The. The Future of Expatriate Remuneration. SARA Johannesburg Kohl van Rensburg Nevan Naidoo

Transcription

1 The The Future of Expatriate Remuneration SARA Johannesburg Kohl van Rensburg Nevan Naidoo 1

2 Expat Reward : Context Africa A Great place to do business but with unique challenges

3 Africa Overview: Africa s view of the world

4 Africa : Overview 6% of the earth surface 54 20% Land Mass DIFFERENT Countries Languages >1 Billion People 15% World population

5 Africa Overview The following countries could fit within Africa: 1. China 2. United States 3. India 4. Europe 5. UK 6. Japan

6 Africa : 2040 Largest working-age population 20% of all young people in the world Labour force of 1.1 billion exceeding China and India Urbanization: 57%

7 Africa : Business Languages Arabic Amharic Spanish French Portuguese English

8 Africa Regional views Northern Africa Diverse cultural, ethnic, political, and demographic realities Historic tribal influences Muslim rich countries Northern Africa Language differences Bureaucratic and lengthy processes to obtain work permits Challenging obtaining suitable housing Closed Expat compounds

9 Africa Regional views West Africa West Africa is dominated by Nigeria s economic size French speaking countries very different OHADA system business laws legally easier ECOWAS Visa agreement Strict quota systems spouse employment can be difficult Western Africa Who you know. Nigeria Federal State regional risks - Boko Haram Stories abound of attacks on foreigners in the Niger Delta region Advises against all travel - risk of kidnapping, armed robbery Attacks on foreigners - 25% cut in Nigeria s oil production

10 Africa Regional views Eastern Africa Establishing a Trade block East Africa community Movements of people easier if locals Tourisms, parks and recently oil and gas Historic tribal influences Tanzania 60 tribes Anti gay sentiments and laws Eastern Africa No intra company transfers need to proof why Expat All have short term work passes 6 months. Government requirements to localize the workforce over time Cities designed for small populations infrastructure and traffic problems

11 Africa Regional views Central Africa Tribalism rife Mineral resources only at explorations stage Poor infrastructure roads Agriculture and massive mining potential Major rivers capable of enough hydro power for Africa HIV/AIDs Central Africa Malaria Exodus of traditional farm owners Corruption Active armed insurgency

12 Africa Regional views Southern Africa Rich in mineral resources with mining industries Agriculture, textile & tourism important. Challenges: HIV/AIDs Exodus of traditional farm owners Cultural complexities in some areas South Africa Gateway into Africa Rainbow nation One of the most complex populations in the world 11 Languages, Diverse cultures Southern Africa

13 Business Challenges in Africa 41% Unstable political environment 22% Corruption Weak 22% security 17% Poor transport & logistics infrastructure 14% Regulatory & administrative environment

14 Business Challenges in Africa Transport Infrastructure 66% SSA citizens do not have reliable access to power 33% Mobile Africa s population is malnourished IT Capacity Phones Penetration still low

15 Business Challenges in Africa

16 Business Challenges in Africa

17 Immigration : Visa application

18 Governance

19 Governance : Corruption & Ease of doing business Corruption index Ease of doing business

20 Expatriate Remuneration Present State Practice differs from one country to the next Increases above CPI Widespread talent shortages Poor succession Security concerns Reward mostly higher than local employees Allowances and Benefits are major attraction factors Currency fluctuation needs special focus Happy wife, Happy Life

21 Expatriate Remuneration Present State MEDICAL

22 Expatriate Remuneration Present State HOUSING

23 Expatriate Remuneration Present State SECURITY

24 Expatriate Remuneration Present State SCHOOLING

25 Expatriate Remuneration Present State SOCIAL

26 The future of Expatriate Remuneration

27 The future of Expatriate Remuneration Cost Management All in CTC Approach Paid in local currency (more alignment) Less Benefits Allowances

28 The future of Expatriate Remuneration Technology

29 The future of Expatriate Remuneration Technology

30 The future of Expatriate Remuneration Solving the work permit conundrum Succession Performance Management Incentives

31 The future of Expatriate Remuneration Expatriate Profile Younger talent Less expensive Shorter assignments

32 The future of Expatriate Remuneration Non negotiable benefits Transport Accommodation Health Insurance

33 The future of Expatriate Remuneration Localization Local Plus benefits Localize over time Gradually reduce certain benefits Some to remain : Health Insurance

34 The future of Expatriate Remuneration Off shore company to manage IA s Paid in USD Total Reward paid at a central point Negotiation based on net pay

35 The future of Expatriate Remuneration Centralization of Payroll Tax Management Less visibility to high expat costs Disconnect between expats and locals Use of better and more tax efficient tools

36 In Summary Cost Management Technology New Expat Profile Localisation

37 Africa : STILL A Great place to do business but with unique challenges It takes a positive mindset to succeed in Africa A commitment to seeing the glass as half full

38 Thank you

39 Interactive Session Topic 1: Off Shore Mobility Company Topic 2: Assignment Extension vs Localization Topic 3: 3 Purposes of Expat Rem Package Topic 4: Career Expats / Glopats Topic 5: Single Expats Asian model

40 Topic 1: Off Shore Mobility Company Summary: Due to the vulnerability of the global economic climate, in many countries there is rapid inflation and deflation of local currencies. Organizations raise salaries of International Assignees and this practice is making it difficult for companies to budget payroll costs. One option of circumventing this is to set up a company in a country and pay all International Assignees in a single fixed currency. Question1: Assuming you support the above view, where in the world would you set up such a company and why? Question 2: What are the pros and cons of this scenario?

41 Topic 2: Assignment Extension vs Localization Summary In many instances International Assignees remain in a country on assignment for more than 3 years. This frustrates locals as the rate of pay for an International Assignee is more than a local employee. Question 1 After what assignment period should a company consider localizing the employee? Question 2 From a remuneration perspective when localizing an employee how would you determine the rate of pay to ensure fairness and equity of remuneration practices at a local country level? Local plus? What will be included and excluded and why

42 Topic 3: 3 Purposes of Expat Rem Package Executive Summary It is becoming extremely expensive for companies to send Expatriates on assignment. Due to strategic business imperatives companies are forced to implement this strategy. Question Should expatriate pay be structured to enrich an employee whilst on assignment or should the pay be aligned to local market and awarded benefits / allowances to ensure expenses that the expatriate would not have incurred whilst based in the home country are covered?

43 Topic 4: Career Expats / Glopats Executive Summary Recent trends have revealed that Career Expats (internally mobile assignees) are becoming more prevalent. These are expatriates who do not necessarily have a home base but move from one country to the next on assignment. Trying to pay them in different local currencies and contributing to pension / provident funds in different countries is extremely complex. Cost of living is different from one country to the next and this creates its own challenges in ensuring an employee is not disadvantaged from take home perspective when moved on assignment from one country to the next. Question What is the best way to manage pay and benefits for Career Expats and why?

44 Topic 5: Single Expats Asian model Executive Summary In the Asian markets it is common for Expatriates to be sent on assignment on his/her own. Families are left behind making it cheaper to land an Expatriate. Question What will be a sustainable remuneration strategy from companies that operate outside of Asia minimize staff costs and remain competitive? How many Home leave flights will be reasonable?