FEM's Policy in Practice 2016 Executive Summary
FEM is delighted to confirm our annual Policy in Practice survey launched at our Houston Conference. We have shared our executive summary below.
Our Policy in Practice 2016 survey was completed by 237 individuals from a wide range of industries and regions. More than three-quarters of participants worked in the global mobility function, with 70% either global mobility managers or holders of more senior roles. Other respondents included HR generalists, compensation and benefits specialists, and policy advisers. The key findings of our survey are as follows:
- Just over half (58.6%) of participants had a formal localization policy.
- Of those without a policy, more than half (54.2%) expected to have one in place within a year.
- Localization was still regarded by organizations as catering to the assignee rather than to the business. Over half of respondents said the typical reason for applying localization was an employee request, such as staff wanting to stay in the host location after the end of their assignment.
- Interestingly, reducing the business compliance burden emerged as the least likely reason for moving an assignee onto a localization policy.
- Two-thirds (68.6%) of participants expected to localize more assignees over the next five years, with growth plans indicating a rise in locations where localization was considered challenging.
- Localization conversations often did not begin until the assignment was under way. Less than a quarter of respondents addressed localization at the start of the assignment.
- Most organizations acted on a case-by-case basis when discussing localization. The majority of respondents indicated they began discussions based on individual circumstances, rather than having a formal discussion period.
- A common comment was that localization could be effective only if discussed at the start of the assignment. However, the data shows this was not common practice and it should therefore figure in the reform or development of localization policies.
- Companies were almost evenly split in their approach to implementing localization. The most common tactic (32.2%) was changing base salary to reflect the new location, followed by a gradual phase-out period for all assignment benefits (30.4%).
- The US proved the most popular destination for localization requests, reported by 61% of respondents, followed by the UK on 29%. Singapore and Australia came next in popularity.
- Benefits that were commonly 'cliffed' (removed with immediate effect) were home social security and pension, COLA and other allowances, repatriation benefits and home leave, all with a 50% or higher indication. Other benefits most likely to be terminated upon localization included international medical, language training, shipping and storage and household goods.
- Benefits typically phased out were housing allowance and children’s education.
- Transitional allowances for moving from assignment to localization were offered by only around a quarter of respondents. In these cases, businesses usually practised cliffed or case-by-case retraction of assignment benefits.
- Where given, the transitional allowance was most commonly used for household goods shipping and/or temporary accommodation.
- There was no clear winner among cliffed or phased approaches to localization; rather, both represented unique business benefits.
- It may be worth considering why localization took place. Typically, this was through one of two enablers – business need or employee request. Can businesses segment their localization practices around these two unique types?
- Exceptions were the rule for managing adherence to localization policies, with 41.4% of organizations indicating they applied their policy with exceptions. Less than 10% followed their policy strictly.
- Overwhelmingly, employees were expected to sign their contract in their new location. Years of service were almost universally recognized despite the migration of employment contract.
- 'Case-by-case' was the dominant tactic for establishing a phasing period.
- Localization reform was being tackled by organizations to optimize costs.
- Concerns were raised around difficulties in phasing out benefits. The most common phasing-out period was a minimum of one year, with two and three years also considered. The economic drivers behind a longer period were two-fold: an easier transition for the employee and legal compliance requirements for the company in areas such as tax.
- Transition from assignment to localization was challenged by both organizational culture and legal requirements. As an employee moved onto a local contract in their host country, the governance of their policy became increasingly murky and compliance issues were often raised.
- The most difficult country in which to localize employees was China, followed by India and the US. Russia, Brazil and Singapore tied for the fourth-most challenging location.
- The nationals found to be most resistant to localization were US citizens. Unsurprisingly, they were followed by Europeans, including from the UK, France and Germany, where benefits such as maternity leave and holiday allowance proved difficult to concede. Singapore and Australia tied for fifth.
- More than half of respondents agreed that housing allowance and children’s education were the top benefits that employees struggled to give up.
- Home pension also proved difficult for employees to concede. When segmented against the nationals who struggled with localization, it was clear that both Americans and Europeans were not keen to localize where their pension contribution might not be recognized.
- Few organizations responding to our survey believed they had a best in class localization policy. While nearly half thought they needed only to put in some work to improve, 36.5% indicated they felt substantial policy reform was required in order to be best in class.
- The role of permanent transfers cannot be downplayed. Freely given comments indicated that, rather than utilizing localization, companies tended to initiate permanent transfers from the start.
- Succession planning, or rather the lack of it, remained a key challenge in effective assignment transition, whether for repatriation or localization.
With the full report clocking in at 40 pages, the amount of data is critical for any organization looking to develop or reform their localization policy. To obtain your own copy of the report in downloadable format please contact Courtney Ellis-Jones.