Brookfield Global Relocation Services. Global Relocation Trends

Transcription

1 Brookfield Global Relocation Services Global Relocation Trends

2 2010 Brookfield Global Relocation Services. All rights reserved. This book may not be reproduced, in part or in whole; in any form, or by any means, without the expressed written consent of Brookfield Global Relocation Services. Printed in the United States of America.

3 Global Relocation Trends Brookfield Global Relocation Services, LLC Brookfield Global Relocation Services is the trusted leader for the design and management of domestic and international relocation and assignment services throughout the world. We passionately believe that our integrity, transparency, flexibility and commitment to our clients and each other enable us to deliver a cost effective Premier Service experience to everyone we serve. Our 800 employees operate from regional offices in Asia, Europe and North America to support the success of our clients and their relocating employees around the world. We have the local knowledge and worldwide presence to develop and implement global employee relocation solutions. Brookfield Global Relocation Services is an operating company of Brookfield Residential Property Services, a leading global provider of real estate and relocation services, technology, and knowledge. To find out more visit us at: brookfieldgrs.com, or us at [email protected].

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5 Contents Introduction 5 AN INDUSTRY STANDARD 5 IN THIS REPORT 5 Purpose and Methodology 6 NUMBER OF EXPATRIATES PER COMPANY 6 PARTICIPANT REPRESENTATION BY INDUSTRY 6 INTERNATIONAL RESPONSE RATES 7 Key Findings 8 THE EXPATRIATE POPULATION 8 EXPATRIATE SOURCES AND DESTINATIONS 9 ASSIGNMENT TYPES AND BENEFITS 9 GLOBAL BUSINESS STRATEGY 10 CULTURAL AND FAMILY ISSUES 11 ASSIGNMENT EVALUATION AND COMPLETION 12 COST ESTIMATES, TRACKING, AND COMPARISONS 13 OUTSOURCING 13 Table of Contents Survey Highlights 15 THE EXPATRIATE POPULATION 15 EXPATRIATE SOURCES AND DESTINATIONS 15 ASSIGNMENT TYPES AND BENEFITS 15 GLOBAL BUSINESS STRATEGY 16 CULTURAL AND FAMILY ISSUES 16 ASSIGNMENT EVALUATION AND COMPLETION 17 COST ESTIMATES, TRACKING, AND COMPARISONS 17 MEASURING RETURN ON INVESTMENT 18 COMPENSATION 18 OUTSOURCING 18 NEW AND INNOVATIVE PROGRAMS 19 Survey Findings in Detail 21

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7 AN INDUSTRY STANDARD The 2010 Global Relocation Trends Survey Report is the 15th annual report issued by Brookfield Global Relocation Services (Brookfield GRS). These reports constitute one of the industry s most reliable sources of global relocation data and trends. The longevity of this report enables us to compare each year s results with historical averages that include data from the current year and previous years; this helps readers to gauge the relative importance of annual variations. Each year, this report is used as a benchmark for policy development and it is cited in major business publications and journals that specialize in international business. IN THIS REPORT This year s survey contained 120 questions and was available online. It comprises the following characteristics: Introduction It reflects information current through the close of January It elicits details pertaining to expatriate demographics, key destinations, challenging destinations, expatriate program management structure, assignment expense management, assignment types and policy structures, localization considerations and practices, expatriate compensation management, repatriation policies, expatriate attrition rates, cross-cultural training, return on investment, assignment evaluation and failure, and the management of outsourced services. The 120 respondents represented small, medium, and large organizations with offices located throughout the world. Participating companies ranged in size from having as few as two international locations to 4,050 branch locations. Together they managed a total world-wide employee population of nearly 5.8 million. 55% of the responding companies were headquartered in the Americas; 43% were headquartered in Europe, the Middle East, and Africa; 2% were headquartered in the Asia-Pacific region. In most cases, respondents were senior human resource professionals and/or managers of international relocation programs.

8 Purpose & Methodology Expatriate Population NUMBER OF EXPATRIATES PER COMPANY The percentage of respondents who represented companies with small expatriate populations (one to 25 expatriates) continued to be low (18%) compared to previous years. The percentage of respondents with slightly larger populations (26 to 50 expatriates), however, was the largest (20%) in the history of this report. The number of companies with 501 to 1,000 expatriates also was the largest (12%) in the history of this report. Percentage of Responding Companies by Size of Total Expatriate Population / / % 29% 32% 54% 41% 36% 35% 29% 48% 27% 21% 15% 17% 18% % 16% 15% 15% 17% 14% 13% 13% 14% 13% 13% 15% 15% 20% % 18% 14% 11% 13% 15% 13% 18% 9% 9% 10% 12% 18% 14% % 26% 29% 16% 17% 22% 25% 29% 21% 31% 33% 35% 32% 26% 501-1,000 8% 8% 6% 3% 5% 5% 8% 6% 2% 7% 9% 10% 10% 12% Over 1,000 6% 3% 4% 1% 7% 8% 6% 5% 6% 13% 14% 13% 8% 10% PARTICIPANT REPRESENTATION BY INDUSTRY As in past years, respondents represented a range of industries, and an authorized list of participating companies appears at the end of this survey report. Participation by companies in the following categories was higher than in all or most previous reports: Construction, Engineering Transportation Participation by companies in only one category was lower than in all or most previous reports: Services (Publishing, Advertising, Hospitality, and Entertainment). Industry Segment Survey Participants by Industry Percentage of Firms / Information Technology * 19% 18% 20% 14% 15% 24% 17% 14% 20% 18% Machinery, Shipbuilding, Manufacturing, Aerospace 18% 19% 17% 11% 17% 8% 11% 12% 15% 12% Consumer Products, Retailing 12% 10% 9% 14% 8% 13% 13% 10% 13% 12% Finance, Insurance, Real Estate 16% 15% 14% 14% 10% 14% 11% 16% 8% 12% Energy, Utilities, Mining 8% 8% 10% 6% 8% 6% 8% 8% 7% 8% Construction, Engineering 3% 3% 4% 3% 2% 4% 5% 7% 7% 8% Services (Publishing, Advertising, Hospitality, Entertainment) 8% 10% 9% 9% 14% 10% 9% 9% 12% 7% Pharmaceuticals, Medical Devices, Healthcare 6% 1% 6% 10% 10% 9% 11% 9% 7% Transportation 3% 1% 1% 3% 2% 7% 8% 3% 7% Chemicals, Agriculture 8% 6% 8% 9% 7% 2% 5% 3% 3% 6% Other 5% 4% 6% 11% 9% 7% 5% 2% 3% 3% * The information technology category includes electronics, computers, software, e-commerce, and telecommunications

9 INTERNATIONAL RESPONSE RATES Since 1999, we asked companies to identify the location of their headquarters. In the current report: 55% were headquartered in the Americas. 43% were headquartered in Europe, the Middle East, and Africa. 2% were headquartered in the Asia-Pacific region. The following table summarizes all previous and current responses: Location of Company Headquarters Year Americas EMEA Asia Pacific % 43% 2% % 40% 1% % 48% 2% % 49% 3% % 46% /4 79% 21% % 23% % 17% % 10% % 8% - Purpose & Methodology

10 Key findings THE EXPATRIATE POPULATION Once again, concerns about the economic climate affected the size and composition of the expatriate population. Last year (2009 report), 33% of respondents predicted growth, but only 27% could demonstrate an increase in the current report. It was the second-lowest increase in the history of this report (2001 report holds the record for the lowest increase in expatriate population). In the same vein, last year only 25% expected a decrease in the population, but 46% reported a drop in the current report. Those who expected the population to remain unchanged were even less accurate with 42% predicting stability last year and only 27% currently reporting no change. The variation between the predictions of volume and what actually happened is clearly a reflection of the uncertain economy and the difficulty of coming up with a clear strategy to address both short term pressures and longer term business plans. Validating these findings, respondents adopted a cautious approach toward hiring. Only 8% of expatriates were new hires. It was the lowest percentage in the history of the report, and it compared to a historical average of 12%. It is possible that a drop in graduate recruiting contributed to the decrease. Despite the drop in expatriate population and apparent hiring freeze, respondents expressed cautious optimism about the future. Only 12% expected a decrease in the expatriate population (compared to 25% in the 2009 report); 44% expected an increase, and another 44% expected the population to remain the same. The data may reflect the variety of destinations to which expatriates were sent. Consequently, future growth and optimism may be experienced by companies that send expatriates to Brazil, Russia, India, and China (BRIC). We also recorded a retrenchment that was reflected in the age, gender, and marital status of expatriates as well as in a number of accompanied assignments. Most fundamentally, the expatriate population became older as companies selected more experienced employees for assignments. Expatriates in the 40-to-49- year group increased from 37% to 40%, and those in the 50-to-59-year group also increased from 14% to 16% during the past year. At 17%, the percentage of female expatriates in the current report was the lowest since the 2001 report, when it was 16%. In addition, the increasing age of expatriates also was linked to an increase in the percentage of married males. At 63% it was higher than at any time since the 1999 report. In yet another area, the increasing age of the expatriate population was linked to a drop in the percentage of accompanying children. Employees in the 40-to-59-year age group typically have fewer children at home and attending school than employees in the 30-to-39-year group. Consequently, the percentage of expatriates with accompanying children was the lowest in the history of this report at 47% (compared to a historical average of 56%). In a related trend, the percentage of expatriates accompanied by spouses fell to 79% the second-lowest percentage in the history of this report (the historical average was 85%). We also connect these results with other findings, particularly those around commuter assignments which are typically unaccompanied. We found that 35% of respondents indicated that they utilized commuter assignments, as opposed to 29% for 2009, and that 36% are considering using a Commuter policy as opposed to 30% in We believe that dual career and the education needs of older children impact whether or not spouses and families accompany the expatriate on assignment. Finally, it became more difficult for previously employed spouses to obtain employment during assignments. Only 9% were employed both before and during assignments, compared to a historical average of 14%. In contrast, 50% of partners were employed before (but not during) assignments, compared to a historical average of 48%. We suspect that the difficulties in finding partner employment were related to economic conditions or to the locations where expatriates were posted. Language and cultural difficulties may inhibit employment and the challenges of immigration may make potential employers unwilling to consider an expatriate spouse candidate who would need immigration support.

11 EXPATRIATE SOURCES AND DESTINATIONS The current report reflects a continuation of the globalization trend. For example, only 56% of assignments involved relocation to or from a headquarters country. This was the lowest percentage in the history of the report and it compares to a historical average of 62%. It also signals an increase in reliance upon thirdcountry nationals for assignments (transferees between locations that do not include the headquarters). Furthermore, there has been an increase in the percentage of intra-regional transfers from 22% in the 2009 report to 27% in this report. Among companies that rely on intra-regional transfers, 49% took place within Europe, the Middle East, and Africa; 26% within the Americas; and 25% within the Asia-Pacific region. The United States and China were the top expatriate destinations reversing the order of the 2009 report. The United Kingdom remained in third position. The results for emerging assignment locations, however, were surprising. While China remained in the top position, Singapore moved from fourth to second place. While India fell from second to fourth place, the United States rose to third place climbing from its nineteenth position in the 2009 report. Another unexpected change was Russia; it fell from third position in the previous report to twenty-first position. We believe that this is possibly a reflection of the continuing strains in the Russian economy. Key findings China, India, and Russia led the list of countries that were most challenging for expatriates making this the fourth consecutive report without a change in the ranking. This year, India took the top position as the most challenging destination for program managers replacing China, which had held the top position since the 2003/4 report. Russia remained in third position, which it has held since the 2006 report. To obtain more specific information about key areas of concern, for the first time we asked which countries were most challenging for housing, temporary accommodation, and immigration. For both housing and temporary accommodation, China and India were the most challenging. For immigration, Russia, the United Kingdom, India, and the United States were the most challenging. The United Kingdom, ranking in particular, is a reflection of changes to immigration law and the United States continues to mirror ongoing security concerns. As in the 2009 report, China and India topped the list of locations with the highest rates of assignment failure, and the United States was in third position (replacing the United Kingdom). ASSIGNMENT TYPES AND BENEFITS There was a slight increase in the percentage of long-term assignments, from 61% in the 2009 report to 64% in the current report. The percentage for short-term remained unchanged and for one-way assignments it actually decreased 1% from 12% to 11%. With regard to expectations about assignment length, respondents presented a more complex picture: On one hand, they expected more assignments of six months to one year 15% in the current report compared to 11% in the previous report. On the other hand, for assignments of one to three years in length, there was a decrease in expectations from 55% to 47% in the current report. At the same time, there was an increase in the number of expected three-to-four-year assignments from 13% to 18%. The shorter assignments may be less costly and less disruptive, and are sometimes easier to approve than longer assignments. However, in spite of this, it is only the expectation of an increase in short term assignments that we see so far and it remains to be seen if this translates into an actual increase. With regard to the expected increase in three-to-four-year assignments, we believe that companies are hoping to keep expatriates on existing assignments for an extra year rather than to replace them with another expatriate, which is very costly, or possibly if there are no open positions available for the expatriate upon their return. We also noted a shift in the percentage of assignments that were completed on schedule. Compared to the 2009 report, there was a 3% decrease in assignments completed on schedule from 62% to 59%. The

12 Key findings top responses to the question why some assignments required additional time to complete were a change in business needs, expansion in the project scope, and because there was no successor ready to replace the expatriate. All of these reasons speak again to the less predictable economic times that companies are facing. It is possible that assignment duration is positioned optimistically as part of the approval process but that reality intervenes later and assignments are then extended when necessary. While assignment extensions are unavoidable at times, we urge mobility managers to avoid the practice of transforming short-term assignments into long-term assignments because of the corresponding tax implications and additional expenses. Regarding policies that are currently in place, we noted increasing use of policies for localization (from 52% to 58%). We believe that this reflects the fact that localization was once only a practice and a recent increase in use of this practice has prompted companies to develop corresponding policy. The increase in local-hire policies from 37% to 38% and the increase in commuter policies from 29% to 35%, however, are certainly in line with trends we have seen developing over recent years. On the other hand, the percentage of extended business travel policies has fallen from 47% to 44%. This may signal another shift. Extended business travel was once viewed as a cheap alternative to an assignment, but it is difficult to administer in terms of taxes and immigration and carries a great deal of compliance risk if not done well. Furthermore, when we asked which policies are being considered for the future, commuter assignment policies increased from 30% in the 2009 report to 36% currently. This again is consistent with the significant increase within the industry in this type of assignment. We also noted that the practice of localizing expatriates after five or more years was at an all time high: 44%. We believe that this is a result of companies experiencing increased pressure to reduce costs and the administrative burden of assignments by shifting long-term expatriates to local status. Furthermore, we noted the following developments regarding the benefit-transition schedule: There was a reduction in the percentage of respondents that transitioned expatriates immediately to the local benefits structure from 43% in the 2009 report to 37% in the current report. At the same time, there was an increase from 7% to 11% in respondents who transitioned expatriates during a one-year period. These results can be explained by acknowledging that localization has become a more common practice in the current economic climate. However, in many cases, the lack of a transition period seriously inhibits the ability or willingness of expatriates to accept a localization. In response to expatriates reluctance to localize, companies may be providing an incentive to make the transition to local benefits by offering a structured transition to local benefits over the period of one year. GLOBAL BUSINESS STRATEGY This report documented a record high percentage (58%) of revenue generated outside of the headquarters country; the historical average was 44%. It is therefore not surprising that only 56% of expatriate assignments involved relocation to or from a headquarters country. For the first time, we asked respondents to identify where the mobility function reports within the corporate structure. There has been some excitement about closer collaboration between international mobility and talent management functions, but when we tabulated the results, only 4% indicated a reporting line to talent management. In fact, 56% of respondents reported to corporate human resources, and 31% reported to the compensation and benefits function. The lack of innovation in the traditional pattern of reporting relationships perhaps speaks to the difficulty of making the significant organizational changes that would be required in order for mobility to report to talent management. The centralization of the decision-making process has reached the highest level in the history of this report: 96% of respondents reported that relocation decisions were made globally at company headquarters. At the same time, regional decision-making fell from 7% in the 2009 report to 2% currently. This reinforces our perception that companies are exercising more top-down governance. Driven by the need to manage costs more closely in a weak economy, central human resource departments are issuing guidelines for policies and processes, and they are keeping tighter control of the relocation process than ever before. 10

13 To prepare for global expansion, companies continue to pursue centrally directed strategic practices. For example, the choice to evaluate programs to ensure that needs are met remained in the top position at 80%. It shared that spot with align global business objectives and needs, which historically held the first position most often. In both cases, companies are exercising a greater degree of governance as they evaluate and adapt policies and processes to respond to current conditions. In addition, the choice to identify a pool of potential candidates was less of a concern. It slipped from 64% in the 2008 report to 49% in the 2009 report and 45% in this report. This trend is an understandable consequence of reduced business activity and the decreasing need to have a pipeline of available candidates. When asked about their method of policy standardization, global policy standardization rose to a historical average of 69% while regional standardization fell to a historical average of 20%. Divisional standardization remained at 4%. Verbatim comments indicated that the core-flex methodology has gained in popularity. Moreover, we do not believe that regional policies have been as effective as hoped. We believe that the reason for this is related to the fact that companies often find that there is no real justification for offering a different package for intra-regional assignments to that offered for inter-regional assignments. Key findings Seventy-two percent (72%) of respondents indicated that companies were reducing expenses (versus a historical average of 63%.) Furthermore, 84% of respondents reported an increase in pressure to reduce costs compared to a year ago. Companies are finding that there are a number of ways in which to attain these reductions. So while they continue to reduce or modify policy options as their primary method, they also are scrutinizing policy exceptions more carefully and they are increasing their reliance on local hiring. Attempts to reduce vendor fees, however, have been nearly abandoned as a method of cost reduction (it fell to 2% of respondents). Respondents realize that continuous reductions in this area can jeopardize the quality of service. Instead, they are adopting a pro-active stance and are structuring their policy options and benefit packages accordingly placing heavier reliance on short-term assignments and localization. Not surprisingly, the stated objectives for embarking on an assignment have changed to reflect the new culture of cost-consciousness. While filling a skills gap and building management expertise continue to be cited as top reasons, launching new endeavors has fallen in rank for the third straight year declining to fifth place in the current report and losing its former position to technology transfer. In response to significant relocation challenges, participants once again displayed concern about costs, but appear determined to make strategic decisions that help them to manage costs, not simply reduce them across the board. For example, the leading challenge remains cost of the assignment, but it was followed by controlling policy exceptions, which had moved up to fifth position in the 2008 report and to third position in the 2009 report. We believe respondents are attempting to obtain greater value by managing both policy design and the way exceptions are managed. Furthermore, the decline in employment opportunities was reflected in the decline of finding suitable candidates to third place. CULTURAL AND FAMILY ISSUES While 80% of responding companies provided formal cross-cultural preparation, the percentage that provided it on all assignments dropped by 8% (from 35% in the 2009 report to the current 27%). More companies provided it only for some assignments (an increase from 46% in the previous report to 53% currently). Usually the decision to offer it was based on the destination country (57% of respondents). At the same time, fewer companies mandated cultural preparation only 17% in this report compared to 22% in the 2009 report and 25% on average. Since cross-cultural preparation is widely accepted to improve expatriate performance and 83% respondents believe it has good or great value, the lack of a practice that makes the benefit mandatory is disappointing. We assume that the difficulty of quantifying the benefits to be derived from this type of training continues to inhibit the way it is offered. As alternatives to face-to-face cross-cultural training, 35% of respondents provided media-based or web-based cross-cultural training an all-time high. More companies (25%) use it to supplement formal training, and its portability is cited as a chief reason (20%) along with cost (20%). Only 5% of companies provided it as the only type of training offered (a decrease from 19% in the 2006 report). When asked which family challenges were critical to companies, respondents once again cited family 11

14 Key findings adjustment, children s education, and partner resistance as the top three reasons. Similarly, when asked to rank the most commonly cited reasons for candidates turning down assignments, respondents once again cited family concerns, partner s career, and employee career aspirations as the top choices. Family concerns also topped the list of reasons for early return from an assignment (although 7% was not a high percentage). With such widespread agreement about the nature of these challenges over such a long period of time, the lack of apparent success in addressing them is puzzling and they continue to appear year after year. On one hand, it is possible that companies have not adequately addressed the career aspirations of partners, concerns about children s education, the career aspirations of employees, or concerns about family adjustment during an assignment. On the other hand, it is possible that these concerns are unavoidable in any transfer involving a two-career family with children enrolled in school. Again, the difficulty in providing a quantifiable cost benefit analysis means that justifying the cost of additional support is problematic and so is rarely pursued. If we take a closer look at how companies assist spouses or partners, once again, the top three choices were language training, educational assistance, and company-sponsored work permits. Furthermore this year, assistance with career planning moved up from sixth to fourth position. Spouses and partners feel strongly that their professional lives are valid concerns both during and after international assignments. After all, 50% of spouses were employed before such assignments. Consequently, they are demanding that companies assist them in maintaining their careers especially when economic conditions make this difficult. ASSIGNMENT EVALUATION AND COMPLETION The ranking of the top three performance review methods was nearly the same as it has been for the past four reports: performance review in the host country, performance review in the host and home locations, and performance review in the home country. In the current report, however, 18% of respondents replied that they did not know how expatriate performance was measured an increase from 6% in the 2009 report. It is possible that mobility departments realize that they are separated from the talent management process. Nonetheless, by noting this shortcoming, they at least indicate an awareness of the importance of knowing how expatriates are evaluated. It remains to be seen if this surprising lack of information will be remedied in the future. When asked about the career impact of international assignments, respondents reported that expatriates received promotions more quickly (33%), which has been the first choice historically. In equal percentages (28%), respondents indicated that expatriates more easily obtained positions in the company and changed employers more often. We wonder if these responses were based on documented records or if they represented only an impression that mobility professionals have of the career impact of assignments. The responses regarding promotion and obtaining a new position, appear to contradict the conclusions that might be inferred from the data on post assignment attrition, i.e. that 38% of expatriates leave their company within a year of repatriating and 23% leave between one and two years of repatriating. How would expatriates themselves answer this question? We believe that there may in fact be a significant difference between how mobility professionals and expatriates themselves perceive the career impact of assignments and that more integrated processes between the mobility and talent management functions might be used to gain more information in this regard. There appears to be increasing agreement that successful repatriation is an integral part of the international assignment cycle. For example, 74% of respondents now have written repatriation policies compared to 70% in the 2009 report. In addition, 92% of respondents held repatriation discussions with expatriates compared to 91% in the 2009 report and a historical average of 73%. Unfortunately, most of these discussions (38%) take place less than six months before assignment completion, and only 25% take place before departure. Moreover, only 12% of companies require a clear statement about post-assignment expatriate duties. In an uncertain economy, it may be difficult to make extended post-assignment commitments, but these discussions should be had at least for the expatriates that companies wish to retain. This is another area where a closer collaboration between the mobility and talent management functions is likely to be beneficial. At a minimum, companies should attempt to hold repatriation discussion 12 months before the end of an assignment, and they should develop the processes 12

15 and milestones, during an assignment, for opening and progressing these discussions. While 95% of companies helped repatriating employees to identify new jobs within the company, mandatory assistance was offered by transferring departments at only 31% of companies. Otherwise, employees had to rely on formal job postings (24%) or informal networking (23%). 20% of respondents cited an increase in expatriate attrition, compared to 10% in the 2009 report, and more expatriates have been leaving companies during the first year after repatriation 38% in this report compared to 35% in the 2009 report and a historical average of 22%. We believe that employees were unable to find jobs at these companies upon returning because of the weak economy and were perhaps laid off yielding the current high percentage. Historically, the highest attrition occurred more than two years after returning from an assignment (39%), but for the current report, only 22% of repatriated employees left their companies after two years. We believe that it is reasonable to assume that employees, having noted that there were fewer job opportunities outside of their companies, chose to remain with their companies in order to remain employed. Key findings COST ESTIMATES, TRACKING, AND COMPARISONS Respondents revealed an increased level of formal governance over expatriation. 75% of companies required a clear statement of assignment objectives before obtaining funding for expatriate assignments compared to a historical average of 65%. Among companies that required such statements, 11% required approval by the chief executive officer (CEO), 41% by the business unit, and 17% by corporate human resources. We believe that CEOs immediately became more involved in assignment approval during 2008 as the economy weakened. Consequently, the level of CEO approvals was higher (17%) in the 2009 report than in the current report. Now that companies have instituted stronger assignment-approval guidelines and oversight, CEOs have become less engaged in the process. Similarly, 46% of responding companies required a cost-benefit analysis to provide justification for an assignment compared to 39% in the 2009 report and a historical average of 43%. This is good news and particularly understandable, given the current economic situation. In addition, 75% of companies prepared cost estimates before initiating all assignments, and 14% did so only on certain assignments. Considering the inherently high cost of assignments, particularly the less obvious costs such as host taxation, the requirement to consider a cost estimate as part of the assignment approval should be a bare minimum and basic process to manage costs. During assignments, however, only 64% of companies actually tracked costs compared to 68% in the 2009 report and a historical average of 70%. We believe that this decline reflects two circumstances. On one hand, the number of destination countries and the complexities of managing and collecting data contribute to a decline in cost tracking. On the other hand, there may be fewer resources for tracking costs as companies reduce the size of the mobility function in an effort to cut costs. Reductions in the size of the mobility function also may explain the declining percentage of companies that compared actual with estimated costs only 33% in this report compared to 35% in the 2009 report and a historical average of 37%. We also believe that the complexity of gathering and tracking cost data is a key reason why so few companies (8%) measure their ROI for assignments. Without data, ROI cannot be calculated. OUTSOURCING When asked about the necessity of making headcount cuts within mobility departments and any associated trend towards increasing reliance on outsourcing, the responses seem to indicate stagnation on this point in that companies have had to make staff cuts but at the same time they have not been able to rely on outsourcing to bridge the gap. On the other hand, when asked about general trends towards outsourcing, responses indicate a gradual build over time towards an increased reliance on outsourcing but seem also to show that the build has slowed and has become rather flat. Companies clearly still value the benefits of outsourcing, but these benefits have become very clearly focused on outsourcing s ability to support the management or cutting of costs, i.e. identifying costs, better reporting and facilitating 13

16 Key findings headcount reductions are now the top three perceived benefits. Cutbacks in the mobility function also explain why respondents have indicated that less is being measured in other parts of this report such as the tracking of assignment costs and the comparison of actual versus estimated costs. There are simply too few people remaining to carry on these functions. As a result, perceptions about the benefits of outsourcing now focus on identifying costs, reporting, and reduced staff instead of specialized expertise. 14

17 THE EXPATRIATE POPULATION Only 27% of respondents believed the number of expatriates increased in 2009, the second lowest percentage in the history of this report; 44% expected the number to increase in % of all employees had previous international experience, and 8% of current expatriates were new hires (the lowest percentage in the history of this report). 17% of expatriates were women, the lowest percentage since the 2001 report. 48% of responding companies deployed 100 or more expatriates. Only 10% of expatriates were 20 to 29 years old; 40% of expatriates were in the year age group (a tie with the 2003/4 report for the all-time high). 70% of expatriates were married. The percentage of married men (63%) was higher than at any time since the 1999 report. Only 47% of expatriates had children accompanying them, an all-time low. Spouses/partners accompanied 79% of expatriates; the second lowest percentage in the history of this report. 50% of spouses were employed before an assignment (but not during); 4% were employed during an assignment (but not before); 9% were employed both before and during the assignment. Survey Highlights EXPATRIATE SOURCES AND DESTINATIONS 56% of expatriates were relocated to or from the headquarters country, the lowest percentage in the history of this report. 27% of transfers were intra-regional; 49% of these transfers took place within Europe, Middle East and Africa; 25% within the Asia-Pacific region; 26% within the Americas. The United States, China, and the United Kingdom were the most frequently cited top destinations. China, Singapore, the United States, and India were the primary emerging destinations. China, India, and Russia were the most challenging locations for expatriates (same as the past three reports). India, China, and Russia were the most challenging for administrators. For the first time in the history of this report, China was not in the top position. China and India were the most challenging destinations for housing and for temporary accommodation; Russia, the United Kingdom, India, and the United States were the most challenging in terms of immigration. ASSIGNMENT TYPES AND BENEFITS 64% of assignments were long term, 22% short term, and 11% one way. 21% of assignments were initially expected to be for less than 1 year in duration, 65% for 1 to 4 years, 7% for more than 4 years, and 7% permanent. 9% of assignments were completed in less time than estimated, 59% on schedule, and 32% exceeded the estimated time. More time was required because of a change in business needs (69%), expansion of the project scope (50%), and because there was no successor/replacement ready (39%). 97% of respondents had long-term assignment policies, 84% short term, 58% localization, 55% one way (permanent), 44% extended business travel, 38% local hire, 35% commuter, 25% developmental, 9% graduate, and 7% virtual-team policies. For the future, 36% of respondents were considering commuter policies, 35% localization, 28% extended business travel, 21% short term, 16% long term, 16% developmental, 15% one way (permanent), 11% local hire, 4% graduate, and 3% virtual-team policies. Factors considered in localization policies included expatriate wishes to remain in the host country (38%), a predetermined assignment length (20%), cost (19%), and no position at the home location (10%). Among companies that relied upon localization, 21% localized immediately, 35% localized in 1 to 4 years; 44% localized in a period of 5 years or more. 15

18 Survey Highlights When transitioning away from their expatriates original benefits structure to local standards, 37% transitioned immediately, 11% used a one-year transition, 9% a two-year transition, and 17% used a three-year transition. GLOBAL BUSINESS STRATEGY 58% of company revenues were generated outside the headquarters country, a record high that compares to a historical average of 44%. At 56% of responding companies, the global mobility function reports to corporate HR, at 31% to compensation and benefits, and at 4% to talent management. For 96% of respondents, relocation assignment policy decisions were made globally at headquarters (the highest percentage ever), 2% regionally, and 2% country by country. 80% of respondents reported that their companies prepared for global expansion by evaluating programs to ensure that needs are met, 80% aligned objectives and needs, 45% identified a pool of potential candidates, and 45% planned long-term career paths. In response to economic conditions, 72% of companies reduced assignment expenses, 84% reported increased pressure to reduce costs compared to a year ago. The primary areas for cost reduction were reduced policy offerings (29%), scrutiny of policy exceptions (19%), local hiring (11%), and short-term assignments (9%). The most common assignment objective was filling a managerial skills gap (22%), followed by filling a technical skills gap (21%), building management expertise (17%), technology transfer (16%), and launching new endeavors (13%). Critical relocation challenges included cost (37%), controlling policy exceptions (33%), finding suitable candidates (32%), career management (29%), retention of expatriates (27%), inability to use experience after repatriation (23%), and compliance (23%). 69% of companies use a global approach to policy standardization, 20% a regional approach, and 4% a divisional approach. CULTURAL AND FAMILY ISSUES 80% of companies provided cross-cultural preparation (53% on some assignments and 27% on all assignments). Where it was offered, 57% made it available in certain countries, 8% at employee request, and 2% by grade of employee. Only 4% limited training to employees; 38% made it available to the employee and spouse, and 55% provided training to the entire family. Cross-cultural training was mandatory at 17% of companies. 83%, however, rated it as having good or great value. 35% of respondents used media-based or web-based cross-cultural programs an all-time high. 25% considered such programs as additional support to reinforce in-person programs; 20% cited portability, 20% cost, and 15% used them as stand-alone alternatives. The most critical family challenges were family adjustment, children s education, spouse/partner resistance, and cultural adjustment. The top reasons for assignment refusal were family concerns (83%), spouse/partner s career (47%), employee career aspirations (28%), and compensation (27%). 85% of respondents supported spouses with language training, 38% provided education/training assistance, and 34% sponsored work permits. 8% of responding companies assisted expatriates with elderly family members usually (63%) by relocating them to the assignment location or supporting expatriate visits to the home country (63%). ASSIGNMENT EVALUATION AND COMPLETION To monitor assignments, 35% of respondents used host-country performance reviews and 27% used both home- and host-country reviews. Regarding the career impact of expatriate assignments, 33% believed that they led to faster promotions, 28% to finding new positions at their company more easily, and 28% to changing employers more often. 16

19 7% of assignments were incomplete because expatriates returned early; families returned early 7% of the time and left expatriates behind. Reasons for early return from assignment included family concerns (32%), a new position at the company (21%), and early completion (17%). 92% of respondents held repatriation discussions; 25% discussed repatriation before assignment departure, 29% more than 6 months before return, and 38% less than 6 months before assignment completion. 74% of companies had written repatriation policies, but only 12% required a clear statement of expatriates post-assignment duties. 95% of companies identified new jobs within the company for repatriating employees. This was accomplished through the transferring department (31%), formal job postings (24%), and informal networking (23%). Attrition for all employees was 13%, equal to the historical average. 17% of expatriates left the company during an assignment, 38% within one year of returning, 23% between the first and second year, and 22% after two years. 65% of respondents indicated no change in the assignee attrition rate since last year, 20% an increase, and 15% a decrease. To minimize expatriate turnover, 36% of respondents cited opportunities to use international experience as the best method, followed by choice of position upon return (24%), and recognition during and after an assignment (17%). Respondents indicated that 6% of assignments fail. Key factors leading to assignment failure were spouse/partner dissatisfaction (65%), inability to adapt (47%), other family concerns (40%), and poor candidate selection (39%). China, India, and the United States were cited as the locations with the highest rate of assignment failure. Survey Highlights COST ESTIMATES, TRACKING, AND COMPARISONS 75% of responding companies required a clear statement of assignment objectives before funding an assignment where approval was required (compared to a historical average of 64%), 11% required CEO approval, 41% the business unit, 17% corporate HR, 1% home-country HR, 0% host-country HR, and 4% on a case-by-case basis. 46% of companies required a cost-benefit analysis to justify relocation assignments. 75% of respondents prepared cost estimates before an assignment, and 64% tracked costs during an assignment. 33% of respondents compared estimated with actual costs. For those who compared costs, 21% reported that their estimates were accurate. MEASURING RETURN ON INVESTMENT 8% of respondents formally measured return on investment (ROI). Of those who did, the factors considered included expatriate compensation (75%), the cost of relocation support (75%), business revenue generated (75%), administration costs (63%), completion of objectives (38%), and employee management development (38%). 89% of respondents defined ROI as accomplishing assignment objectives at the expected cost. 89% of respondents rated their ROI as good or very good (none as excellent). 33% of respondents had programs to improve their ROI for expatriates. The top initiatives to improve expatriate ROI included better candidate selection and assessment (30%), career planning (26%), effective communication of assignment objectives (15%), and better preparation (8%). 17

20 Survey Highlights COMPENSATION 65% of respondents used a home-country approach to determine compensation for long-term assignments; 26% used a combination home/host-country approach. 88% of respondents used a home-country approach to determine compensation for short-term assignments; 6% used a combination home/host-country approach. To determine host-country income tax liability, 78% used a tax-equalization approach; 5% provided tax protection; 8% provided no compensation for the differential. To determine home-country income tax liability, 74% used a tax-equalization approach; 4% provided tax protection; 10% provided no compensation for the differential. 19% of respondents used a split pay to manage fluctuations in exchange rates for expatriate compensation; 42% made periodic adjustments, 11% provided exchange-rate protection, and 28% provided no compensation. When asked how often they adjusted compensation to accommodate exchange-rate fluctuations, 14% made quarterly adjustments, 16% biannually, 26% annually, 8% case by case, and 17% never during an assignment. OUTSOURCING Respondents believed that the key benefits of outsourcing were identifying assignment costs (53%), better reporting (45%), staff reduction (40%), service quality (28%), consistent policy application (23%), and cost reduction (20%). 35% of respondents currently outsource international assignment programs. 30% of respondents reported staffing cuts in assignment management departments; among them, 50% reported increased reliance on outsourcing as a result. Among all respondents, 45% increased reliance on outsourcing since last year (a new record high exceeding last year s), 48% reported the same level of reliance, and 7% decreased reliance since last year. 14% of respondents who did not outsource international assignment program administration were considering outsourcing within two years. Compliance (including taxes, social security, and immigration) was the most commonly outsourced service, followed by financial management, program administration, vendor management, and policy consulting. 41% of respondents managed multiple vendors themselves; 24% outsourced vendor management tasks; 32% used a mix of both types of management. Respondents ranked global HR experience as the chief outsourcing criterion, followed by pricing, geographic reach, and service philosophy. For 82% of respondents who outsourced all or part of their international assignment program, expectations were met or exceeded. 50% of respondents measured their supplier s performance. Among respondents that did not measure supplier performance, 42% had an internal service level agreement. NEW AND INNOVATIVE PROGRAMS We asked respondents to describe innovative programs instituted in the last year, and we received a wide range of comments. Innovative Programs Policies, Programs, and Components: a regional mobility policy was recently developed to allow for greater movement of assignees and job opportunities within intra-asian countries currently working on intra-regional assignment policy to reduce costs for certain assignments between countries which closely resemble one another introduction of a formal commuter policy local-plus (expat light) policy 18

21 mandatory cultural training, increased destination support, increase utilization of preview trips more tailored to the destination; more thoughtful planning around the purpose of the assignment and expected ROI; improved policy design to accommodate terms of assignment new global assignment policy; implementing a local-plus compensation structure; developing a center of excellence for international mobility; investing in software to assist with capturing and storing assignment data new global policy; reviewed all current procedures; introduced an exceptions policy our policy is being reviewed recently developed a scalable development policy revision of short- and long-term assignment policy; new localization policy ROI program being planned (2010) temporary transfer programs we are currently reviewing and benchmarking our current policies; we hope to have a revised international assignment policy in place in the first quarter of 2010; we hope to revise our current housing and cost-of-living allowances we are in the process of developing a new international assignment policy which will provide a global overlay but still allow for localization to respect and recognize the local market norms and practices currently just bringing in a relocation vendor to help policy and process development; very early stages of having a true GM [global mobility] program Cost-Saving Measures: Asian intra-regional associates, who were initially hired on a prior employer s comparative expatriate package, have been moved to an allowance pool with no tax assistance or other expatriate allowances; they may apply the allowance pool to taxable or non-taxable costs; the allowance pool is determined as a percentage of base salary budget constraints are focusing on elimination not implementation switching to experienced purchaser rates; putting caps on certain other allowances; requiring cultural training for the full family; cost-sharing on host-country vehicle testing minimized provisions to accommodate employee requests and business needs (on assignment and moving to minimally supported assignment) we are transferring Filipino ultrasound techs whom we employ in the U.K. to the U.S.A.; we are also hiring new ultrasound techs directly from the Philippines and moving them to the U.S.A. under H2-B seasonal peak-load visas all extensions must also be justified and a cost estimate prepared; this must be approved before an assignment is extended we have moved away from expense reimbursement for many allowances and implemented a lump-sum payment approach; this has reduced the number of exceptions for items covered under lump sum, reduced administration, and has provided flexibility to assignees in managing their spending, which has been largely welcomed by them implemented use of the Modified Efficient Producer Index for paying goods and services differential versus using the Standard Index our company did restructure the international assignment program in 2009; we changed from host-based pay to home-based pay; changed all allowances so that the overall package is less lucrative; brought most aspects of the package down to the market median Survey Highlights Procedures and Models: assignment cost sharing between assignment location and function the current approach is to keep transferees on the home-country payroll system; if there are no implications in the long-term plans, we are now evaluating the possibility of enrolling transferees in the host-country payroll as an opportunity for cost savings implemented expat management program for data and payroll process more competitive and benchmarked against other companies overhauled spouse support web site [and] the schools/child-care database talent management department will be reviewing performance of proposed long-term assignees prior to administration of assignment we are creating HR managers in all our offices and having bi-annual global HR meetings to ensure that everyone understands the group policies and knows how to work together to ensure the success of moving staff from office to office we have started to employ our expat build-up salary calculation (excluding incentive allowance) to calculate salaries for short-term project assignments rather than using daily allowances 19

22 Survey Highlights Survey Findings in Detail THE EXPATRIATE POPULATION 21 Expatriate Population Growth Rate 21 Previous Expatriate Experience and Company Employment 21 Female Expatriates 22 Age of Expatriates 22 Expatriate Marital Status 22 Accompanying Children 22 Spouse/Partner Accompaniment 23 Spouse/Partner Employment 23 EXPATRIATE SOURCES AND DESTINATIONS 24 Sources of Expatriate Population 24 Intra-Regional Transfers 24 Top Destinations 24 Emerging Destinations 25 Most Challenging Destinations for Expatriates 25 Most Challenging Destinations for Program Managers 27 Most Challenging Destinations for Housing, Temporary Accommodation, and Immigration 29 ASSIGNMENT TYPES, POLICIES, AND BENEFITS 32 Assignments by Type 32 Expected Assignment Duration 32 Timely Completion of Assignments 32 Reasons for Requiring More Time to Complete Assignments 33 Assignment Policies Currently in Place 34 Future Assignment Policies Under Consideration 35 Localization Considerations 35 Localization Transition Period 36 Benefit Transition Schedule 36 GLOBAL BUSINESS STRATEGY 37 Source of Company Revenues 37 Global Mobility Function Reporting 37 Relocation Decisions 37 Preparing for Global Expansion 38 Response to Economic Conditions 38 Ranking Assignment Objectives 39 Relocation Challenges that Are Critical to Companies 40 Standardization of Assignment Policies 40 ASSIGNMENT EVALUATION AND COMPLETION 46 Monitoring and Evaluating Assignment Success 46 Career Impact of International Experience 47 Premature Return from Assignments 47 Reasons for Early Return 48 REPATRIATION AND ATTRITION 49 Repatriation Discussions 49 Written Repatriation Policy 49 Clear Statement of Post-Assignment Duties 49 Identifying New Jobs at a Company 50 Expatriate Attrition 50 Annual Change in Attrition Rate 50 Minimizing Expatriate Turnover 51 Assignment Failure 51 Factors Leading to Assignment Failure 51 Locations with High Rates of Assignment Failure 52 COST ESTIMATING, TRACKING, AND COMPARISONS 53 Funding Requirements and Required Assignment Approvals 53 Cost-Benefit Analysis 54 Preparing and Tracking Cost Estimates 54 Comparing Estimated and Actual Costs 54 Corrective Measures Taken 54 Challenges of Estimating, Capturing, and Comparing Estimates 55 EVALUATING RETURN ON INVESTMENT 56 Measuring Return on Investment (ROI) 56 Measures Factored into ROI 56 Definition of Return on Investment 57 Rating Return on Investment 57 Initiatives to Improve Return on Investment 57 COMPENSATION 58 Long-Term Assignment Compensation 58 Short-Term Assignment Compensation 60 Host-Country Income Tax Liability 61 Home-Country Income Tax Liability 61 Managing Exchange-Rate Fluctuations for Compensation 62 Adjusting Compensation for Exchange-Rate Fluctuations 63 CROSS-CULTURAL TRAINING 41 Cross-Cultural Program Availability 41 Family Eligibility and Mandates 41 Media-Based and Web-Based Cross-Cultural Programs 42 Effectiveness of Cross-Cultural Programs for Expatriate Success 42 FAMILY-RELATED EXPATRIATE ISSUES 43 Critical Family Challenges 43 Assignment Refusal 44 Spouse/Partner Assistance 45 Assistance for Elderly Family Members 46 OUTSOURCING 63 Perception of Outsourcing Benefits 63 Current Level of Outsourcing 64 Staffing Cuts and Reliance on Outsourcing 64 Outsourcing Plans 64 Services Outsourced 65 Managing and Coordinating Outsourced Services 65 Outsourcing Criteria 66 Satisfaction with Outsourcing 66 Measuring Supplier Performance 66 Internal Service Level Agreement 67 Recovering the VAT on Supplier Disbursements 67 Method of Recovering the VAT on Supplier Disbursements 67 20

23 THE EXPATRIATE POPULATION Expatriate Population Growth Rate Only 27% of respondents reported an increase in the number of expatriates over last year, 46% cited a decrease, and 27% no change. There was a continuing decrease in assignments compared to the past two reports. The historical averages were 49%, 21%, and 30% respectively. Increased Decreased Same Expatriate Population for 2009 Compared to % 27% 27% 37% 42% 46% 0% 20% 40% 60% 80% 100% Forty-four percent (44%) of respondents expected the number of expatriates to increase during 2010, 12% expected a decrease, and 44% no change. The expected increase continued to be lower than average. The historical averages were 57%, 13%, and 30% respectively Expected Expatriate Population for 2010 Compared to 2009 Survey Findings in Detail Increased 33% 44% Decreased 12% 25% Same 44% 42% 0% 20% 40% 60% 80% 100% Previous Expatriate Experience and Company Employment When asked to indicate the percentage of employees that had previous expatriate experience, respondents indicated that 10% of their employee population had expatriate experience. The historical average was 10%. Eight percent (8%) of current expatriates were new hires (the lowest percentage in the history of this report), and 92% already were employed by the company at the time of assignment. The historical average for new-hire expatriates was 12%. Total Employee Population with Expatriate Experience Company Employment Previous Experience 10% New Hires 8% No Expatriate Experience 90% Already Employed 92% 21

24 Survey Findings in Detail Female Expatriates Respondents indicated that 17% of expatriates were female a retreat to the lowest percentage since the 2001 report. The historical average was 16%. Age of Expatriates When asked to indicate the ages of expatriates, respondents reported that 10% were 20 to 29 years old, 32% were 30 to 39 years old, 40% were 40 to 49 years old (a tie for highest in the history of this report), 16% were 50 to 59 years old, and 2% were 60 years old or more (a tie for lowest in the history of this report). The historical averages were 13%, 33%, 35%, 16%, and 3% respectively years years years Female 17% 10% Expatriates by Gender 32% 40% Male 83% Expatriates by Age Group years 60 years or more 2% 16% Expatriate Marital Status As in previous reports, most expatriates were married (70%), compared to a historical average of 66%. Furthermore, at 1%, the percentage of females with a significant other has returned to the characteristically low range that prevailed before it reached 4% in the 2004 and 2005 reports. SM 17% MSO 6% Expatriate Marital Status FSO 1% SF 6% MF 7% MM 63% MM Married male MF Married female MSO Male with significant other SM Single male FSO Female with significant other SF Single female Accompanying Children Only 47% of expatriates had children accompanying them during an assignment an all-time low in a trend that began with the 1999 report. The historical average was 56%. Accompanying Children Without Children 53% With Children 47% 22

25 Spouse/Partner Accompaniment During assignments, spouses and partners accompanied 79% of expatriates the second lowest percentage in the history of this report. The historical average was 85%. Spouse/Partner Accompaniment Without Spouse 21% Spouse/Partner Employment Fifty percent (50%) of spouses and partners were employed before (but not during) the assignment, compared to a historical average of 48%. Furthermore, 4% were employed during (but not before) the assignment, compared to a historical average of 12%. Only 9% were employed both before and during the assignment, compared to a historical average of 14%. Employment Before Assignment Only Not Employed 50% With Spouse 79% Employment During Assignment Only Employed 4% Not Employed 96% Survey Findings in Detail Employed 50% Employment Before & During Assignment Employed 9% Not Employed 91% 23

26 Survey Findings in Detail EXPATRIATE SOURCES AND DESTINATIONS Sources of Expatriate Population When asked where expatriates were sent, respondents indicated that 56% were relocated to or from a headquarters country, the lowest percentage in the history of this report (compared to a historical average of 62%); 44% were relocated to or from a non-headquarters country. Intra-Regional Transfers Where Expatriates Are Relocated To/From Non-HQ Country 44% To/From HQ Country 56% Participants were asked to cite the percentage of transfers that were intra-regional (a cross-border transfer within a geographic region of the world). They reported that 27% of transfers took place within a region, compared to 22% in the 2009 report. We also asked them to provide a breakdown of where those intra-regional transfers took place. They reported that 49% of intra-regional transfers took place within the EMEA region, 26% within the Americas, and 25% took place within the Asia-Pacific region. Intra-Regional Transfers EMEA 49% Asia Pacific 25% Americas 26% Top Destinations When asked to name the three countries that were the top international assignment destinations, respondents cited the United States (20%), followed by China (13%), and the United Kingdom (12%). The United States, China, and the United Kingdom have been among the top three destinations since the 2000 report. The United Kingdom has been cited in every report. Most Frequently Selected Locations for Expatriate Assignments (Ranked showing percent of companies identifying them; last year s rank in parentheses) United States (2) 20% Switzerland (5) 3% France (12) 1% China (1) 13% U.A. Emirates (NA) 3% Saudi Arabia (NA) 1% United Kingdom (3) 12% Australia (9) 2% Mexico (14) 1% Singapore (4) 7% Hong Kong (NA) 2% Poland (NA) 1% Germany (6) 5% Russia (10) 2% Canada (18) 1% India (11) 4% Belgium (8) 2% Brazil (17) 1% Netherlands (15) 3% Italy (NA) 1% Turkey (NA) 1% 24

27 Emerging Destinations When asked to identify the three countries that were emerging as new assignment locations, 7% of respondents ranked China as the most common new destination, followed by Singapore (6%), the United States (5%) and India (5%). With only one exception in the history of this report (when it was ranked in second place), China always has been the most commonly cited emerging destination. Emerging New Locations for International Assignments (Ranked showing percent of companies identifying them; last year s rank in parentheses) China (1) 7% Saudi Arabia (NA) 4% Netherlands (NA) 2% Singapore (4) 6% Brazil (7) 3% Turkey (NA) 2% United States (19) 5% Australia (6) 3% Hungary (NA) 2% India (2) 5% Germany (12) 3% Mexico (NA) 2% U.A. Emirates (5) 4% Qatar (NA) 3% Sweden (NA) 2% Canada (10) 4% Bahrain (NA) 2% Russia (3) 2% United Kingdom (9) 4% South Korea (21) 2% Poland (8) 2% Most Challenging Destinations for Expatriates When asked which three countries produced the greatest assignment difficulties for expatriates, China was cited by 16% of respondents, followed by India (14%), and Russia (7%) the same as in the past three reports. China and India always have been among the top seven destinations presenting the greatest assignment challenges. With one exception (when it was ranked in second place), China has always been cited as the most challenging destination for expatriates. Locations That Present the Greatest Assignment Difficulties for Expatriates (Ranked showing percent of companies identifying them; last year s rank in parentheses) Survey Findings in Detail China (1) 16% U.A. Emirates (NA) 3% Qatar (NA) 2% India (2) 14% United Kingdom (5) 3% Germany (NA) 1% Russia (3) 7% Turkey (21) 3% Italy (15) 1% Saudi Arabia (NA) 4% Singapore (8) 2% South Africa (NA) 1% United States (4) 4% Nigeria (10) 2% Venezuela (14)) 1% Brazil (6) 4% Poland (NA) 2% Afghanistan (NA) 1% Mexico (16) 3% Indonesia (NA) 2% Locations Presenting Challenges to Expatriates Afghanistan: culture and danger security situation Algeria: security concerns Argentina: local regulations Australia: distance from U.S. immigration and housing Brazil: housing and settling in home/host payments difficult, receiving driving permit difficulties around assignment out of Brazil because of income tax withholding obligations for non-residents medicine culture Chile: culture China: cultural challenges, transportation...isolated location culture, language and communication, lifestyle cost of education language problems culture, immigration formalities low purchasing power for transfers from China developing country high housing costs, tax liabilities, language distance from the U.S.cost of living remoteness, availability of services tax language and culture payroll and income tax related issues unique assignment challenges (property management, cars) complex immigration rules outside major cities, medical, language, and general support housing/cultural regulatory changes and assignee expectations tax rate on personal income 25

28 Survey Findings in Detail location, schooling PE [private equity], hardship location Dominican Republic: cultural Egypt: culture France: lack of internal administration housing Germany: language and culture taxation was unpredictable Guatemala: currency and housing Hungary: housing, education India: tax living conditions lifestyle, cultural (work and personal), family settling in cultural differences, complexity of move cultural costs, reliable DSPs [destination service providers] housing and cultural assignment policies are difficult to structure to be both attractive to an assignee and compliant with external and internal requirements cultural differences, Indian regulations availability of appropriate schooling various regulations and requirements, hardship location changes in immigration laws and sales tax collection (TDS [tax deducted at source]) visas, accommodation, transport unrealistic expectations standard new location challenges (understanding the tax system, familiarization with new processes, etc.) security, developing country constant change changing legislation and little/lack of communication cultural issues introduction of mandatory provident fund contributions security concerns, living conditions, cultural differences hardship location assignee expectations Indonesia: visas language and culture, assignee s spouse/partner integration continuing security concerns hardship Iraq: movement restrictions Iran: culture and danger Italy: bureaucracy (work permits, housing, etc.) immigration Japan: culture (work and personal for family), cost of living Jordan: hardship location, difficulties with obtaining work permits Kazakhstan: local regulations/peculiarities travel difficulties (lack of direct flights to many key locations) Kenya: power and water shortages due to security issues, the assignees are opting for an early repatriation, or ask for an increased territorial premium Mexico: G&S [goods and services] violence security, safety, medical security and housing crime Nigeria: hardship cultural challenges Pakistan: security situation Poland: immigration process significant COLA fluctuations social security, economical employer status Qatar: hardship location, difficulties with obtaining work permits isolated location immigration unaccompanied versus accompanied assignments, strain on personal relationships Russia: authorities orders work permit process, taxation economic turbulence and downsizing complex immigration, labor law, and tax rules changes bureaucracy work permit renewal issues immigration Saudi Arabia: block visa issues for work permits, acclimatizing to the culture of the Middle East housing shortages work permit and housing shortage unaccompanied versus accompanied assignments, strain on personal relationships immigration problems Singapore: reasonably priced housing no tax treaty with United States culture South Africa: standard of living and safety security concerns South Korea: tax matters Spain: tax and housing issues immigration process length Thailand: we had to place assignees on local payroll to maintain work permit for duration of assignment Turkey: accommodation fast build-up in Istanbul without a lot of infrastructure already built to support them difficulty bringing money in standard new location challenges (understanding tax system, familiarization with new processes, etc.) 26

29 Ukraine: local regulations/peculiarities United Arab Emirates: housing housing issues G&S [goods and services] accommodation hardship location United Kingdom: immigration requirements immigration related immigration restrictions taxation was unpredictable immigration United States: immigration exchange rate and culture cultural challenges, housing transition issues (tax rate, SSN [social security number], difference in benefits) taxation expectations of personalized service in a world tax, pension contribution issues being away from U.S Uzbekistan: remoteness culture and danger Venezuela: crime, government corruption invasive household goods inspections at departure, resulting in high damages immigration Vietnam: tax matters Zimbabwe: inflation... Most Challenging Destinations for Program Managers Until this report, China was always cited as the most challenging destination. In this report, India was cited by 16% of respondents, followed by China (16%), and Russia (10%). India, China, and Russia also were in the top three positions in the past three reports. China and India have been among the top six destinations that presented the greatest challenges to program managers since the 2003/4 report. Locations That Present the Greatest Assignment Difficulties for Program Managers (Ranked showing percent of companies identifying them; last year s rank in parentheses) Survey Findings in Detail India (2) 16% U.A. Emirates (NA) 3% Netherlands (NA) 2% China (1) 16% Poland (20) 3% Argentina (14) 1% Russia (3) 10% Singapore (6) 3% Mexico (18) 1% United States (8) 4% France (12) 2% Switzerland (NA) 1% Saudi Arabia (NA) 3% Turkey (NA) 2% Indonesia (NA) 1% United Kingdom (7) 3% Australia (10) 2% Italy (12) 1% Brazil (4) 3% Nigeria (15) 2% Qatar (NA) 1% Locations Presenting Challenges to Program Managers Afghanistan: culture and danger Argentina: local regulations tax Australia: visa complications immigration and housing changing immigration laws housing costs Belgium: tax complications, timing Brazil: immigration home/host payments difficult, receiving driving permit weak local structure tax management local indexation and the inflated local grading structure (in comparison to global grading) causes salary issues immigration Chile: lack of credible resources and information China: visas, cost control, exchange rate fluctuation, accommodation exchange rate issues, housing managing expectations taxation, education cost and availability lack of mobility [department] understanding locally, changes to PE [private equity] rules impacting on expat payroll, accounting for assignment costs coverage agreement cost of housing cost management pay delivery, work permits tax issues housing/immigration talent availability and language challenges payroll and income tax related issues complex immigration rules difficulty attracting needed 27

30 Survey Findings in Detail staff cost assignee expectations and localization car/driver costs Colombia: tax and contract issues Congo (DRC): no legal entity, and so [we have] issues on salary and tax Czech Republic: legal/tax compliance housing, security, safety Dominican Republic: government regulations Ecuador: second shipments (air/sea) charged a duty of over 40%... France: bureaucracy labor law adherence to plans Germany: unpredictable taxation Hungary: staffing India: tax issues, permanent establishment tax issues, social security issues tax issues cost, reliability of information, DSPs [destination service providers] tax issues high compliance requirements both internally and externally driven Indian regulations car/driver taxation changes in immigration laws and sales tax collection (TDS [tax deducted at source]) immigration trying to train the local office to look after demanding expats introduction of provident fund bureaucracy lack of mobility [department] expertise locally, little local understanding of hypothetical tax and assignment planning accessibility due to non-major-city destination, tax compliance housing and immigration immigration and tax changes in legislation compliance and costs tax issues adapting to life style in that location lengthy immigration process lack of internal partnerships assignee expectations Indonesia: visa processing hardship Iran: culture and danger Iraq: preparing competitive and attractive assignment conditions Jordan: difficulties with obtaining work permits Kazakhstan: hardship destination, local peculiarities Kenya: lack of expat infrastructure Kuwait: immigration Netherlands: tax rules when assignment [is] unexpectedly extended Dutch tax laws cost Nigeria: hardship/security security and safety issues, lack of local internal and external support Pakistan: security situation Peru: lack of credible resources and information Poland: difficulty attracting needed staff immigration process social security, economical employer Qatar: difficulties with obtaining work permits immigration Russia: work and residence permit, transparency and local HR support difficulties because of authorities orders work permit bureaucracy and changing immigration laws immigration difficulties around assignments into Russia because by law, all employees should have a local contract and should be paid locally immigration changes, compliance difficulty with quota bureaucracy complex immigration, labor law, and tax rules work permit renewal difficulties tax and visa management local regulatory requirements Saudi Arabia: always challenging regarding visa issues and changing government rules and regulations housing shortages lack of local DSP [destination service provider] support Singapore: reasonably priced housing no tax treaty, causing more expense (tax gross-ups) and tax filings South Africa: employees did not want to be assigned here due to standard of living and safety South Korea: tax matters Switzerland: taxes taxes employee expectations on housing Turkey: quick build-up with limited local build-out of expat services new location work permit process and processing time new location which we are managing remotely; understanding some local taxation basics has been a challenge 28

31 Ukraine: hardship destination, local peculiarities United Arab Emirates: housing culture, climate mainly housing issues no tax immigration United Kingdom: falling pound sterling immigration changes and need for sponsorship license immigration requirements immigration related unpredictable taxation tax laws United States: immigration and tax complexity of U.S. tax taxation legal/tax compliance Uzbekistan: culture and danger Venezuela: proactive planning for invasive customs process on departure Vietnam: tax matters Zimbabwe: inflation and salary payments Most Challenging Destinations for Housing, Temporary Accommodation, and Immigration This year for the first time, we asked participants which countries specifically were the most challenging for housing, temporary accommodation, and immigration. With respect to housing, China (18%) and India (12%) were the most challenging. For temporary accommodation, China (15%) and India (12%) again topped the list. With respect to immigration, Russia (12%), the United Kingdom (12%), India (11%), and the United States (11%) presented the most challenges. Most Challenging Locations Housing Temporary Accommodation Immigration Survey Findings in Detail China (18%) India (12%) Russia (7%) Singapore (7%) U.A. Emirates (7%) United Kingdom (6%) United States (6%) Hong Kong (4%) Brazil (3%) Saudi Arabia (3%) China (15%) India (12%) Hong Kong (7%) United Kingdom (7%) Brazil (5%) Germany (5%) Peru (5%) Saudi Arabia (5%) Turkey (5%) United States (5%) Russia (12%) United Kingdom (12%) India (11%) United States (11%) Brazil (8%) China (4%) Saudi Arabia (4%) Australia (3%) Indonesia (3%) Kazakhstan (3%) Spain (3%) Turkey (3%) 29

32 Survey Findings in Detail Challenges with Housing Australia: very expensive Brazil: due to our location in Curitiba quality versus price China: finding suitable accommodation at a reasonable cost supply and cost remote areas visa issues, negotiation with landlords high cost cost and payment methods expectations Egypt: availability and cost Hong Kong: prices are very high cost India: restricted expat housing in a number of areas security not a large selection lack of serviced apartments, expectation mismatch, high rental costs, and demands for quick closure local laws favor landlords Mexico: getting a fiscal receipt Netherlands: smaller houses than typical in the U.S. Russia: tough regulation high demand leads to inflation of prices, property owners change their mind at the last minute most locations are remote, and children have to commute to access international schools Saudi Arabia: shortage of compound housing for families Singapore: rents can change drastically in a one-month period housing near international schooling cost Sweden: in Stockholm, the rental market is aggressive, there are not a lot of rental properties Turkey: difficult finding executive accommodations United Arab Emirates: large payment up front costs United Kingdom: difficult for individuals to get their own lease, expectations, recent changes in the market United States: varied prices, customs, and areas people relocating from the U.S. cannot sell [their] homes volume and importance, house purchase allowed renting is not the norm Challenges with Temporary Accommodations Brazil: complex and lengthy remote areas Canada: Waterloo is our headquarters, and it does not offer executive housing for assignments under a year in length China: mainland China temporary accommodation [is] hardly available supply and cost shortage of desired locations high cost France: expensive Germany: lack of corporate housing in location Hong Kong: lease contract requirement cost India: not a large selection availability Jordan: not suitable for western-based expats Peru: we try to get serviced apartments, and our experience in Peru has been limited, but [we] found availability harder than many locations unreliable Saudi Arabia: restricted in some areas, especially Jubail Singapore: availability Turkey: limited choice United Kingdom: very expensive lack of corporate apartments outside London expensive United States: lack of adequate rental property 30

33 Challenges with Immigration Australia: visa complications and sponsorship of migrants changing immigration laws Belgium: lengthy process Brazil: challenges with documentation timeframe, documents to be provided, local contracts lengthy bureaucratic process China: different culture lengthy process complex formalities India: long procedures length of time to obtain correct visa frequent changes that are difficult to clarify too much paperwork and IM [immigration] intervention Indonesia: the length of time the process takes often is 3 to 4 months Italy: very time consuming application processes for non-eu assignees very lengthy and drawn out process long process, unusual documentation Lebanon: waiting times in country Netherlands: bureaucratic Philippines: long procedure Qatar: length of time often exceeds assignment length Russia: getting work permits for permanent moves work and residence permit, transparency and local HR support authorities orders work permits bureaucracy and changing immigration laws new immigration and tax rules make this complex bureaucracy Saudi Arabia: always changing the rules Spain: current economical situation lengthy, involved process Thailand: harder to get a visa and verify the need for an expatriate Turkey: notarization/translation requirements and processing time United Kingdom: strict rules particularly in regards to salary package, which doesn t entirely match [our] guidance on the issue compliance with PBS [points-based system] getting to grips with new regulations and preparing for audit by U.K. border agency United States: process due to different requirements, depending from host organization and visa type lengthy, involved process; I would say both Canada and U.S.; we have equal issues in both cultures Venezuela: bureaucracy Survey Findings in Detail 31

34 Survey Findings in Detail ASSIGNMENT TYPES, POLICIES, AND BENEFITS Assignments by Type We asked participants to provide a breakdown of their international assignments by type. Respondents indicated that 64% of assignments were long term, 22% were short term, 11% were one-way international transfers, and 3% were other types of international assignments. In the 2009 report, the percentages were 61%, 22%, 12%, and 5%. Long Term Short Term One Way Other Breakdown of International Assignment by Type 11% 3% 22% 0% 20% 40% 60% 80% 100% Expected Assignment Duration When we asked participants to indicate the initial expected duration of assignments, respondents indicated that they expected 6% of assignments to be less than six months in duration, 15% for six months to one year, 17% for one to two years, 30% for two to three years, 18% for three to four years, 7% for over four years, and 7% permanent. In the 2009 report, the percentages were 7%, 11%, 18%, 37%, 13%, 7%, and 7% respectively. 64% Expected Assignment Duration Under 6 mos. 6% 6 mos. to 1 year 1 to 2 years 15% 17% 2 to 3 years. 30% 3 to 4 years 18% Over 4 Years 7% Permanent 7% 0% 20% 40% 60% 80% 100% Timely Completion of Assignments When we asked participants about the timely completion of assignments, 59% of respondents reported that assignments were completed on time, 32% that they required more time than originally estimated, and 9% less time than originally estimated. The historical averages were 59%, 31%, and 11% respectively. Assignment Completion Less Time 9% More Time 32% On Schedule 59% 32

35 Reasons for Requiring More Time to Complete Assignments For the first time, we asked respondents why some assignments require additional time to complete. Sixty-nine percent (69%) of respondents reported that additional time was needed because of a change in business needs, 50% because of an expansion in the project scope, 39% because there was no successor ready to replace the expatriate. Change in Business Need Project Scope Expansion No Successor Expatriate Family Reasons Poor Project Planning Poor Project Execution Other Reasons for Additional Time 11% 11% 11% 11% Reasons for Requiring Additional Time for an Assignment 39% continuing business need no next job identified in time poor balance of personal needs and business need in context of assignment length project execution; not necessarily poor as in above selection project extension remain best person for the job roles for assignee in home country strong performer/leadership suitable role not identified 50% 69% Respondents provided multiple answers. Survey Findings in Detail 33

36 Survey Findings in Detail Assignment Policies Currently in Place When we asked respondents about the kind of policies they currently have in place, 97% identified long-term assignment policies (one year or more), 84% short-term assignment policies (six months to one year), 58% policies for localizing expatriates (conversion away from expatriate status to local standards), 55% one-way permanent move policies, 44% extended business travel policies (less than six months), 38% local-hire policies, 35% commuter assignments, 25% developmental assignments (a new choice this year), 9% graduate assignments (a new choice this year), 7% virtual team policies, and 13% other types of assignment policies. Long-term Assignments Short-term Assignments Localization of Expatriates One-way Permanent Moves Extended Business Travel Local Hires Commuter Developmental Graduate Virtual Teams Other Assignment Policies Currently in Place 13% 7% 9% 25% 38% 35% 44% 58% 55% 84% 97% 0% 20% 40% 60% 80% 100% Respondents provided multiple answers Assignment Policies Currently in Place country-specific [for] the United Kingdom and France dual career extended business travel for one to three months and a standard policy for assignments over three months intern policy, lump-sum, and partial lump-sum policy international hires and permanent transfers local-plus (local T&C [terms and conditions] with some added expat benefits) localplus, freelancer, project, young professional, and international professional policies long-term assignments in business divisions mid-term assignments (one to two years) regional policies regional (European and Latin [American] policies) short-term assignments are three months to one year temporary transfers trainee policy very long-term positions on government or military installations; very short-term assignments in high risk or war zones 34

37 Future Assignment Policies Under Consideration When we asked which policy types were being considered for future development or implementation, 36% identified commuter policies, 35% policies for localizing expatriates (conversion away from expatriate status to local standards), 28% extended business travel policies (less than six months), 21% short-term assignment policies (six months to one year), 16% long-term assignment policies (one year or more), 16% developmental assignments (a new choice this year), 15% one-way permanent move policies, 11% local hire policies, 4% graduate policies (a new choice this year), 3% virtual team policies, and 19% other types of assignment policies. Commuter Localization of Expatriates Extended Business Travel Short-term Assignments Long-term Assignments Developmental One-way Permanent Moves Local Hires Graduate Virtual Teams Other Assignment Policies Being Considered for the Future 15% 11% 16% 16% 4% 3% 21% 19% 28% 36% 35% 0% 20% 40% 60% 80% 100% Respondents provided multiple answers Survey Findings in Detail Assignment Types Now Under Consideration engineering project expat-light policy expat-lite intra-regional assignments local-plus local-plus policy project assignment repatriation review of international plans short-term assignments for domestic moves training policy Localization Considerations When we asked respondents who make use of localization to identify the factors that determine when it is used, 38% indicated that localization was used if the expatriate wanted to stay in the host country, 20% always used it for assignments of a predetermined length, 19% considered cost (compared to 15% in the 2009 report), and 10% localized if there was no position available at the home location. Factors That Determine Localization Expatriate wishes to stay in Host Country Always After Fixed Number of Years Cost No Position at Home Location Other 20% 19% 10% 13% 38% 0% 20% 40% 60% 80% 100% Localization Considerations if the position has been moved permanently to the host location both company and assignee choose to do so [if the] future career of employee will remain in the host country we do not use localization today [if the] assignee wants to stay; [if the] business agrees; [if the] tax situation supports localization if we need him there and he wants to stay employee career progression does the employee s career path lie in the host country [we are] just working on this policy, historically [we] always treat all moves as permanent relocation [we judge] jointly between cost and employee desire 35

38 Survey Findings in Detail Localization Transition Period Among companies that rely upon the localization process (converting expatriates to local standards), 21% localized immediately, 3% made the transition during a one-year period (the second lowest amount in the history of this report), 10% in two years, 17% in three years, 5% in four years, and 44% in five years or more (an all-time high). Immediate 1 year 2 years 3 years 4 years 5 or more years Localization Transition Period 10% 3% 17% 5% 21% 44% 0% 20% 40% 60% 80% 100% Benefit Transition Schedule Respondents were asked how quickly they transitioned away from the expatriates original benefits structure to the local benefits structure. Thirty-seven percent (37%) indicated an immediate benefit transition (to 0% of the original benefit level), 11% a one-year transition (at 50% of the original benefit level), 9% a two-year transition (80% of the original benefit level in the first year and 50% in the second year), 17% a three-year transition (80% of the original benefit level in the first year, 50% in the second year, and 20% in the third year), and 26% of respondents indicated the use of other benefit-transition schedules. The historical averages were 38%, 7%, 9%, 16%, and 30% respectively. Benefit Transition Schedule Immediate 1-year Transition 2-year Transition 3-year Transition Other 37% 11% 9% 17% 26% 0% 20% 40% 60% 80% 100% Benefit Transition Schedule Case by Case: case by case case by case based on policy and need negotiated case by case case by case unfortunately it depends who it is Phased or Timed Transition: a five to seven year transition period [in] China 67%/33%/0% over three years 100% over one year reduction after one year 100%/50%/0%...60/30 two years housing only three-year 70%/70%/60%... Exceptions and Hybrid Schedules: continue schooling and home pension if possible; otherwise from full benefits to 0%... schedule localization one year prior and pay full benefits for that year graduated housing coverage 36

39 GLOBAL BUSINESS STRATEGY Source of Company Revenues Responding companies generated 58% of revenues outside of the headquarters country. This is a record high and compares with a historical average of 44%. Location of company headquarters: 55% were headquartered in the Americas 43% were headquartered in Europe, the Middle East, and Africa 2% were headquartered in the Asia-Pacific region Source of Company Revenues Inside HQ Country 42% Global Mobility Function Reporting For the first time, we asked respondents to identify where the mobility function reports within the corporate structure. Fifty-six percent (56%) indicated that the mobility function reported to corporate human resources (HR), 31% the compensation and benefits department, and 4% talent management. Mobility Function Reporting Outside HQ Country 58% Survey Findings in Detail Talent & Management 4% Other 9% Compensation & Benefits 31% Corporate HR 56% Global Mobility Function Reporting E&P division tax shared services group regionally [the] TM [talent management] group level [reports] to comp and benefits that reports to HR ops and admin workforce services international sales and innovations both in finance and HR HR in divisions corporate HR and global business solutions (shared services) executive development and compensation Relocation Decisions For 96% of respondents, relocation assignment policy decisions were made globally at company headquarters (the highest percentage ever), 2% regionally, and 2% on a country-by-country basis. Historically, the percentages for the first two responses were 81% and 10% respectively; the last choice was a recent addition. Where Relocation Decisions are Made Globally/HQ 96% Regionally Country by Country 2% 2% 0% 20% 40% 60% 80% 100% 37

40 Survey Findings in Detail Preparing for Global Expansion When asked how companies were preparing for global expansion, the following practices were cited as the most important: evaluating policies and programs to ensure that company needs are met (80%), aligning global business objectives and needs (80%), identifying a pool of qualified potential candidates (45%), planning for long-term career paths (45%), establishing criteria for measuring assignment success (22%), requiring completion of at least one assignment as a condition of executive advancement (11%), and conducting international awareness programs (9%). The historical averages were 62%, 81%, 55%, 45%, 32%, 12%, and 30% respectively. Evaluate Programs to Ensure Needs are Met Align Objectives and Needs Identify Pool of Potential Candidates Plan Long-term Career Paths Establish Criteria for Assignment Success Require assignments for Management Advancement Conduct intercultural Awareness Programs Other How Companies Prepare for Global Expansion 11% 9% 8% 22% 45% 45% 80% 80% 0% 20% 40% 60% 80% 100% Respondents provided multiple answers Preparing for Global Expansion combining relocation and mobility to streamline services and enhance execution evaluating the function and scope of our international assignments department focusing on long-term solution to global business needs reviewing support for assignees and families rotational program for high potentials taskforce on global mobility Response to Economic Conditions Seventy-two percent (72%) of respondents indicated that their companies were reducing expenses for international assignments in response to economic conditions. The historical average was 63%. In a new question, we asked respondents if there has been pressure to reduce costs compared to a year ago. Eighty-four percent (84%) of respondents indicated that their companies have increased pressure to reduce costs, 2% reported a decrease in pressure, and 14% reported that the pressure to reduce costs has remained the same. Pressure to Reduce Costs Compared to a Year Ago Increased 84% Decreased Same 2% 14% 0% 20% 40% 60% 80% 100% At companies that reduced expenses, the primary areas for cost reduction were reduced policy offerings or amounts (29%); closer scrutiny of policy exceptions (19%), which was a new choice this year; increased reliance on local hiring (11%); and increased reliance on short-term assignments (9%). 38

41 Reduce Policy Offerings Scrutinize Policy Exceptions Reliance on Local Hiring Reliance on Short-Term Assignments Scrutinize Tax Ramifications More Care Selecting Candidates Reduce Bonuses & Incentives Vendor Fees Reliance on Assignee Localization COLA Use of Expatriates from Low-cost Locations Other Primary Areas for Cost Reductions Response to Economic Conditions 29% 19% 11% 9% 6% 5% 4% 2% 2% 1% 0% 12% Survey Findings in Detail more one-way permanent moves and localizations no new expatriates increased scrutiny of the necessity of assignments reduce the number of assignments, consider localization, general scrutiny of provisions repatriating the assignees all of the above to varying degrees looking at whether local-plus terms are more suitable effort to introduce COL/HS [cost of living/hardship] adjustments on a regular basis increased scrutiny of the need for an assignee versus a local national travel Ranking Assignment Objectives We asked respondents to rank objectives for international assignments. Filling a managerial skills gap (22%) was the top response, followed by filling a technical skills gap (21%), building international management expertise/career development (17%), technology transfer (16%), launching new endeavors (13%), transferring corporate culture (5%), and developing local business relationships (4%). Respondents ranked the top three assignment objectives in the same sequence in the 2009 report. Assignment Objectives Fill Skills Gap (Managerial) Fill Skills Gap (Technical) Build Management Expertise Technology Transfers Launch New Endeavors Transfer Corporate Culture Develop Business Relationships Other 22% 21% 17% 16% 13% 5% 4% 2% 0% 20% 40% 60% 80% 100% 39

42 Survey Findings in Detail Relocation Challenges that Are Critical to Companies When asked to rank the significance of relocation challenges that were critical to their companies, respondents identified assignment costs (37%), controlling policy exceptions (33%), finding suitable candidates (32%), career management (29%), and retention of expatriates (27%) as their top challenges. In the 2009 report, assignment costs also led the list, followed by finding suitable candidates, controlling policy exceptions, career management, and retention of expatriates. Cost of Assignment Controlling Policy Exceptions Finding Suitable Candidates Career Management Retention of Expatriates Inability to Use Experience After Repatriation Compliance Return on Investment Mobility Team Resources Spouse/Partner Dissatisfaction Lack of Mobility Technology Reluctance to Relocate Inefficient Process Ranking Critical Challenges 12% 8% 13% 13% 5% 5% 23% 23% 27% 32% 29% 33% 37% Complex Administration Program Security Concerns Concern About Children s Education Adjustment to New Environment Intercultural Understanding Inflexible Assignment Policies 5% 5% 4% 3% 2% 2% Respondents provided multiple answers Assignment Management Challenges consistency in policy application creating mobility opportunities family assimilation support globalization of assignment administration managing dual careers Standardization of Assignment Policies When asked about their method of relocation policy standardization, 69% of respondents indicated use of a global approach, 20% a regional approach, 4% a divisional approach, and 7% another approach. The ranking sequence has been the same in all previous reports, and the historical averages of the first three options were 69%, 20%, and 3%. Method of Standardization Regional 20% Other 7% Divisional 4% Global 69% 40

43 Policy Standardization we are in the process of moving [from regional standardization] toward a more global approach core/flex policy currently reviewing, but likely going to global standardization global standardization with country-specific supplement global standardization with some country modifications global with carve-outs for local needs and requirements menu driven divisional standards mix of global and some divisional CROSS-CULTURAL TRAINING Cross-Cultural Program Availability When we asked survey participants if they offered formal cross-cultural preparation for relocation/assignments, 80% of companies provided it (the historical average was 81%). Furthermore, 53% offered preparation on some assignments and 27% on all assignments (compared to historical averages of 49% and 32% respectively). At companies where cross-cultural preparation was offered, 57% made it available only for certain destination countries, 8% based on employee request, 2% based on the grade of employee, and 33% using other criteria (compared to historical averages of 58%, 11%, 4%, and 27% respectively). All Assignments 27% Cross-Cultural Program Availability None 20% Some Assignments 53% Other Criteria 33% Cross-Cultural Training Criteria Employee Request 8% Grade of Employee 2% Certain Countries 57 % Survey Findings in Detail Cross-Cultural Preparation Availability based on type of assignment that is, rotational assignees do not receive this benefit based on policy type based on business manager need duration of assignment over 12 months destination, employee need, affordability type of assignment cultural difference of host country to home country length of assignment case by case based on length of assignment based on local management perspective of need and budget constraints type of assignment and host s perspective assignee need based on duration and destination countries when projects are willing to pay business need business need assignment level at manager s discretion Family Eligibility and Mandates At companies where cross-cultural preparation was offered, 55% provided training for the entire family, 38% for expatriate and spouse, and 4% for employee alone. Historically, 42% of respondents offered this preparation to the entire family and 27% for the expatriate and spouse alone. Only 17% of respondents indicated that training was mandatory, and 83% responded that it was optional. The historical average for mandatory training was 25%. Cross-Cultural Program Eligibility Optional or Mandatory Employee & Spouse 38% Employee Only 4% Other 3% Family 55% Optional 83% Mandatory 17% 41

44 Survey Findings in Detail Family-Member Eligibility for Cross-Cultural Preparation assignee, spouse, and children over ten years old to accompanying family members age 15 and up to expat and spouse plus children on an as-needed basis Media-Based and Web-Based Cross-Cultural Programs When asked if their cross-cultural programs included media-based or web-based alternatives to face-to-face training, 35% of respondents reported that they were available an all-time high, The historical average was 26%. Of those who provided these alternatives (or were considering them), when asked about the purpose of these programs, 25% indicated that they used them as additional pre-move and post-move support to reinforce in-person crosscultural programs, 20% used them for portability (anywhere, anytime), 20% for cost reasons, and 15% as standalone alternatives to in-person programs. Historically, the averages for the first four responses were 43%, 37%, 14%, and 22% respectively. Add Support to In-person Programs Portability Cost Standalone Alternative Only Preparation Offered Easy Implementation Time Efficiency Other Use of Media-based and Web-based Alternatives 5% 5% 2% 20% 20% 15% 8% 25% 0% 20% 40% 60% 80% 100% Purpose of Web or Media-Based Cross Cultural Training additional support all of the above tool is available to all employees, not just assignees Effectiveness of Cross-Cultural Programs for Expatriate Success When asked to rate the value of cross-cultural preparation for expatriate success, 83% of respondents rated them as having great value (the highest rating in the history of this report), 16% neutral, and 1% poor or no value. The historical average for a combined good or great value rating was 81%. Value of Cross-Cultural Training Great Value 23% Good Value 60% Neutral Poor Value No Value 1% 0% 16% 42

45 FAMILY-RELATED EXPATRIATE ISSUES Critical Family Challenges When asked to rate family challenges that were critical to their companies, respondents indicated that family adjustment (15%), children s education (15%), partner resistance (15%), cultural adjustment (12%), and location difficulties (11%) were the most critical issues. These were followed by partner career (9%), inability to speak the language (8%), assignment length (8%), and support for other dependent family members (7%). Historically, family adjustment, children s education, and partner resistance were the top choices (in ranked order). Family Adjustment Children's Education Spouse/Partner Resistance Cultural Adjustment Difficult Location Spouse/Partner Career Language Assignment Length Other Dependent Family Critical Family Challenges 9% 8% 8% 7% 15% 15% 15% 12% 11% Survey Findings in Detail Critical Family Challenges Families Are Critical: as long as people are considered the main asset in the company, family plays a critical role in our program can often determine the success/completion of an assignment family challenges are critical to the success of the assignment because when the assignees are not stressed with handling family matters, they can better focus on the job they were sent to do family challenges are very important as this may highly impact the expatriation success and may result in early return/termination of the secondment family is extremely important, and we are currently working on resources to support the family family issues are very important and can affect success of the assignment family support or not support of the moves will affect the assignee s performance in the company if the family is not happy, the employee will not succeed in the assignment if the family isn t happy and adjusting, the assignment could fail for the employee if the family unit is taken care of and settled into the host location quickly and satisfactorily, the expatriate can focus on the job it continues to be our #1 challenge it is important to the company that the employee is happy and content in the host location so that they put 100% into their role; if there are unhappy family members, then the employee will be distracted it s very important that the family adjust well to the new location since a large majority of our assignments include the spouse and children most important issue to success of an assignment the family adjusting and successfully integrating is very important to the overall success of the assignment the family changes need to be taken seriously as this will have an impact on the success of the assignment the family makes or breaks the assignment, so they must be factored into the package [family needs are] the most important to deal with as these are the most likely to derail an assignment; however, they are the hardest to deal with as they are the most outside the company s control these are all critical; trying to move leadership to understand the importance and cost of failure of an assignment these have made or broken assignments in the past, so [they are] highly important they will make or break the assignment; they must be resolved we are aware that an assignee s transition time to operate effectively in the work location is shorter if the family is settled in and happy in the shortest time we are very concerned about the family challenges we are very much aware of the importance that accompanying family has on the success or failure of an expatriate assignment; we have taken steps in our policy to recognize the need to provide support for the spouse and education for the children we do not provide enough support in my opinion; however, due to cost constraints, this is likely not going to change; work is project based, and associates are paid to get work done we don t track failed assignment, but assume many are due to family challenges we take this very seriously even before the assignee agrees to accept the role; if the family is not happy, the assignment will fall apart with no value having been received for expensive outlay of money for the relocation, etc we feel the main reason why assignments fail is due to adjustment 43

46 Survey Findings in Detail problems of the family we provide assistance in these areas to help the family adjust Education and Children: education is the biggest family challenge, then cross-cultural adjustment for the spouse/ partner and children it varies by individual situation, but perhaps the greatest challenges have involved what dependent children are able to do or not do because of visa restrictions that is, seeking local employment we have some destinations with poor schooling facilities, which blocks out some of the families with children with the exception of children s education, family challenges are minimal to none Adjustment to Location and Culture: assimilation in the new country depends on the country of origin; wide variance in lifestyles between our three major countries that is, schooling, spouse careers, etc.; biggest challenge is getting HQ to understand other countries issues family s adjustment to the foreign location is a critical factor in the success of the assignment if the family cannot adjust, the assignee (and therefore the assignment) cannot be successful it is critical that the family, if accompanying the assignee, understands the limitations/environment of the new assignment this varies from country to country, but we assist as much as possible to ensure a smooth mobilization we feel the main reason why assignments fail is due to adjustment problems of the family when individuals are going to remote locations, this can be an isolating experience for the family; if the family does not settle in, it can often lead to early termination of the assignment from the individual Maintaining Family Contacts: long periods spent away from family are not sustainable, so we make sure that the expat comes home at least once a month many of our international assignment are in high danger/risk locations, and it is not a viable option for the family to relocate; many employees and their families have separation issues Spouse Employment and Other Issues: not many fail due to family issues; other factors such as poor expectation setting for assignee, are more important for us our biggest difficulty has been professional spouses attorneys and doctors who are not certified to work in host country our company offers formal support for spouses and families, and it pays particular attention to health and safety issues for relocating families the family challenges are important only to the point where it stops the employee performing; however, we rarely have a failed assignment, and our policy is generous for housing and education we have a growing need for spouse employment assistance on assignment and to revamp our cross-cultural programs to be less time commitment [heavy] working through the challenges of split families Assignment Refusal When asked to rank (in order of importance) the most common reasons cited by candidates for turning down assignments, family concerns (83%) were identified as most important, followed by partner s career (47%), employee career aspirations (28%), compensation (27%), and quality of life at the location (25%). Family concerns were historically the most commonly cited reason, followed by partner s career, employee career expectations, and quality of life at the location. Reasons for Assignment Refusal Family concerns 83% Spouse/Partner s Career 47% Career Aspirations Compensation Location Quality of Life Job Security Personal Safety 28% 27% 25% 15% 6% Inadequate Practical Support 1% Respondents provided multiple answers Assignment Refusal I am not aware that an assignment has been turned down need to encourage employees to consider assignments; not really part of our culture yet no one has turned down an assignment unknown as manager selects prior to mobility administration involvement 44

47 Spouse/Partner Assistance When asked how companies assist spouses or partners, 85% of respondents cited language training, 38% education/ training assistance, 34% company-sponsored work permits, 31% career-planning assistance, and 30% a lump-sum allowance for spousal support. Historically, language training, education/training assistance, work permit sponsorships, and identifying volunteer activities and support networks were the top four choices. (ranked in order). Language Training Education/Training Assistance Sponsor Work Permit Assist Career Planning Lump-sum Spouse Allowance Employee Assistance Program Job-finding Fees & Search Reimburse Career Enhancement Networks & Volunteering Club Membership Support Beyond First 3 Months Pay for Lost Spouse Income Other Spouse/Partner Assistance 6% 15% 20% 24% 24% 21% 8% 31% 30% 29% 34% 38% 85% Survey Findings in Detail Respondents provided multiple answers. Spouse/Partner Assistance 50% of childcare costs for the first three months if the spouse finds a job at host all assignees are provided with an allowance to recognize their diverse family needs (e.g., single, married, widowed, divorced) annual family assistance allowance annual lump sum allowance for spousal support plus CCT [cross-cultural training] created a website to provide resources to support spouse/life partners cultural training cultural training for the family, specialized school selection support when needed depends on the job of the expat (i.e., board level to the U.K. we offer a number of the above) exploring other monetary assistance now global spouses association lump sum spousal allowance most of our expats have either young children, so spousal assistance has not been an issue options above are limited to a cash maximum cap the host office will assist the family locally and culturally, where they are able, but there is no financial assistance beyond what is already included in the package trips to visit spouse in host country we provide a miscellaneous allowance that can be used for the above 45

48 Survey Findings in Detail Assistance for Elderly Family Members When asked if their policies had provisions to assist expatriates with elderly family members, 8% of respondents indicated that they had such provisions. The historical average was 10%. Among those who had elderly assistance provisions, 63% supported relocation of the elderly family member to the assignment location (historically the top choice), 63% supported visits to the elderly family member in the home country (additional home leave), 13% supported elder-care in the home country, and 13% supported elder-care in the assignment location. Historically, the top two choices have remained the same in every report. Relocate to Assignment Location Visit Member in Home Country Elder-Care in Home Country Elder-Care in Assignment Location Other Assistance for Elderly Family Members Assistance for Elderly Family Members 13% 13% 38% 63% 63% Respondents provided multiple answers if elderly dependent is recognized by home country, and immigration can be obtained in the host, and the host location accepts elderly dependents from a policy perspective, they are eligible to go on assignment lump sum family allowance paid at beginning of assignment (one-time) ASSIGNMENT EVALUATION AND COMPLETION Monitoring and Evaluating Assignment Success Host-country performance reviews were cited most frequently (35%) by respondents as the best way to evaluate assignment success. This was followed by reviews in both host and home countries (27%) and home-country performance reviews (10%). Historically, host-country performance reviews have topped this listing, followed by homecountry reviews, and then by reviews in both home and host countries. Monitoring and Evaluating Assignment Success Performance Review in Host Country Performance Review in Host/Home Country Performance Review in Home Country Regular Manager Visits to Host Office Regular Expatriate Visits to Home Office 2% 2% 10% 27% 35% Don't Know 18% Other 6% 0% 10% 20% 30% 40% 50% Respondents provided multiple answers. 46

49 Evaluating Assignment Performance case by case annual salary performance review not reviewed at a corporate level yearly reviews by employee s manager surveys multiple methods listed above annual talent review process Career Impact of International Experience When asked about the value of international experience to an employee s career, 33% responded that they were promoted faster, 28% believed expatriates obtained positions in the company more easily, and 28% that they changed employers more often. Historically, the ranking sequence has been faster promotion, obtaining new positions in a company, and changing employers more often. Faster Promotion Easily Obtain New Position in Company Change Employer More Often Other Impact on Expatriate's Career 11% 28% 28% 33% 0% 20% 40% 60% 80% 100% Survey Findings in Detail Impact of Assignments on Expatriate Careers we do not have insight as to the career path of repats better qualifications for a global company the experience is great, but upon repatriation, there are not a lot of jobs to come back to more likely to take up further international employment unsure no difference a high percentage of senior management have international experience contributes to all of the above, but not the catalyst no difference unknown and not measured Premature Return from Assignments Respondents indicated that 7% of assignments were not completed because expatriates returned prematurely (the same as in the 2009 report). Furthermore, family members returned prematurely to the home country and left the expatriate employee behind at the assignment location in 7% of assignments (the same as in the 2009 report). The historical average for early return of expatriates was 7% and was 7% for early return of family members. Premature Return from Assignments Early Return of Expatriate 7% Early Return of Family 7% 0% 20% 40% 60% 80% 100% Family-Related Reasons for Early Return Children s Education: back to the home country schooling system for teenage children children s school or issues children education completion of a school term/semester and application in the other country for school places coordination with school year due to schooling for children; school year education considerations or 47

50 Survey Findings in Detail divorce education difficulty and settling the children education for the children; spouse unhappy education of children educational concerns end/start (new) school year if schools in home country start earlier lack of suitable education according to the age of the children school school school enrollment school registration school transitioning school year school year concerns school schooling schooling concerns schooling for children secondary schooling start of school year start of the new school year in new location they normally begin at the school year start; employee still remains (for example) until year end timing of school schedules/breaks timing on schooling timing with school starts to fit with home country school start to settle children back into home school system, typically if at crucial high school age or close to university entrance age to start the new school year usually to do with the children s education, but the company usually facilitates so that the employee assignment ends so the whole family can return together Location Issues: cultural adjustment cultural adjustment challenges family adaptations hardship location lack of adjustment to the international location safety; children unable to adjust to schools Repatriation Preparation: preparing for end of assignment and return to home country get prepared for the return and sometimes depends on children s schooling or get settled prior to expatriate returning home Family Issues: elder parent issues; often the real reason is the family s inability to adjust and assimilate to the new location and to being an expat extended family issues family adjustment or family illness that is, aging parents breakup in the marriage often schooling for children or the spouse needs to return home to look after elderly parents issues with family separation family need at home; illness Other Issues: spouse career opportunity miss family and friends to take up spouse job opportunity etc Reasons for Early Return When we asked participants to cite the principal reasons for early returns from assignments, family concerns (32%) topped the list, followed by transfer to a new position within the company (21%), early completion of the assignment (17%), cultural adjustment challenges (8%), career concerns (4%), and security concerns (1%). Historically, the ranking sequence for the top three reasons has been the same since we first asked this question. Reason for Early Return Family Concerns 32% Accept a New Position in Company Complete Assignment Early Cultural Ajustment Challenges Career Concerns Security Concerns Other 21% 17% 8% 4% 1% 17% Other Reasons for Early Return poor selection decision; person not able to perform client demands change business concern about cost reason for early return may be due to another position costs not applicable at this time job performance cost focus; management cancels assignment sold the subsidiary the employee was working [for] various reasons performance or change in business needs business change 48

51 REPATRIATION AND ATTRITION Repatriation Discussions Most respondents (92%) held repatriation/re-entry discussions with expatriates compared to 90% in the 2009 report and a historical average of 73%. Among respondents who discussed repatriation with employees, 25% discussed it before relocation, 29% did so at least six months before return, and 38% discussed it less than six months before assignment completion. The historical averages were 40%, 35%, and 43% respectively. Before Departure 6 months or More Before Return Under 6 Months Before Return Repatriation/Re-Entry Discussion Discuss 92% Do Not Discuss 8% When Repatriation Is Addressed 25% 29% 38% Survey Findings in Detail Do Not Discuss 8% 0% 20% 40% 60% 80% 100% Written Repatriation Policy We asked participants if their companies had a written policy for repatriation. Seventy-four percent (74%) responded that they did, compared to 70% in the 2009 report. Written Repatriation Policy No 26% Yes 74% Clear Statement of Post-Assignment Duties We asked participants if their companies required a clear statement about what the expatriate would do following an assignment. Only 12% responded that they did (compared to 11% in the 2009 report). Clear Statement of Post-Assignment Duties Yes 12% No 88% 49

52 Survey Findings in Detail Identifying New Jobs at a Company When we asked if companies helped repatriating employees by identifying new jobs within the company, 95% responded that they did (compared to 98% in the 2009 report and an 83% historical average). At companies that identified these new jobs, 31% required the department that authorized the assignment to identify a job, 24% used formal job postings, and 23% relied on informal networking (compared to 22%, 20%, and 28% in the 2009 report). Transferring Department Formal Job Postings Informal Networking Do Not Assist Other How Companies Identify Jobs 5% 17% 24% 23% 31% 0% 20% 40% 60% 80% 100% Expatriate Attrition The average annual turnover for all employees was 13% the same as the historical average. As for expatriate attrition, respondents reported that 17% of expatriates left the company during an assignment, 38% within one year of returning from an assignment, 23% between the first and second year, and 22% after two years. The historical averages were 15%, 22%, 19%, and 39% respectively. When Expatriates Leave the Company During Assignment 17% Within 1 yr. of Return 38% Between 1 and 2 yrs. of Return 23% Over 2 yrs. 22% 0% 20% 40% 60% 80% 100% Reasons for Expatriate Attrition career and talent management (before, during, and after) is the single most important factor in retaining employees after the assignment Annual Change in Attrition Rate When asked if the expatriate attrition rate had changed since last year, 65% reported no change, 20% an increase, and 15% a decrease. In the 2009 report, the figures were 75%, 10%, and 15% respectively (historically, they were 73%, 15%, and 12%. Changing Attrition Rate Increased 20% Decreased 15% Same 65% 50

53 Minimizing Expatriate Turnover When asked to rate the effectiveness of ways to reduce expatriate turnover in order of high, medium, or low effectiveness 36% of respondents selected greater opportunity to use international experience as the most effective method, followed by more choices of position upon return from an assignment (24%), greater recognition during/after an assignment (17%), repatriation career support for expatriates (10%), and improved performance evaluation (7%). Historically, the top four choices were opportunity to use international experience, choice of positions upon return, greater recognition during/after an assignment, and repatriation career support. Opportunity to Use Experience Position Choices Upon Return Recognition Repatriation Career Support Improve Performance Evaluation Family Repatriation Support Respond to Security Issues Other Methods of Reducing Expatriate Turnover 10% 1% 3% 2% 17% 7% 24% 36% Assignment Failure We asked participants to report the percentage of failed assignments. According to respondents, 6% of assignments fail, compared to 4% last year. Survey Findings in Detail Assignment Failure Falure 6% Success 94% Factors Leading to Assignment Failure When asked which factors were often or sometimes responsible for assignment failure, respondents cited spouse/ partner dissatisfaction (65%), inability to adapt (47%), other family concerns (40%), poor candidate selection (39%), poor job performance (36%), and job does not meet expectations (25%) most often. Historically, spouse dissatisfaction has always been the most frequently cited factor, followed by other family concerns and inability to adapt. Causes of Assignment Failure Spouse/Partner Dissatisfaction Inability to Adapt Other Family Concerns Poor Candidate Selection Poor Job Performance Job Does Not Meet Expectations Poor Management of Assignee Quality of Life Security and Safety Remuneration Dissatisfaction 65% 47% 40% 39% 36% 25% 18% 9% 8% 7% Respondents provided multiple answers. 51

54 Survey Findings in Detail Locations with High Rates of Assignment Failure When asked which three locations had the highest rate of assignment failure, China was first, identified by 12% of respondents, followed by India (10%), and the United States (8%). Since the 2005 report, China and the United States have always been among the four locations most commonly cited, and China has always topped the list. It is important to remember, however, that a high rate of failure is naturally associated with popular business locations that also have large expatriate populations (refer to the Top Destinations section). Locations with the Highest Rates of Assignment Failure (Ranked showing percent of companies identifying them; last year s rank in parentheses) China (1) 12% Russia (5) 5% Australia (4) 3% India (2) 10% Singapore (6) 5% Netherlands (NA) 3% United States (4) 8% Germany (8) 4% Switzerland (10) 3% Saudi Arabia (NA) 7% Italy (15) 4% U.A. Emirates (NA) 3% United Kingdom (3) 7% Afghanistan (NA) 4% Iraq (NA) 2% Locations with High Rates of Assignment Failure Afghanistan: culture and danger... Australia: assumptions that it would not be so different and that cultural training was not required family issues Brazil: congested driving in Sao Paulo area; security issues China: management focus on costs; cancelled many assignments cultural adjustment challenges; family issues resignations language and high expense to live in major cities such as Shanghai Equatorial Guinea: hardship location France: culture India: mostly accommodation issues; location too busy; security family cultural difference and living conditions very different cultural experience from most other assignment locations cultural issues usually early completion or no extension into a longer term assignment hardship Indonesia: cultural differences Iraq: culture and danger security issues Italy: we have not succeeded with our U.S. assignees in Italy, mainly due to the localization, but also cultural deficiencies, language difficulties, etc. Jordan: poor candidate selection, hardship of country (poor sanitation), poor management of project, inconsistencies between assignees in what packages [are] given Mexico: family not able to settle crime Russia: difficulty of location Saudi Arabia: cultural shock difficult culture to bring family due to restrictions (no drinking) Singapore: culture really not the image they present volatile region Switzerland: culture Taiwan: cultural issues United Arab Emirates: climate, culture poor assignee performance culture and danger United Kingdom: difficulty adjusting family issues culture United States: expat compensation family reasons school system job performance Zambia: unrealistic expectations from the GM [global mobility] 52

55 COST ESTIMATING, TRACKING, AND COMPARISONS Funding Requirements and Required Assignment Approvals Seventy-five percent (75%) of respondents indicated that their companies required a clear statement of assignment objectives before obtaining funding for an international assignment. The historical average was 64%. Required 75% Statement of Assignment Objectives Not Required 25% We asked whose approval was required if a statement of objectives was necessary before receiving funding for international assignments. At companies with an approval requirement, 41% of respondents required approval by the business unit, 17% by corporate human resources (or the mobility department), 11% by the CEO, 4% on a case-by-case basis, 1% by home-country human resources, and 0% by host-country human resources. In the 2009 report, the results were 49%, 17%, 17%, 11%, 3%, and 3%. Required Approvals Survey Findings in Detail Business Unit 41% Corporate HR 17% CEO Case-by-case Home HR Host HR 11% 4% 1% 0% Other 26% Required Approval for an Assignment CEO or business unit manager and corporate HR divisional VP or VP of HR business unit, host HR, and mobility senior VP multiple approval (business unit, finance, HR) HR executive or CEO business unit head and corporate HR committee business unit, which includes HR/finance manager manager home HR, home CEO, and host CEO SVP of HR and business unit leader business unit, home and host HR, mobility HR business group director division head and HR leadership board of management, host business unit manager unit manager and vice president SVP home HR, and host HR all of the above except CEO, [which is] only for exec transfers home partner/leader and host partner/ leader, host HR VP level by region, function, or country business HR or head of business function 53

56 Survey Findings in Detail Cost-Benefit Analysis Forty-six percent (46%) of companies required a cost-benefit analysis to provide a business justification for the relocation/assignment (compared to 39% in the 2009 report). The historical average was 43%. Not Required 54% Preparing and Tracking Cost Estimates We asked respondents if they prepared cost estimates before initiating international relocation assignments. Seventyfive percent (75%) of respondents indicated that they did, 14% did for certain assignment types only (a new choice for this survey), and 11% did not. In addition, 64% indicated that they tracked costs during an assignment (compared to a historical average of 70%). Preparation of Cost Estimates Certain Assignments 14% No 11% Cost-Benefit Analysis Yes 75% No 36% Required 46% Cost Tracking During an Assignment Yes 64% Comparing Estimated and Actual Costs When asked if they compared estimated with actual costs, 33% of respondents indicated that they did (compared to a historical average of 37%). For respondents who compared estimated with actual costs, 21% reported that their estimates were accurate (identified as same in the chart), 47% that they were higher, and 32% that they were lower. The historical averages were 36%, 32%, and 32% respectively. Compare Estimated and Actual Costs Accuracy of Estimates No 67% Yes 33% Lower 32% Higher 47% Corrective Measures Taken When asked to describe the corrective measures taken to adjust the assignment budget or control costs when actual costs varied from estimated costs, respondents provided the following answers: Same 21% Corrective Measures Related to the Budget Make Adjustments and Revise Estimates: adjust accruals adjust budget adjust the estimate as the move progresses through periodic reporting analyze the differences and make adjustments in the next estimate can review remuneration annually handled as an exception improving the accuracy of the cost estimate data inform the finance department of the revised amount none at the moment although going forward [we] will provide quarterly true-up/ comparison and provide it to the business units notify the division of the cost increase so that they can adjust their 54

57 budget for the increase obtain revised cost estimate for the duration of the assignment and modify accruals review the budget and notify the parties bearing the cost they are lower due to cutting out benefits to get the assignment approved, but later they are added back!...try to have taxes estimated more accurately we adjust the assignment budget Accept Cost Increases: generally the costs rise for those who are more senior as they are allowed to add elements (support, etc.) to their assignments without being brought into line Evaluate the Case: case by case review of the particular circumstances to determine if any adjustment is warranted, but most generally, given the relatively small number of assignments, if it is to the employee s benefit to maintain the expense as is, we ll do that for the term of the assignment agreement Challenges of Estimating, Capturing, and Comparing Estimates When asked to describe the most challenging aspects of estimating, capturing, and comparing expenses, respondents indicated the following challenges (although many of the observations overlapped): lack of consistent systems, processes, and tools for capturing, estimating, and comparing data; accuracy of the information; and fluctuating currencies and unexpected changes. Challenges of Estimating, Capturing, and Comparison Systems, Processes, and Tools: [having] accurate tools, [adequate] time, and information available to determine the original estimate accumulating and reporting data from various vendors assimilating the data from multiple vendors currency fluctuations; poor tracking tools estimates are based on preliminary assumptions; expenses are not centralized estimating tax costs and deciding which assumptions to use; we have limited access to tax software and only prepare basic calculations [for] estimating, [it is] individual circumstances; [for] capturing, [it is] exchange rate fluctuations and tax costs currency, foreign HR responsible for collecting costs, but are not reported to headquarters done in each country, not on a global level everything [is challenging]; no solid process to ensure that all costs are being tracked centrally exceptions global understanding of what data corporate HR requires in order to achieve this; company costs and related taxes incurred during different tax years having reliable data to base the initial estimates on and then having sufficient knowledge of the local market to project cost increases over the expected period of the assignment having the decision makers understand that the cost projection is an estimate, not a budget host country cooperation and tracking getting travel, business expenses communicated to global center manual nature, multiple sources obtaining local housing, schools, transportation, and other necessary local expenses obtaining the data to do this tax cost estimations, tax costs, tax gross-ups, local costs tax implications the estimate is based on estimated figures versus the actual figures; therefore it is difficult to create an analysis or explanation that compares why the two figures don t match; they are just different; lack of a centralized repository to capture all of the actual expenses (for every assignee, in every location) to compare against the estimate is also a challenge this is difficult due to taxes paid long after the assignment is over, and those paid through various payrolls around the world too many places where costs are registered (no global tracking system); therefore estimates are only indications tool to calculate costing and actual cost data tracking all actual costs tracking data in multiple systems time consuming; difficulty in comparing like with like we ve had issues with overseas offices changing their policy without agreement from us, which has impacted costs and expenses when business units try to either reduce or increase benefits on a case-by-case basis, which creates inequity Accuracy of Information: accuracy of captured data, currency fluctuations, capturing all costs, estimating the tax impact actual costs and tax estimates impact of exchange rate variations capturing actual expenses reimbursed by category for some types of expenses can be a challenge globally due to country differences in payment methods for example, schooling; also, getting accurate tax equalization estimates as different variables will provide varying outcome, and the mobility reps are not taxation experts identifying, and reporting actual assignment related costs currency fluctuations and what will be needed locally currency fluctuations, actual costs, tracking expenses fiscal cost gathering accurate data globally and tax implications/ treatments of payments, etc household goods moves for the same family size can vary considerably; even the same load if shipping versus storing can result in a large variance; temporary living costs are dependent on shipping times that are not firm at the onset, especially with customs clearances taking longer inflation making sure tax is correct gathering estimated costs up front the number of data points given the number of variables family size, home, host, etc.unable to quantify exact costs, such as local housing tax complexities; capturing all costs whether home or host borne visibility to all expenses, currency fluctuations, determining actual costs Survey Findings in Detail 55

58 Survey Findings in Detail Fluctuating Currency and Changes: currency fluctuations in Brazil and Russia; changing legislation of concern to economic employer status currency fluctuations, changes in tax, and immigration requirements different reports are not fed into one system actual costs as compared to budget definitive local knowledge inflation currency fluctuations, tax estimations currency fluctuations currency fluctuations; difficult to capture all the actual costs as some are paid from home country and some paid in host country leadership makes changes after agreement is reached timing of expenses with tax impact, exceptions after the fact, changes to budgets due to the availability of housing, tax impact of exercise of stock options unexpected cost such as out-of-scope tax service for personal income, unexpected immigration service, etc variance of benefits and managing costs an assignment always has a unique element to it that is not captured in the cost projection; also, taxes indicated are those relative to each year; however, they may be paid in different years capturing costs, basing estimates on current data only to have it change significantly over the course of the assignment constantly changing costs EVALUATING RETURN ON INVESTMENT Measuring Return on Investment (ROI) When we asked if companies formally measured ROI for relocation/assignments, only 8% responded that they did. The historical average was 9%. Measures Factored into ROI Do Companies Measure ROI? Yes 8% No 92% For respondents whose companies measured ROI, we asked which factors were included in their ROI calculations. Seventy-five percent (75%) of respondents included expatriate compensation packages, 75% the cost of relocation support, 75% business revenue generated, 63% administration cost, 38% completion of assignment objectives, 38% employee management development, and 25% the cost of possible retention during/after assignment. In the past, responses were displayed only as verbatim comments. Measures Factored into Return on Investment Expatriate Compensation Package Cost of Relocation Support Business Revenue Generated 75% 75% 75% Administration Cost 63% Completion of Objectives Employee Management Development 38% 38% Cost of Retention During/After Assignment 25% Other 13% Respondents provided multiple answers 56

59 Definition of Return on Investment When we asked those respondents who measured ROI if they defined it as accomplishing the assignment objectives at the expected cost, 89% agreed. In the 2009 report, 64% agreed on this definition. The historical average was 67%. Rating Return on Investment When asked to rate their companies expatriate assignments in terms of ROI, 89% rated it as good or very good, and 11% rated it as fair. None rated it as poor or excellent this year. The historical average for good, very good, or excellent was 83%. Excellent Very Good Good Fair Defining ROI in Terms of Objectives and Costs No 11% Rating the Company s ROI 0% 11% 22% 67% Yes 89% Survey Findings in Detail Poor 0% 0% 20% 40% 60% 80% 100% Initiatives to Improve Return on Investment When asked if respondents had specific programs to improve their ROI for expatriates, 33% indicated that they did. The historical average was 38%. Programs to Improve ROI No 67% Yes 33% When asked to identify major initiatives used to improve ROI for expatriates, the most frequently cited initiatives were better candidate selection/assessment (30%), career-path planning to utilize cross-border skills upon return (26%), more effective communication of assignment objectives (15%), and better assignment preparation (8%). Historically, the top five objectives were better candidate selection/assessment, communication of objectives, career planning, better assignment preparation, and mandatory cross-cultural training. 57

60 Survey Findings in Detail Candidate Selection/Assesment Career Planning Communication of Objectives Better Preparation Recognition/Communication During Assignment Mandating Cross-cultural Training Mentoring Mandating Destination Services Company Intranet Web Cross-cultural ROI Improvement Programs Currently in Place Initiatives to Improve ROI 15% 8% 7% 5% 3% 3% 2% 1% 26% 30% bid preparation is most important and uses many different approaches for example, the Shipley process and our inhouse programs we have reviewed our policies and processes, come up with a new framework or set of policies more tailored to business needs, established a new approval process, built in some quality checks for candidates, involved the partner in the early discussions, introduced cultural awareness trainings, and established sponsorship to enable reintegration COMPENSATION Long-Term Assignment Compensation In a new question, we asked about the approach taken to expatriate compensation for long-term assignments. Sixty-five percent (65%) of respondents indicated that they used a home-country approach, 6% a host-country approach, 26% a combination of home and host-country approaches, and 3% a hybrid approach. Approach to Long-Term Assignment Compensation Home 65% Host 6% Combination of Home and Host 26% Hybrid 3% 0% 20% 40% 60% 80% 100% Approach to Long-Term Assignment Compensation and Reasons for Using It Home-Based Approach: we try not to disrupt the home country benefit structure (pension, 401 [k], social insurance, etc.) if the company knows that the assignee is returning to the home location simplicity, banking, payroll maintain link to home benefits and pension scheme benchmark [is] commonly used [it is] a fair approach to employees going on a temporary assignment intention to return home, equity with peers at home relative simplicity of administration and minimizes disruption to the expatriate and his/her family members to facilitate return to home country and not disrupt home country benefits simplicity assignments are temporary, and therefore assignees remain in their home country payroll and benefits to facilitate return to home country after the assignment long-term benefits impact intent 58

61 is to compensate employee as if he/she had remained at home; ease of returning to home country position home net system all assignments are under corporate policy global policy [it is a] temporary assignment in nature; [our method] retains continuity in compensation and benefits for the employee s career keeps the employee and family tied to their pay and benefits of the home country; easy to administer ease of repatriation, assignee understands compensation structure, standard balance sheet approach we keep the assignee whole on home compensation and benefits to ease repatriation [we use a] home [approach, and] this means an international salary structure; compensation is fixed in either U.S. dollars, the euro, or in GBP policy is to keep assignee on par with home country counterparts this would assist with repatriation back to the home country after the assignment so that the assignee can return to the home country more easily it makes repatriation easier and is administratively manageable the assignee s base is still the home country and [he/she] has financial obligations there; also, in some cases, using hostcountry compensation would turn off interest of potential assignees all our expatriate assignments have host company employment; we have around 50 home and host countries, and a home-based approach more fairly remunerates assignees moving from high-pay to low-pay countries employees going on international assignments will be tied back to home pay; home currency [is used] as that is where their long-term career is; the assignment should be seen as temporary; also, this approach was adopted due to the fact that it is the most common among other companies [we use] anchorage to home country remuneration and social benefits tax and cost of living is an integral part; many parts of the business find it too complex, but over time they realize the value consistency throughout assignment and beyond easier to bring the expat back home upon termination of assignment most beneficial for the expat, especially in case of secondments from western European to CEE countries the philosophy is that we try to keep assignees whole as if they had stayed in their home country; also, their reintegration at the end of the assignment is smoother via the home approach tie associate back to the home country to keep the associate whole ease of repatriation and maintaining home country compensation scheme, tax implications (balance sheet) employees are familiar with it; most equitable; eases repatriation equity with home country peers; we use an international approach for our global nomads ease of administration our philosophy is that employees should be no better or worse off as a result of their assignment; relation of mobility is critical we use the balance sheet approach the assignee is expected to return to the home country; therefore it makes sense for the assignee to remain on the home country payroll, which aids in the transition back to the home country consistency, fairness less administrative effort most logical for the population simplify pension and tax administration it has worked for many, many years, so no need to change to ensure that they are at the same rate when they return from the assignment Survey Findings in Detail Host-Based Approach: we provide uplifts depending on the country, and then we look at costs in the host country [such as] accommodation, per diem, transport, etc easiest for dealing with tax implications in the United Kingdom majority of our assignees are in Russia, where the local compensation has been determined in a competition of talented employees simply have not looked at this as a major issue of consideration and have treated all as permanent moves Combination of Home and Host-Based Approaches: even though the home approach is policy, a combination is often necessary, depending on moving from high-to-low or low-to-high-cost location home generally used for business-need assignments; host used for developmental assignments resulting from employee request headquarters driven deliver certain allowances in host location to decrease exchange rate issues and transfer fees found this most convenient we take into consideration the home basic salary revised to take into account a location factor and the relative tax regimes; an allowance is also offered to cover accommodation, local transport, and leave travel we use cost-of-living index and gross-up calculation mainly home [is used]; host used where one of the measures of assignment success could be localization base is paid in home; allowances that will be used in the assignment location are paid in the local currency by the host entity tax purposes [are the reason] compensation is based on commitments in both home and host country some local expenses are best handled locally, and salary and perks are mostly handled by headquarters we use host in most of our western European destinations; it is easier than to compare to local markets [depends upon] different assignee types we have a mix of host-plus and home approaches for assignments over one year; the host approach tends to be used more in the non-hardship locations employee can select the better of home and host approaches unless the home country is the United States or Sweden splitting the pay provides income in each country to handle bills and payments, and it reduces some of the need for the assignee to transfer funds across borders, and it reduces the impact of foreign-exchange rates; it allows us to maintain home country benefits to some extent for benefits, their salary is in line with home, but bonus is based on business sector/country funding for living expenses in host and maintenance expenses and connectivity to home balance sheet includes cost of living, quality of life, etc. Hybrid Approach: we use compensation balance sheet approach required to follow FAR regulations [Federal Acquisition Regulations], but we also want to ensure that the employee is paid according to local customs [we use a] United States-based compensation plan whether or not they are from the United States; ease of administration; ties mobile executives to the same pay scheme 59

62 Survey Findings in Detail Short-Term Assignment Compensation In a new question, we asked about the approach taken to expatriate compensation for short-term assignments. Eightyeight percent (88%) of respondents indicated that they used a home-country approach, 2% a host-country approach, 6% a combination of home and host-country approaches, and 4% a hybrid approach. Home Host Combination of Home and Host Hybrid Approach to Short-Term Assignment Compensation 2% 4% 6% Approach to Short-Term Assignment Compensation and Reasons for Using It Home-Based Approach: this is a short-term try to keep [the expatriate] whole we try not to disrupt the home country benefit structure (pension, 401 [k], social insurance, etc.) if the company knows that the assignee is returning to the home location simplicity maintain a link to home benefits and pension schemes [we use a] benchmark; [it is] commonly used; [it is a] fair approach to employees going on a temporary assignment easy for administrative purposes relative simplicity of administration and to minimize disruption to the expatriate and his/her family members to facilitate return to the home country and not disrupt home-country benefits simplicity assignments are temporary, and therefore assignees remain in their home-country payroll and benefits to facilitate return to the home country after the assignment long-term benefits impact the intent is to compensate the employee as if he/she had remained at home; ease of returning to the home-country position we continue with the home package with an incentive per diem; the host provides the flights, accommodation, local transport, and basic meals practical and provides consistency stays within the home-base payroll all assignments are under corporate policy SIA [short-term international assignment] will not be in host payroll system continuity, short-term nature of the assignment keeps the employee and family tied to the pay and benefits of the home country; easy to administer tax compensation is the same as in the base country; additional moneys are provided (per diems and incentive) [but] vary depending on the host-country location tax equalization to home country is facilitated by maintaining the home approach we keep the assignee whole on home compensation and benefits assignee remains on home-country salary doesn t make sense to do otherwise for shortterm assignments employees normally remain in home-country salary payment the policy is to keep the assignee on par with home-country counterparts often individuals will not break tax residency in the home country; this is the most fair and least complex approach to deal with this so that the assignee can return to the home country more easily for short-term assignments, financial obligations in the home country do not change; families do not go on assignment and must maintain appropriate income level employee remains with home pay and home currency and will be responsible for home tax as the assignment is less than 12 months anchorage to home country remuneration and social benefits consistency throughout the assignment and beyond due to short term of assignment and most beneficial for the expat the philosophy is that we try to keep assignees w hole as if they had stayed in their home country; also, their reintegration at the end of the assignment is smoother via the home approach administration is difficult for the host and combination home/host approach for short-term assignments to keep the associate whole, [and it is the] least administratively cumbersome since it is a short-term assignment ease of repatriation and maintaining homecountry compensation scheme; tax implications (balance sheet) employees are familiar with it; most equitable; eases repatriation a shadow payroll is implemented for any local tax [and] social security mandatory withholding just treat it as an extended business trip ease of administration maintain home-country benefits and coverages simplicity and aligns with overall policy they remain with no changes to their terms and conditions; [it is a] long business trip [the assignment is] not long enough to change [their status to a host approach]; due to the number of expats, [there is] only one person operating multiple regions and combinations, so it is easiest to retain [the] home [approach] where possible the assignee is expected to return to the home country; therefore it makes sense for the assignee to remain on the home-country payroll, which aids in the transition back to the home country less administrative effort [because they are] going back home without question simplify pension and tax administration easy communication and administration it has worked for many, many years, so no need to change to ensure that they are at the same rate 88% 0% 20% 40% 60% 80% 100% 60

63 when they return from the assignment Host-Based Approach: we provide uplifts depending on the country, and then we look at costs in the host country [such as] accommodation, per diem, transport, etc.the business unit pays [it] as a business expense Combination of Home and Host Approaches: we use cost-of-living index and gross-up calculation the per diem is sometimes paid by the host entity since it is needed in the host location home commitments [are] maintained plus per diem for host costs different assignee types the employee can select the better of home or host approach unless the home country is the United States or Sweden Hybrid Approach: motivation to take on a short-term assignment is crucial, and a flexible approach on compensation is often necessary to succeed home compensation doesn t meet United Kingdom border agency requirements required to follow FAR regulations [Federal Acquisition Regulations] case-by-case basis; very few short-term assignments Host-Country Income Tax Liability In a new question, we asked about the approach taken to expatriates host-country income tax liabilities. Seventy-eight percent (78%) of respondents indicated that they used a tax-equalization approach, 5% a tax-protection approach, 8% no compensation for the tax differential, and 4% another approach. Tax Equalization Tax Protection Approach to Host-Country Tax Liabilities 5% 78% Survey Findings in Detail No Compensation for Tax Differential Other 8% 9% 0% 20% 40% 60% 80% 100% Host-Country Income Tax Liability dependent on location depending on the country, we use either tax equalization or tax protection, [but] mostly equalization host taxes are calculated, and [the] assignee is given a gross salary only just starting to look at tax consultation; mostly people have had to figure it out for themselves only pay host country tax; [the] assignee is liable for tax assessed on that payment required to follow FAR [Federal Acquisition Regulation] regulations still resolving this issue [we have] tax equalization for our short term assignment (STA) and long term assignment (LTA) programs; no equalization is provided in other cases [we have] tax equalization for balance sheet expats and [a] hot tax regime for lump sum expats tax equalized based upon the compensation approach for example, home or host Home-Country Income Tax Liability In a new question, we asked about the approach taken to expatriates home-country income tax liabilities. Seventy-four percent (74%) of respondents indicated that they used a tax-equalization approach, 4% a tax-protection approach, 10% no compensation for the tax differential, and 12% another approach. Approach to Home-Country Tax Liabilities Tax Equalization 74% Tax Protection 4% No Compensation for Tax Differential Other 10% 12% 0% 20% 40% 60% 80% 100% 61

64 Survey Findings in Detail Home-Country Income Tax Liability a mix base [of] salary and LTIP [long-term incentive plan] tax equalization; bonus is tax protect[ed] dependent on location equalization only where home country tax residency is maintained host taxes are calculated and assignee is given a gross salary only just starting to look at tax consultation; mostly people have had to figure it out for themselves required to follow FAR [Federal Acquisition Regulation] regulations still resolving this issue [we have] tax equalization for balance sheet expats and [a] hot tax regime for lump sum expats tax [is] equalized based upon [a] compensation approach for example, home or host [we have] tax protected allowances only varies by assignment and location depending on the country, we use either tax equalization or tax protection, [but] mostly equalization [we have] tax equalization for our short term assignment (STA) and long term assignment (LTA) programs; no equalization is provided in other cases Managing Exchange-Rate Fluctuations for Compensation In a new question, we asked how companies managed fluctuations in exchange rates for expatriate compensation. Forty-two percent (42%) made periodic adjustments for rate fluctuations, 28% offered no compensation for rate fluctuations, 19% used a split-pay technique, and 11% offered exchange-rate protection. Periodic Adjustment for Rate Fluctuations No Compensation for Rate Fluctuations Split Pay Managing Exchange-Rate Fluctuations 19% 28% 42% Exchange Rate Protection 11% Other 12% 0% 20% 40% 60% 80% 100% Respondents provided multiple answers Managing Exchange Rate Fluctuations adjust rate every six months adjust where the rate fluctuations are excessive by rebasing pay and paying the loss as a fixed allowance adjustment for exchange rate if difference is more than 10% during six months adjustment of COLA annual adjustment currency policy with 60% of income protected against U.S. dollar/euro employee remains on home country payroll factored into COLA payments with periodic adjustments full annual currency reconciliation taking into account monthly foreign exchange rates and local salary, based on G&S [goods and services] part of G&S differential partially taken into account in G&S pay an honorarium rather than amend the salary via cost of living adjustment 62

65 Adjusting Compensation for Exchange-Rate Fluctuations In a new question, we asked how often companies adjusted expatriate compensation packages to accommodate exchange-rate fluctuations. Fourteen percent (14%) of respondents indicated that they made quarterly adjustments, 16% biannual adjustments, 26% annual adjustments, 8% on a case-by-case basis, 17% never during an assignment, and 19% used other methods. Quarterly Biannually Annually Case by Case Never During an Assignment Other Adjusting Compensation for Exchange-Rate Fluctuations 8% 14% Adjusting Compensation for Rate Fluctuations 16% 17% 19% 26% 0% 20% 40% 60% 80% 100% when new tables [are] received from vendor review and adjust COLA bi-annually only if exchange rate fluctuates more than 20%...required to follow FAR [Federal Acquisition Regulation] regulations; when government updates rates, we do as well normally biannual, but will trigger a monthly adjustment if movement [on the foreign exchange] moves more than 6% sustained over four weeks monthly usually annually, but lately longer this is done every pay period exchange rate is set at the beginning of the assignment with the update of the COLA tables provided by the vendor whenever change is significant enough to generate a new table +/-10% fluctuations over a consecutive three month period biannually, or if exchange rate changes [more than] 10%...monthly when the exchange rate changes more than 5%...monthly only for COLA; host pay is set once at beginning of assignment when there is a five-point change on the index local salary adjustment will apply Survey Findings in Detail OUTSOURCING Perception of Outsourcing Benefits Respondents indicated that the major benefits of outsourcing were identification of assignment costs (53%), better reporting (45%), the ability to reduce staff (40%), better service quality (28%), consistent policy application (23%), and cost reduction (20%). Historically, the ranking for the top five responses was identifying assignment costs, specialized expertise, service quality, better reporting, and consistent policy application. Outsourcing Benefits Identify Assignment Costs Better Reporting 45% 53% Reduce Staff 40% Better Service Quality Consistent Policy Application Reduce Costs Specialized Expertise Simplify Process Better Vendor Management 28% 23% 20% 19% 18% 18% 0% 20% 40% 60% Respondents provided multiple answers. 63

66 Survey Findings in Detail Outsourcing Benefits all of the above are pertinent compliance in taxation issues scalability Current Level of Outsourcing We asked participants if they currently outsourced their international assignment program. Thirty-five percent (35%) of respondents indicated that they did, compared to 38% in the 2009 report. Currently Outsource Assignment Management Program Yes 35% Staffing Cuts and Reliance on Outsourcing When asked if there were staffing cuts within their company s international assignment management department, 30% of respondents reported cuts, compared to 15% in the 2009 report (the historical average was 22%). Among those who reported cuts, 50% also cited a related increase in reliance upon outsourcing, compared to 56% in the 2009 report (the historical average was 58%). No 65% Staff Cuts in Assignment Management Yes 30% Staff Cuts and Reliance on Outsourcing No 50% No 70% Yes 50% In a related question, 45% of all respondents increased their reliance on outsourcing compared to last year (an all-time record high, surpassing the record high of the 2009 report), 48% reported the same level of reliance on outsourcing, and 7% decreased their reliance on outsourcing. The percentages in the 2009 report were 42%, 56%, and 2% respectively. The historical averages were 32%, 53%, and 15% respectively. Reliance on Outsourcing Since Last Year Increased 45% Same 48% Decreased 7% Outsourcing Plans Among respondents who did not outsource international assignment program administration, 14% were considering outsourcing within two years, compared to 12% in the 2009 report (the historical average was 20%). Considering Outsourcing Within 2 Years Yes 14% No 86% 64

67 Services Outsourced When asked to identify services that respondents currently outsourced, planned to outsource, or did not plan to outsource, compliance (tax, social security, immigration) was the top service (67%), followed by financial management (29%), and program administration (26%). Historically, compliance was the top choice, followed by vendor management and financial management (a tie). Compliance Financial Management Program Administration Vendor Management Policy Consulting Outsourced Services 6% 11% 27% 29% 26% 11% 24% 8% 21% 7% 60% 67% 63% 68% 72% Outsource Plan to No Survey Findings in Detail 17% Payroll Administration 7% 76% 0% 20% 40% 60% 80% 100% Managing and Coordinating Outsourced Services When asked how they managed and coordinated their outsourced vendor services, 41% of respondents managed each vendor themselves, 24% outsourced all management and coordination tasks to a single vendor, and 32% used a mix of internal and external management. In the 2009 report, the percentages were 15%, 32%, and 50% respectively. The historical averages were 45%, 25%, and 43% respectively (the mix of both choice has been included since the 2006 report). Managing Outsourced Vendor Services Manage Vendors In-house 41% Outsource Management 24% Mix of Both 32% Other 3% 0% 20% 40% 60% 80% 100% Managing and Coordinating Outsourced Services plan to outsource don t use specific suppliers single global provider for some providers and one global provider on relocation and immigration who coordinates tasks 65

68 Survey Findings in Detail Outsourcing Criteria When asked to rank the three most important criteria for selecting service providers, respondents indicated that global human resources experience was most important (18%), followed by pricing (17%), geographic reach (16%), service philosophy (12%), technological capabilities (11%), communication with expatriates (9%), general reputation (6%), management of suppliers (4%), size/financial stability (4%), and expense tracking/management system (3%). Historically, the top three choices were global human resources experience, pricing, and service philosophy. Global HR experience Pricing Geographic Reach Service Philosophy Technological Capabilities Communication with Expatriates General Reputation Management of Suppliers Size & Financial Stability Expense Tracking Outsourcing Criteria 11% 17% 16% 12% 6% 4% 4% 3% 9% 18% 0% 20% 40% 60% 80% 100% Satisfaction with Outsourcing For 82% of the respondents who outsourced all or part of their international assignment programs, expectations were being met or exceeded. In the 2009 report, the figure was 86%. The historical average of these two categories was 83%. Satisfaction With Outsourcing Expectations Not Met 18% Exceeded 8% Met 74% Measuring Supplier Performance For the first time, we asked participants if they formally measured their supplier s performance. Fifty percent (50%) of respondents indicated that they did. Measuring Supplier Performance Yes 50% No 50% Measuring Supplier Performance all contracts include KPI [key performance indicator] on service and quality; quarterly meeting discussing KPI and survey results based on SLA and customer satisfaction compare to service level agreement customer satisfaction metrics formal review every three years corporate has supplier contract with relocation, immigration, and tax suppliers, and it manages relationships and performance on behalf of all [of the company s] businesses handled by VMO [vendor management office] have regularly reviewed contracts that are re-priced and renegotiated (normally every three to four years, depending on the contract); tax, technology, and data contract is managed centrally, but immigration is managed regionally; social security is managed in house monthly SLA measurement discussions; biannual scorecard review ongoing surveys of assignees and managers; quarterly reports; annual face-to-face reviews our supplier 66

69 management is handled by one supplier, who then coordinates various third-part suppliers procurement managed quarterly reviewed dashboard metrics quarterly vendor assessment tool relocation, immigration, social security advice, tax advice service level agreement and periodic performance updates service level agreement with key suppliers and quarterly business reviews SLAs in place with fees at risk for not meeting the specified measures suppliers held accountable to agreed-upon metrics third-party administrator reviews vendor performance annually we conduct annual reviews on all our suppliers we have agreements in place, a manager that communicates with the people that use the suppliers to ensure that they are delivering the requested service; if not, a meeting is held to discuss the issues and the way forward we outsource some tasks and it varies by country; in general, we outsource all tax services; we outsource some immigration work, and in a couple of countries, we outsource home search weekly management routines; quarterly senior management updates Internal Service Level Agreement As a follow-up question, for the first time we asked participants who did not formally measure their supplier s performance if they had an internal service level agreement (SLA) between business units in the same company. Fortytwo percent (42%) reported that they had an internal service level agreement within their business. No 58% Internal Service-Level Agreement Yes 42% Survey Findings in Detail Recovering the VAT on Supplier Disbursements For the first time, we asked participants if they recovered the value-added tax (VAT) on disbursements made to suppliers. Thirty-five percent (35%) of respondents recovered the VAT in all jurisdictions where the VAT was applied, 35% recovered the VAT only in some jurisdictions where the VAT was applied, and 30% did not recover the VAT. Recovery of the Value-Added Tax In Some Jurisdictions 35% Yes 35% No 30% Method of Recovering the VAT on Supplier Disbursements For the first time, we asked participants how they recovered the value-added tax (VAT) on supplier disbursements. Fortytwo percent (42%) of respondents performed the VAT recovery in house, 27% relied on their relocation management service provider to perform the VAT recovery, and 27% relied on another third-party specialist to perform the VAT recovery. Method of Recovering the Value-Added Tax Relocation Service 27% In-House 42% Other 4% Another Specialist 27% 67

70 The following companies participated in the survey and gave their permission to be identified. Brookfield GRS Global Locations Americas Region Toronto Office 39 Wynford Drive Toronto, ON M3C 3K5 Phone: Chicago Office 900 South Frontage Road Suite 200 Woodridge, IL Phone: EMEA Region London Office One Finsbury Market London EC2A 2BN, UK Phone: +44 (0) Asia Pacific Region Singapore Office 8 Shenton Way #09-01 Singapore Phone: [email protected] brookfieldgrs.com 2010 Brookfield Global Relocation Services. All rights reserved. Accenture ADM Agilent Technologies, Inc. AMEC Global Resources Arla Foods Atos Origin Avon Bayer AG BMO Financial Group Boeing Bombardier Transportation BorgWarner Inc. Bupa CA Ltd Campbell Soup Caterpillar Inc. Chemtex International Incorporated Cisco The Clorox Company Coats plc The Coca-Cola Company COLT Telecom Credit Suisse AG The Dow Chemical Company Ernst & Young EZ, a. s. Flowserve Corporation FLSmidth A/S FM Global Ford Motor Company FormFactor Inc. GE Healthcare General Motors GlobalFoundries Hess Corporation HP IBM IM Health Inc ING Group InterContinental Hotels Group Johns Manville JohnsonDiversey, Inc. JTI (JT International SA) Kelly Services Inc. Kraft Foods Inc Lenzing AG Life Line Screening Luvata Magna International Marks and Spencer plc Mars McDonald s Corporation The McGraw-Hill Companies Metsäliitto Moog Inc. Mott MacDonald Ltd. Mustang Engineering, L.P. Navistar Nokia Parker Hannifin Corporation PepsiCo, Inc Perot Systems Corporation Philips International BV Pöyry PLC Rexam PLC Ryder System, Inc. S&B Industrial Minerals S.A. sanofi-aventis Scientific Research Corporation State Street Corporation Tata Steel Europe (Corus Group) Textron Global Services TNT Head Office B.V. Tower Automotive UniCredit Group UPM-Kymmene VTT Technical Research Centre of Finland Weyerhaeuser Company Brookfield Global Relocation Services