Few things have changed the expatriation landscape as dramatically as local-plus Local-plus is an approach in which expatriate employees are paid according to the salary levels, structure, and administration guidelines of the host location, as well as being provided, in recognition of the employee’s foreign status, with special expatriate benefits such as transportation, housing, or the costs of dependents’ education.compensation. A survey by EY* found, for example, that 67 percent of mobility managers report "compensation packages" as the biggest area where international assignee expectations are not met, no doubt due in part to the introduction of local-plus, localizationIn delayed localization, an expatriate commences a traditional international assignment and, after a period of between three to five years, then transitions to local terms and conditions (i.e. is ‘localized’) directed by either the employer or employee. Immediate localization takes place at the onset of an assignment in the form of a permanent transfer. , and permanent transfersA permanent transfer is one in which an employee resigns from their home country office and is hired by the host country office of the same company, but for which there is no return (repatriation) to the home-country and no guarantee of company-sponsored re-assignment elsewhere. Permanent transfers are “one-way moves” directed by the company in which employees operate as a “local” in the host country..
While companies use these approaches to maximize both talent management and cost containment, the opportunity costs of doing so can be immense. One clear outcome is that the heightened competition for foreign talent has not driven assignee salaries up as one would logically expect but has actually driven salaries down.
The question, then, is whether these new compensation approaches enable organizations to achieve their long-term strategic goals regarding talent management and knowledge sharing.
What we do know, in practice, is that local-plus, localization and permanent transfers create many problems - not just for companies, but also for assignees. While these new approaches bring direct benefits to companies via cost savings, among expatriates it often results in reduced job satisfaction and commitment in relation to:
- how reductions in expatriate salary are communicated
- when changes in benefits are likely to occur
- alternatives offered to offset financial shortfalls that will impact on an assignee's responsibilities as the family breadwinner
In short, while companies save money, they also risk losing high potential global staff to competitors because fewer perks means that job movement in and out of the organization can be facilitated with greater ease. To link global mobility to talent management, companies need to simultaneously deploy compensation approaches that engage and motivate their expatriates, while being aware that some of their short-term financial ROI gains may, in the long run, be undermined by long-term strategic losses in talent.
* EY (2010). Global Mobility Effectiveness Survey. London, UK: EY