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Regional C&B Leaders in Singapore Discuss the Realities of Expatriate Localisation

Hosted by: LinkedIn

In April, ChapmanCG brought together a group of senior Compensation & Benefits professionals at the offices of LinkedIn in Singapore. This was the latest in our regular HR Leader networking series, held regularly throughout the year and around the world. Adel Tan, LinkedIn’s Regional Head of C&B for Asia Pacific, co-hosted the group discussion for over 35 C&B leaders, including representatives from Allianz, Barclays, BAT, Bloomberg, Citi, Dentsu Aegis Network, DKSH, Franklin Templeton, GSK, Mead Johnson, Sandvik, SCB, Swarovski, Unilever and UOB. We also welcomed Mario Ferraro, Principal, Global Mobility with Mercer, who presented and helped facilitate some insightful discussion around the hot topic of expatriate localisation in Asia. In this brief synopsis of the session, I have highlighted some of the key trends and issues currently being considered in this area.

Expatriation is Still on the Rise

One major myth to address at the start is the idea that as localisation increases, the number of expatriates (expats) decreases. The opposite is actually the case, in spite of the rise of localisation. Current worldwide and Asia Pacific surveys have both indicated that companies are increasingly relying on locally hired foreigners, and are using both long-term and short-term assignments to get the talent they need. Expat management can be very complex, and while previously expats where quite obvious, now things have become much more vague with many variations on the traditional ‘expat package’. These days, managing an expat population is sometimes more art than science, and often creativity is key. According to Arindam Mukherjee, “At DKSH we have a concept of expatriates, as well as local foreigners (foreigners recruited locally) who are basically local-plus as per market practise. We have to be creative so as not to lose the talent and specialised knowledge, especially in some countries where there is a shortage of talent at a local level.”

When to Consider a ‘Local’ or ‘Local Plus’ Arrangement?

Moving employees to a new country with a full expat package is commonplace, but it is an expensive business and is almost never a long-term plan. The provision of ‘Plus’ elements still varies greatly between company and location and can include housing, dependents’ education, transportation, medical benefit, pension plan, immigration assistance, tax & social security assistance, home leave support, relocation assistance and even language training. As you might expect, the components of the package generally increase, as does seniority. At what point does an organisation transition an employee to a more localised arrangement? This can vary widely from company to company, but the localisation “process” is as important as its end-point. The four most common scenarios are identified below, each with different implications:

  • Foreigners hired directly on local package;
  • Foreigners transferred directly on local package;
  • Foreigners transitioning from expatriate to local package in accordance with localisation policy;
  • Foreigners transitioned from expatriate to local package with no localisation policy in place.

The discussion turned to whether or not there is a ‘hierarchy’ of status within organisations, in terms of full expats, local-plus employees, local employees, etc. Broadly speaking there is a ranking in many respects, and often this is vital to retain the knowledge that isn’t readily available locally. But things are changing in certain areas on a global scale. Overall there are more people living and working outside of their home countries than ever before, which means that expats are no longer quite as ‘special’ when it comes to localisation. We now see global nomads, also known as career expats, and as one C&B Leader from a major FMCG company said, “It’s down to talent strategy. For us ‘Local Plus’ is expensive in the first place, and then people don’t want to leave. We have stopped it altogether.”

Courage is also needed from the top: a good leader will localise when necessary. These leaders know their employees, and their intentions and drivers well, and they should have the courage and the willingness to address this. Of course personal as well as economic factors must be taken into consideration. If an employee is happy where they are living, from both a professional and a personal perspective, he or she will obviously be more inclined to localise. The question then arose around how to ensure consistency in an environment where expats come and go? Yes, business leaders are key, but many are expats themselves.

Triggers for Localisation

The group moved on to discuss the factors that can ‘trigger’ a localisation, and how best to transition an expat to a local (or local-plus) package. This often comes down to a decision around cost versus value. Is the person filling a permanent position? Internal equity issues might also be triggers, particularly if schooling is included for some. Other factors include whether someone is a Permanent Resident in the host country, whether they have bought a property there, are married, have a family, etc. On the topic of phasing out programmes, where employees are gradually weaned off an expat package, many felt that five years is too long for this. The employee needs to be responsible for their costs, and the majority agreed that 2-3 years should be the maximum expat stint. Another consideration is what percentage of the role could or should be mobile? Other potential triggers are the ROI of international assignees, versus retention risk. Most agreed that people planning and appropriate talent/succession planning are absolutely key, in order to make sure expats build up the local talent base.

What Factors Hinder Full Localisation?

Sometimes full localisation is just not possible, and this can be down to a variety of reasons. Some common issues and considerations include: taxation, cost of living, local standards of living, local remuneration levels, availability of a wide range of international products, access to public housing, access to local schooling — including language and curriculum considerations, local medical standards, access to the property market, currency export and immigration restrictions. All in all, it is a fairly complicated business, and it must be handled carefully, and to some extent individually.

Rewards View vs. Talent Management View

Finally we looked at this vital comparison of the differing views of those in Rewards and those in Talent Management:

  • Rewards: Will the foreign employee accept a local package? VS {nolink}Talent Management{/nolink} – What is the availability of the required skills and competencies in the local labour pool? Are we using foreign talent because the required skills are scarce in the local market?
  • Rewards: Tactical — how do we localise this individual? VS {nolink}Talent Management{/nolink} – Strategic, how do we localise this position?
  • Rewards: How do we ensure that our package is competitive in the local market and helps with employee retention? VS {nolink}Talent Management{/nolink} – Are we likely to need this employee’s skills in another country in the future? Is the employee truly committed to staying on in the host location, or would he or she be open to competitors’ job offers in other markets?

Conclusion

The group generally agreed that localisation may work in some markets and in specific circumstances, but it requires a delicate balance of strategic and tactical considerations. Many thanks again go to Adel Tan and her team at LinkedIn for co-hosting another excellent gathering of C&B experts, and to Mario Ferraro for his insights. We look f
orward to bringing this group together again later in 2015.

Here’s What People are Saying:

“Networking has long been recognised as a powerful tool for business people and professionals. Knowing more people gives you greater access, facilitates the sharing of information, and makes it easier to influence others for the simple reason that influencing people you know is easier than influencing strangers. The Chapman Consulting group has not only understood the value of networking but has facilitated it. It was an insightful sharing session of passionate people talking about what we love: Compensation & Benefits.” – Adel Tan, LinkedIn

“Thanks for a very valuable and insightful information-sharing session around the perpetually thorny area of expatriate management and localisation. For me, the key drivers are talent management, pragmatic implementation and clear communication — basically, we must be clear about the Why and the How, and get stakeholder buy-in upfront to minimise rude shocks along the way”. – Jean Fung, Dentsu Aegis {nolink}Media{/nolink}

“It was an insightful and impressive group discussion around localisation and expatriate management. It really took us back to the basics of the considerations that need to be taken into account while implementing localisation and mobility policies in an organization.” – Arindam Mukherjee, DKSH

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Graham Tollit

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Graham is a Senior Director with ChapmanCG based in the United Kingdom. He is passionate about building long-term partnerships and his current focus is on European and global search mandates, working with the team to identify high-calibre HR talent across EMEA and internationally.

With over twenty years in executive search, Graham has a successful track record delivering across multiple industry sectors and specialist functions with many of the top global multinationals. He has a deep interest and knowledge of the HR profession, future of work and a big advocate of the importance around mental health and wellness in the workplace. Before a return to the UK in 2017, Graham spent seven years based in Singapore.

Graham’s personal interests revolve around his family and you could find him either on the golf course or exploring a new city or coastline somewhere.

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