The High Cost of Expat-Lite Programs

M.C. ESCHER (Dutch, 1898-1972), Rind, 1955.  

Current economic conditions have forced companies to take a look at their policies to see what can be trimmed.  For expatriate programs, corporations that did not already have a pared-down assignment program may be interested in incorporating one now as a result of an effort to introduce across-the-board austerity measures.

But to incorporate expatriate programs with a reduced benefits structure may actually increase the number of assignees that you probably wouldn't or shouldn't have sent in the first place and thereby inadvertently increase the overall cost of your international assignment program.

As many have learned the hard way, an attempt to save money while sending people on assignment almost begs to be thwarted.  In the end, what you may find is that you've done is actually introduced a more expensive program to move individuals who might have otherwise accepted a local package.  Also you may risk adding to the administrative costs of managing your assignment program.

Before outlining a stripped expatriate package, examine the reasons you are seeking to offer a reduced package.  Are there candidates that you would gladly send on assignment if only it were more affordable?  

Generally, it's not a bad idea to have an expat-lite program as long as you are looking to move more talent internationally -- not to move the same talent at less cost.  These programs may be right for lower level employees, or for those who have elected for themselves to go on assignment.  But don't expect that typical candidates for full assignment packages will be interested in (or even should) accept an expat-lite program, though.

MBA rotational programs or leadership development programs can work well if implemented as their own separate and distinct programs.  However, keep in mind that newer and lower level employees may have difficulty obtaining host country work authorizations in some locations.  Especially with some countries moving to tighten their borders to shore up the loss of local jobs.  Examine the candidates, their capabilities as well as likely home and host combinations ahead of time.  As with assignments, the selection of these candidates should be nominated by the company and not be open to 'volunteers' without a business case to send them.

If there is a strong desire to move talent that you may not have a solid business reason to justify one (meaning a temporary assignment with a plan to return or go onto another locale) then consider moving that talent on a local basis.  You may consider spending the time on defining a standardized local-to-local package that works.  It may be the standard local offer that includes international move benefits, language and cross-cultural support.  Key benefits to keep transferees (and you) out of trouble.

While some companies think of bringing back a deceptively simple lump sum (bucket o' money laissez faire) approach to international assignments.  Some companies are moving in quite the other direction.  They notice that offering a housing allowance rather than a housing reimbursement may encourage assignees to live in a cheaper area that could have safety issues.  Reduced oversight and management of assignment benefits may in effect 'buy' more trouble.

Wiechert Realty in their 2011 Trends report observed that some companies are incorporating a tiered approach to managing assignment benefits.  A cafeteria program that sometimes referred to as a 'Flex-patriate' assignment.  All assignees receive core benefits such as immigration, travel to the new location and tax equalization - while all other assignment benefits are optional and determined on a case by case basis.  I could see that such an approach may lead to more lost time in negotiating and then having to administer each package one-by-one.

At the same time, companies would do well to avoid the trap of sending persons who should go on a full assignment package on a local-to-local basis.  If there is a real intention for that person to return home, then to send that person on a local basis may experience costly tax implications.  In addition, employees may experience potential adverse hits to nationalized benefit programs.  The company should also clarify its approach company retirement programs as well as the tax treatment of and payment of long-term incentive plans for which this group may be eligible.  Well-run assignment programs foresee and address these issues - local offers will not.

There is either a business case or there is not - and the expatriate program is generally designed to foster international mobility.  The benefits are not offered arbitrarily and without good reason.  Paring them back in a vacuum may have unexpected implications.

A clever man commits no minor blunders. 

- Johann Wolfgang von Goethe