Evolving Definition of Family and Policy Tweaks to Save Costs Top Areas of Focus for Mobility Programs

June 28, 2012 /
As the competition for international talent picks up steam, companies are looking to enhance their mobility policies to attract and retain key global talent. According to KPMG’s International Executive Service’s Global Assignment Policies and Practices Survey, mobility programs are undergoing a number of subtle yet important changes.

One of the most significant long-term trends identified by the more than 577 human resource professionals who participated in the survey is the evolving definition of ‘family’ for assignment-related benefits purposes. Since the first survey in 1999, the number of mobility programs that include unmarried domestic partners of the opposite gender rose from just 24 percent in 1999 to 55 percent in 2012; the number of programs that include same-sex partners has risen from 17 percent to 49 percent in the same timeframe.

The tendency to include same-sex couples is most marked in Europe (63 percent of organizations) and Asia (60 percent), whereas 40 percent of American-headquartered companies extend their classification of family to include same-sex partnerships.

“As this trend increases, we will likely experience implications for companies offering international assignments and their global mobility managers,” says Achim Mossmann, Partner, Global Mobility Advisory Services, KPMG’s International Executive Services.

“Expanding the definition of family could help companies become more attractive for new employees and help with retention of existing staff. At the same time organizations could likely see an increase in the cost of mobility per employee as more couples become eligible, thus requiring an extension of spousal benefits such as work visa support and job search expense allowances. However, it is notable that governments do not always follow the broader definition of ‘family’ and there may be a mismatch between assignment policies and immigration regulations.”

A growing number of organizations with international assignees are looking to tweak their mobility policies and practices in order to enhance their competitive position in the marketplace. One area where significant divergence is becoming clear is in the treatment of cost-of-living allowances. While 58 percent of all companies have no limits or caps on allowances over and above normal compensation, companies headquartered in Asia Pacific are much more likely (77 percent) to have no limits, versus those in the Americas (55 percent). And while 41 percent of European companies impose negative cost-of-living allowances on their assignees, only 13 percent of Asian companies do the same.

Almost three quarters (73 percent) of companies offer tax equalization policies, meaning that their employees on international assignment pay no more or no less tax than they would have paid had they remained in their home jurisdiction. The practice is more prevalent in the Americas than in Asia Pacific or Europe. But while tax equalization policies have remained fairly common since 1999, the survey indicates significant changes in how they are being managed. For example, over the past 10 years, companies have become 50 percent more likely to expect assignees to pay any tax due on share purchases.

“The results show that companies are taking a more strategic approach to calculating their tax equalization payments to achieve greater control and certainty over costs,” says Mossmann. “At the same time, companies seem to be balancing out when it is appropriate for assignees to manage their own tax liabilities and when it is more cost-effective for the company to manage this role. Ultimately, this shows that companies are starting to take a more granular view of tax reimbursement policies in order to achieve a mutually beneficial arrangement with their assignees.”

The survey also showed a significant drop in the number of companies that develop specific emergency plans for each country in which they have assignees. Whereas in 2003, 21 percent of respondents indicated they had such a plan, only 13 percent note the same today. At the same time, less than 10 percent encourage their assignees to complete wills or document arrangements for child custody in case of emergencies while they are on assignment. There has also been a steady decline in the number of companies that have reduced the number of assignees that are sent to high-risk locations.

Not surprisingly, industries that tend to operate in higher-risk locations – such as Energy companies – demonstrate a higher likelihood to have country specific emergency plans. Energy companies are also much more likely to have contracted an external service provider to manage emergency evacuations or assistance during a crisis (51 percent versus an average of 33 percent).

“Given the rise in geo-political turmoil over the past few years and the increased prevalence of natural disasters, one would expect this practice to have dramatically increased rather than diminished,” says Mossmann. “Based on the high cost of reactive evacuation and assistance services in times of crisis, it would seem that this would be a prudent area of focus for companies with overseas assignees under their care.”

The survey further indicates that almost three quarters of respondents (72 percent) suggest that the main objective of international assignment programs is to support the organization’s business objectives and create greater adaptability to changing business requirements.

To achieve this goal and drive greater efficiency into the assignment process, many companies (48 percent) now outsource parts of their international assignment program to gain access to a service provider’s global resources and expertise.

Mossmann concludes, “As these adjustments to mobility policies and practices continue to evolve, we anticipate seeing a widening gap in the competitive positioning between regions, industries and companies.”


 

 

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