
X
Economy class airfare
LT IA Policy
X
On-Assignment
Business Class airfare
X
X
Housing deduction
X
COLA
X
Dependent education
Tax prep
X
Transportation
X
Core benefit
33
X
Discretionary benefit
X Not applicable
Case Study
Flex Policy Example
Core/Flex Elements
Policy
Compensation
Home country compensation guideline
Benefits
Home country compensation guideline
Work Authorization
Healthcare
International Plan
Tax Preparation
Core
Dependent Education
Core
Emergency Leave
Core
Home Auto Loss on Sale
Cost-of-Living Differential
Tax Equalization
Home Leave
Host Country Transportation
Cultural Orientation
34
Temporary visas/work permits; no permanent ones
Optional
Core
Expatriate or EPI Index
Optional
Optional
Optional – Economy Class
Optional
Optional/On-line
Key Takeways
What We Covered Today
Organizations will continue to source talent globally
•
Become part of the talent conversation
•
Ongoing need to validate mobility program philosophy
•
Educate mobility staff on pay challenges from countries with disparate
compensation levels
•
Establish a “Watch List” of problematic countries
•
Audit, evaluate, and evolve your Mobility policies
•
Implement Mobility Workforce Planning programs
35
Don’t hesitate to contact us!
Per diems
Daily living allowance for groceries, meals out,
recreation, transportation, incidentals
Normally one fixed per diem established per
location, but practices vary
Customize allowance per what is provided at
assignment location
Ed Hannibal
Chicago
+ 1 312 917 9297
[email protected]
36
For example, does accommodation
Adele
Yeargan
have
cooking
facilities?
Is transportation
New York provided?
+ 1 212 770 8254
[email protected]

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