Mobility Services International Whitepaper: Short Term and Rotational Assignments What You Need to Know November

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1 Mobility Services International Whitepaper: Short Term and Rotational Assignments What You Need to Know November

2 Global Mobility: Short Term and Rotational Assignments What You Need to Know Over recent years, there has been a marked increase in companies utilizing both short term assignment programs and rotational assignments to meet their worldwide business needs. An August 2008 article, Industry Spotlight: So Many Assignment Types, which appeared in Worldwide ERC s Mobility Magazine ( sited a survey concluding that short term assignments were continuing to increase and rotational assignments were becoming a key career development vehicle. Project work has also been a factor in the rise of both short term and rotational assignments, in addition to knowledge transfer, skill shortage in the host location, new business ventures in emerging markets, leadership development, and cost containment, especially in this harsh economic climate. Indeed, few corporations have reduced the number of short term assignments in 2009, and we do not expect to see a significant change to that trend in CONTRIBUTING FACTORS TO THE INCREASE IN SHORT TERM AND ROTATIONAL ASSIGNMENTS > Cost containment > Growing need for global project work > Knowledge transfer between key employees > Host location skill shortage > New business ventures in emerging markets > Career and leadership development

3 Short Term and Rotational Assignments versus Traditional Long Term Assignments One of the major reasons leading to the upsurge in shorter assignments is obvious short term and rotational assignments are less costly than long term assignments for the corporation. Short term assignments typically last less than a year, compared with traditional long term assignments, which are usually defined as a one year to five year commitment. Rotational assignments, on the other hand, can be as brief as a couple of weeks, to a few months, but are characterized by the frequency of assignments throughout a one year period. Aside from the pure duration, another contributing factor to the cost reduction is that the majority of companies do not provide benefits for the family to accompany the assignee on a short term or rotational assignment. Thus, the cost to transport and house a single individual for a year, whether in the same location or several sites during that year, is often a fraction of the cost of moving a family for a long term assignment. While there are immediate cost savings in terms of benefits, it is important to fully understand the business rationale for creating a particular assignment to ensure that using a short term approach to meeting the goals and objectives is the correct tactic, as cost containment alone may be the wrong reason to limit the amount of time the employee is in-country to manage the job at hand. Typical Benefits: Short Term Assignments Benefits paid by the company for employees embarking on a short term assignment typically include immigration, medical examination and any subsequent immunization expenses, tax planning and preparation assistance, a small shipment of personal items (either by air or excess baggage), destination services in the form of an orientation and perhaps home finding, company-paid housing in either a hotel or serviced apartment, and a per diem for extra expenses. Expenses covered by the per diem vary greatly, but usually include food, transportation, and other incidentals. If the per diem does not include a transportation allowance, some employers will provide a vehicle, depending upon the level of the employee in the organization. Most companies are hands-off when it comes to the employee s home, recommending that the employee keep their home country property vacant if they are single; if married but unaccompanied, then the family will remain in the home during the duration of the assignment. One of the most important benefits for a short term assignee is visits home, and the interval can range from monthly to once a year, though the most typical is every three months. Most companies will allow a family visit to the host location in lieu of the assignee going home, though some corporations do not allow this swap in travel benefits. There are significant differences in the cost pattern of a short term assignment versus long term assignment, most notably because the vast majority of short term assignees go to the host location unaccompanied. Therefore, the disposition MSI s technology of the home country and property high-touch is one of customer the most expensive service benefits saved by the company. A shipment of household goods, typically an provides ocean-going me 20 with or 40 the container information will not be necessary, and security nor will long-term I need to storage be required, further reducing the overall expenses, in addition to the need ensure for smaller aspects accommodations of our in global the host location mobility because programme the family does not accompany the assignee as they would for a long term transfer. With that said, the cost for are serviced running apartments smoothly. or hotel stays can quickly add up and may even match the cost of housing a family in unfurnished quarters, so companies should be aware that housing will probably be a large portion of the total cost of a short term assignment.

4 Typical Benefits: Short Term Assignments, continued Additional benefits often provided to long term assignees include cross-cultural and language training, which are intended to assist an employee in assimilating to the host country. Unfortunately, these benefits are offered less often to short term assignees, though this can be a critical mistake as short term assignees are given, by the very virtue of the assignment, a limited amount of time to be effective. Understanding cultural differences, especially in the work environment, is critical to the success of the assignment. Another benefit not to be overlooked is an orientation to the host location so that the short term assignee can quickly acclimate and navigate through a unfamiliar city, rather than struggling to become acquainted with new surroundings. The ability of the company to keep the assignment within the fixed time frame of one year or less will have a direct impact on the total cost of the assignment, as many companies report that controlling the assignment length is one of their biggest challenges. It is our recommendation that a cost estimate be run for every short term assignment to provide a measure against which final costs can be tallied. SHORT TERM ASSIGNMENT BENEFITS Standard > Immigration > Company sponsored host location housing > Small household goods shipment > Area orientation > Tax planning and preparation assistance > Home visits > Per diem > Medical examination and immunizations Optional > Vehicle lease in the host country > Expanded destination services including home finding and settling-in > Cross-cultural training > Language training Typical Benefits: Rotational Assignments The creation and use of rotational assignments is frequently the result of a business need for expertise to travel, whether a technology company must send programmers to a client site, a consulting firm brings in a team to analyze client efficiencies, or an energy company needs employees in hardship locations. We have also seen more clients use rotational assignments for career and leadership development over the past few years and we anticipate that this trend will continue. Rotational assignments differ from short term assignments in their duration, although the common benefits for rotational assignees parallel those provided to short term assignees: immigration and tax assistance, company-paid furnished accommodations on-site, and a per diem to supplement salary. It is more common to award hardship or international assignment premiums to rotational employees as the nature of their work life is difficult, whereas we have witnessed a reduction in companies offering these premiums to short term assignees.

5 Taxation and Immigration While the need to control costs may be the paramount reason for a company deciding on a short term assignment as opposed to a long term stay, compliance from a tax and immigration perspective must be an integral part of the program. There are a number of tax issues to consider when creating a short term or rotational assignment program, including the fact that not all countries have a negotiated Totalization Agreement (which helps to avoid double taxation). In addition, time in a country may be counted continuously (a 12-month period) or within a specific tax year, and the tax yearend may differ between the home and host country. Moreover, as noted in the article Short Term Assignments: Why You Need to Run the Numbers which appeared on Global HR News website ( if the family accompanies the assignee, the employee costs may be exempt from tax, but the reimbursed family expenses may not, and for the assignee to receive certain tax concessions, it is important for the employee to prove duplicate housing costs were incurred. Immigration compliance is as important as tax compliance when building any global assignment program. It is paramount that short term assignees and frequent business travelers hold the proper immigration documents, and that a business visa may not be adequate protection for a business traveler who should hold a work permit. Managing Mobility Risk: The Importance of Compliance for Short Term Business Travelers, published in the January 2009 edition of Mobility, warned that while some companies may elect to expand their frequent business traveler programs while reducing their long term, or even short term assignments, global organizations should be aware that countries around the world are tightening their work rules as a way to shield the local population from an encroachment of foreign workers. The United States, Canada, Australia, Japan, China, Malaysia, Singapore and the United Kingdom, among other locations, may consider heavy penalties for companies that violate immigration rules. Corporations caught ignoring immigration law may find a public relations nightmare on their hands as this can be a hot-button political issue. There also can be serious consequences if business visitor rules are over-looked: the business traveler may be denied access to the country or in extreme cases, the business traveler may be jailed; some countries are scrutinizing the number of changes while in-country from a visitor s visa to a work permit holder; and in other instances, anonymous tips may be sent to immigration authorities by locals unhappy with the increase in foreign workers, resulting in investigations into the practices of the employer. Sometimes the employee is fined, but oftentimes, the company is financially penalized as well. The Human Element While it is imperative that companies embrace responsibility for tax and immigration compliance for both short term and rotational assignments, a key factor that is frequently forgotten is the human element of these assignments. According to research conducted by Dr. Anne Copeland, and published in the February 2009 issue of Mobility in the article entitled Voices from Home: The Personal and Family Side of Unaccompanied Short Term International Assignees, even though short term and rotational assignments may cost the employer less, there are other things to consider. Surveyed families acknowledged that even though spouse/partner career disruptions were avoided and children were able to stay on track in school, the stress on the family was considerable, and many of those who had undertaken a short term assignment said they would not do so again. Dr. Copeland s study revealed that the more supportive the company was in terms of allowing the employee to create the right relocation package as it related to the family s specific situation (with the number and length of visits home being a crucial part), the more successful the assignment was viewed by the assignee and the sponsoring organization. Moreover, as long as the assignee felt adequately compensated financially, since additional personal costs for communication, food, transportation, child care, and household help were incurred, the more positive the assignee viewed the outcome.

6 The Human Element, continued Dr. Copeland s research participants were asked to provide advice to those who may be considering a short term or rotational assignment, and one of the most important thoughts was that a couple should not even consider accepting the assignment unless the marriage was rock solid to begin with, as trust was fundamental. Enhanced communication via and Skype, having an emotional support system in place, and embracing the chance to be independent were other sound words of advice shared through the survey. Conclusion Corporations site the challenges in managing both short term and rotational assignments as finding the right employees to suit the assignment, maintaining compliance with immigration and tax authorities in both the home and host locations, and controlling costs. Developing appropriate policies around these two types of assignments is central in running these programs properly, and outsourcing all or part of the program functions to a relocation services company fluent in assignment management allows human resources to focus on compensation and other mission-critical areas. Remembering the personal element that families may be separated because of the assignment and creating company-supported health and welfare benefits to buttress the assignment policy, will help ensure success. Further, we suggest that human resource managers ask for feedback before, during, and after the assignment is over, to gauge the adequacy of the benefits provided in the program and reviewing the final costs. A comparison of both the qualitative and quantitative will assist you in determining the total program accomplishments. Tips for a Successful Short Term or Rotational Assignment Program 1) Create a clearly written policy. 2) Match the business need with the right type of assignment and the right employee. 3) Compute a cost estimate. 4) Ensure compliance with tax and immigration regulations. 5) Incorporate family-friendly benefits. 6) Survey assignees prior to, during and upon return to fully evaluate your program. Mobility Services International (MSI) is a leading independent provider of corporate employee relocation and international assignment management services worldwide. Providing a full spectrum of global workforce mobility solutions, MSI is recognized as the global mobility specialty firm due to its rapidly growing client base and broad base of global expertise and capabilities. Established in 1981, MSI administers a complete range of employee mobility and international assignment management services to corporations operating throughout the world. MSI s success is based on its core competencies in strategic planning, mobility finance management, applied technologies, process engineering and supply chain management. MSI offers complete policy consulting and development services for global assignments and domestic relocations. For more information, please contact Liz Portalla, Vice President of Strategic Services at liz.portalla@msimobility.com or

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