Interest in Global Employment (GE) strategies and supporting organizational models has increased significantly with international employers. While many readers will be familiar with GE theory, the methodologies are not as widely understood. GE refers to the terms for a mobile workforce and not to General Electric to avoid any confusion for our North American readers.
In this blog we explore why GE approaches have become prevalent but first a definition is required:
A GE strategy is a method of employing an international workforce that reduces and simplifies the differences in employment terms and conditions resulting from their home or host location origins.
International assignment terms and conditions have traditionally been modeled on some form of home-to-host-to-home (HTH) methodology. In reality however, companies are experiencing that mobility is a scarce commodity and many employees who are mobile, remain mobile for large parts or even entire careers. Further, as differences in employment practices and other factors between locations diminish, the need to recognize variations in employment terms to accommodate these differences likewise diminishes. The traditional approach is costly to administer and unwieldy and is at its heart, discriminatory amongst a team who will often work together and who need to be highly engaged.
Companies target different levels of GE reflecting their profile, goals and challenges. In simple terms levels of adoption can be summarised as:
- Terms and Conditions: Terms and conditions (T&C) of employment such as benefits, home leave, housing, vacation etc are largely uniform irrespective of home or host country
- Pay: Approach to pay, job evaluation and grading is homogeneous across all mobile employees
- Employment: Transfers are organized by a subsidiary created solely for the purpose of employing and managing mobile employees uniformly.
Employers reach this point for a variety of reasons depending on industry, skill sets required and the number of locations and types of employees included in their international mobility mix. There are usually multiple reasons why an organization sees advantages in a common approach to employment or even a common employer for its international workforce and here are some of the more common reasons that we see:
- Internal Equity – many industries search for scarce talent on a global basis and employees discover very quickly if they are being treated differently from their peers. If the only reason for that difference is the country from where they originate or where they have been posted, they won’t stay very long
- Career Paths – mobility is a scarce competency and where it exists, companies will tend to nurture it and use it again and again. A home country employment agreement with home country related T&Cs implies that that is where a mobile employee is headed next, whereas the employer’s talent management plan may be calling for a further international assignment
- Work Patterns – where work comes in definable chunks of time for example contract, rotational and project assignments administration is reduced and recruitment more easily facilitated when people are needed for a limited period from different sending locations. This rationale appeals to engineering and other consulting companies
- Cost – common terms and conditions of employment mean less administrative effort/cost, greater synergies, opportunities to reduce tax costs and optimize social security coverage. With the world growing closer in terms of spending patterns and buying power the costs of determining a traditional cost of living allowance often outweigh the resulting allowance
- Compliance – in both established and developing locations governments are becoming more vigilant in maximising the tax they receive from both expatriated individuals and their employers. Common platforms makes it easier for employers to both comply with local and home country income tax requirements but also enable a company to improve the management of its corporate exposure too.
- Engagement – even more important in international assignments are engaged employees. Differences in terms and conditions will be an irritation and with the high cost of international assignments this is a risk that can be easily avoided
- Talent Management – global employers manage talent across their entire organization and visibly differentiating between employee status i.e. local and expatriate or, expatriates and expatriates, makes little sense. A non-discriminatory approach that minimises the differences will help attract better quality candidates
There are many layers and subtleties in the decision making that drives companies down this path. It is a significant change for those that have previously offered the traditional HTH “keep whole” approach but one that will lead to significant synergy and productivity improvements if handled well.
Watch out for our next blogs that will address the challenges in establishing a purpose built company for managing expatriates and the retention issues associated with a mobile workforce and should you have need to discuss any aspect of international mobility please do not hesitate to reach out to us.