2013 EMEA EXPATRIATE MANAGEMENT CONFERENCE 11-12 APRIL 2013

HOW EMERGING MARKETS ARE CHANGING EXPATRIATE POLICIES 12 APRIL 2013

Olivier Meier Christa Zihlmann

Munich Geneva

MERCER

How emerging markets are changing expatriate policies What we will cover today

• Defining emerging markets

• Developing a new mobility mindset

• Exploring the complexities of pay practices

in emerging markets

• Revisiting the components of the

expatriate package

• Beyond the expatriate package: re-

inventing the mobility function?

MERCER

Source: Citi Report 2011, Global Growth Generators

Note: “Developing Asia” is Asia excluding Japan

2%3%

4%5%

7%8%

Asia

Afri

ca ME

Latam

US

Eur

ope

60% of global growth in next 5 years to come from Emerging Markets

But think beyond the BRICS!

Defining Emerging Markets The engine of global economic growth

Vast economic growth: GDP expansion in growth

markets will dramatically outpace the rest of the world

Rapid population growth: almost all population

growth (92%) to come from growth markets in the next

5 years

Demographic advantage: By 2040, 80%+ of global

working-age population will be in emerging markets,

while the workforce in the rest of the world will be in

decline

MERCER

DEVELOPING A NEW MOBILITY MINDSET

MERCER

Developing a new mobility mindset Dispelling mobility myths

Myth #1: Traditional expatriates are disappearing

• Numbers still going up

• Many different types of packages offered, but incentives still needed

• Highly skilled workers from emerging markets can be high-cost expats, too!

Myth #2: New generations are more mobile

• Not a myth, but companies are losing control over employees’ mobility

• More skilled employees are willing to market themselves globally

• Locations, organisations not equally attractive; employers must consider their “talent brand” and site attractiveness

Myth #3: Local professionals and returnees will replace expatriates

• Global talent landscape much more complex than many anticipate

MERCER

Moving East and South is major strategy for more and more multinational companies

Managing Lateral Moves (from developing countries to other developing countries) is becoming essential

Developing a new mobility mindset Rethinking mobility patterns

MERCER

Developing a new mobility mindset Demographics: what is your current long-term assignee population by age band?

24%

69%

7%

30%

65%

5%

56%

39%

5%

17%

67%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

< 35 years old 35 to < 55 years old 55 +

Latin America

Eastern Europe

Asia

Africa / Middle East

Ave

rage

%

Source: 2012 Worldwide Survey of International Assignment Policies and Practices

MERCER

International assignment drivers and barriers Companies’ topmost concerns regarding their mobility program

Europe Latin America Eastern Europe Asia Africa / Middle

East

1. Finding

suitable

candidates for

assignments

1. Finding

suitable

candidates for

assignments

1. Finding

suitable

candidates for

assignments

1. Finding

suitable

candidates for

assignments

1. Finding

suitable

candidates for

assignments

2. Current

conditions are

too costly

2. Performance

level of

employees on

assignment

2. Performance

level of

employees on

assignment

2. Performance

level of

employees on

assignment

2. Performance

level of

employees on

assignment

3. Performance

level of

employees on

assignment

3. Inability to use

gained

experience

upon

repatriation

3. Current

conditions may

not be

attractive

enough

3. Current

conditions may

not be

attractive

enough

3. Current

conditions may

not be

attractive

enough

MERCER

Developing a new mobility mindset Do you have one policy covering all your assignments or different policies?

36%

64%67%

33%

55%

46%

62%

39%

50% 50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

We have one policy (same terms and

conditions) for all assignments

We have multiple policies (with different

terms and conditions) for different

assignment types

Europe

Latin America

Eastern Europe

Asia

Africa / MiddleEast

% o

f re

sp

on

de

nts

Source: 2012 Worldwide Survey of International Assignment Policies and Practices

MERCER

Developing a new mobility mindset Going beyond traditional segmentation?

Emerging/High-Potential Talent

Int’l learning/ development to grow

next generation of leaders

Strategic Business Leaders

Fill mission-critical roles and deliver specific, strategic business results

Global? Global

Transfers/ Volunteers

Int’l experience to fulfill personal

objectives (opportunistic,

employee-driven moves)

Seasoned Technical Experts Providing specialist skill/expertise to fill

local gap or to complete a specific

project/task

One-time? Global or Regional?

DE

VE

LO

PM

EN

TA

L V

ALU

E

BUSINESS VALUE

INTRA-REGIONAL MOVES VS. GLOBAL MOVES

Is your company globalizing or regionalizing?

Should the policy be driven by regional/global considerations?

How to integrate the regional and the global dimensions?

ONE-TIME MOVERS VS. HIGHLY MOBILE

EMPLOYEES

Should the employees be considered as globally mobile

when moving just once?

MERCER

Developing a new mobility mindset Introducing the new players

• Chinese companies and the “Angola model”

• Indian companies

• Family-owned companies

• Cash-rich companies from the Gulf and their talent acquisition strategy

• “the Russian way”

• Turkish philosophy

• African practices

MERCER

UNDERSTANDING THE COMPLEXITIES OF PAY PRACTICES IN EMERGING MARKETS

MERCER

0

50,000

100,000

150,000

200,000

250,000

300,000

2002 129,429 66,634 84,253 92,568 126,511 82,931 31,401 95,653 37,827

2012 213,981 131,302 167,710 190,980 269,831 186,530 79,200 273,460 148,746

% difference 65% 97% 99% 106% 113% 125% 152% 186% 293%

Germany Poland MexicoChina

(Shanghai)UAE * Turkey India Brazil Vietnam

The complexities of pay practices in emerging markets Keeping pace with a fast changing remuneration landscape Annual Total Cash, 2002 to 2012

Source:2002 and 2012 Total Remuneration Surveys

Senior Management (PC 60) (in USD)

MERCER

The complexities of pay practices in emerging markets The myth of low-paying emerging countries versus high-cost mature markets

0

200,000

400,000

600,000

800,000

Brazil Russia India China Germany

Gross Net COL-adjusted

PC 65= General Director/President (Comp 5) – Gross, Net and COL-adjusted, married + 1 (EUR)

Source: all data Global HR Monitor September 2011

MERCER

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

IPE Position Class

Switzerland Germany France Russia

India Brazil China (Beijing) United States

The complexities of pay practices in emerging markets Visualising the compensation challenges in emerging markets

An

nu

al

To

tal

Gu

ara

nte

ed

Ca

sh

(in

EU

R)

Blue collar Professional

Specialist

Manager Director

VP

MERCER 16 April 12, 2013

Enhanced or

Int’l Plan Medical

End of service

benefits

Social

Insurance plus

supplement

Social security / pension

Home leave

Education

Housing

Hardship allowance

Mobility / foreign service premium

Cost-of-living allowance

Brazil Dubai China Expatriate allowances / benefits

Usually cash, typically a reduction from “full”

expatriate housing amount

Common Less common / limited Never or rarely provided

Pay practices: exploring alternatives to traditional approaches The search for the elusive perfect “local plus” solution

Senior managers only

Enhanced or

Int’l Plan

Enhanced or

Int’l Plan

Social

Insurance plus

supplement

MERCER

Pay practices: exploring alternatives to traditional approaches Example 1 Brazil local and local + vs. typical French expatriate package Professional level – IPE PC 52; married + 2; transfer Paris – Sao Paulo

Net

co

mp

en

sa

tio

n B

RL

Source: Mercer Global HRMonitor 2011

88,784 88,784 86,364

9,895

89,078

111,348

18,86810,783

35,904

35,904

88,784

213,766

274,162

0

100,000

200,000

300,000

Local Local + French expatriate

Education

Mobility

Hardship

Housing

COLA

Net base salary

MERCER

Pay practices: exploring alternative to traditional approaches Example 2 Brazil local and local + vs. typical French expatriate package Executive level – IPE PC 64; married + 2; transfer Paris – Sao Paulo

Net

co

mp

en

sa

tio

n B

RL

Source: Mercer Global HRMonito 2011r

480,363 480,363

225,390

20,498

142,339

177,924

32,315

35,904

35,904

56,550

480,363

658,606

548,581

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Local Local + French expatriate

Education

Mobility

Hardship

Housing

COLA

Net base salary

MERCER

Pay practices: exploring alternative to traditional approaches Example 3 PC 55 (Engineer) to Lagos (Nigeria)

0 €

20'000 €

40'000 €

60'000 €

80'000 €

100'000 €

120'000 €

140'000 €

160'000 €

Nigeria Local Nigeria Local Egypt Dutch

Mobility

Hardship

Housing

COLA

Net base salary

+ Multiplier Expat

Net

Sala

ry

MERCER

Pay practices: exploring alternative to traditional approaches An increasing diversity of approaches

• The growing diversity is a response to new types of assignments

• The boundaries between local and expatriates approaches are

increasingly blurred

• Practices from emerging market companies: multipliers etc.

63%

43%

33%

29%

33%

0%

10%

20%

30%

40%

50%

60%

70%

Europe Latin America Eastern Europe Asia Africa / Middle East

Home balance approach

MERCER

REVISITING THE COMPONENTS OF THE EXPATRIATE PACKAGES

MERCER

Revisiting the components of the expatriate packages Completion bonus

• Paid by 30% of companies who have a guideline and/or

policy, an estimated 60% of emerging countries however pay

a completion bonus on a ad hoc basis

• Amount varies between 10 and 200%

• Mainly paid for hardship and remote locations, as well as for

project assignements

MERCER

Revisiting the components of the expatriate packages Curiosity Benefits – just odd or is there something to learn from them?

Experience Allowance

Festivity Allowance

Regional Allowance

Skill Allowance

Bicycle Allowance

Seniority Allowance

Dearness Allowance

Burn-in Allowance

Uniform Allowance

Newspaper Allowance

Leave Allowance

Capital Asset

Allowance

Conveyance Allowance

MERCER

Revisiting the components of the expatriate packages Family support and cultural issues

• Definition of family varies in emerging countries policies

• Support for education critical, mainly paid as lump sum

• Rotational assignments vary according to culture

MERCER

BEYOND THE EXPATRIATE PACKAGE RE-INVENTING THE MOBILITY FUNCTION?

MERCER

Beyond the expatriate package. Re-inventing the mobility function as…

…Sales team?

Case study #1: selling mobility to Tanzania

MERCER

Beyond the expatriate package Re-inventing the mobility function as…

…Facilitators?

Case study #2: from managing global policies to fixing

issues in “small worlds”

…Financial advisors?

Case study #3: providing financial advice to expatriates

from emerging markets

MERCER

Beyond the expatriate package Re-inventing the mobility function as…

…Techno Geeks?

Case study #4: developing mobile app to provide a

relocation check list

…Tour Guides?

Case study #5: Trips to learn to be an expatriate

MERCER

Managing mobility in emerging markets: conclusion Tips to stay ahead of the game

Learn to navigate the

grey areas between

expatriate and local

compensation

Mobility is not just an admin function: it’s both about managing talent globally strategically and address the tactical issues reflecting the employees’ unique personal experiences

Innovate and find your own idea/solution

that will complement and give a special

touch to your mobility policy

Rather than having pay,

benefits and various

cultural trainings as

isolated boxes, bring the

different elements

together and define

overarching

themes/principles