Northern miner t&c for mobile employees - jan 2013 clean
Overseas/paul.pittman/feb.1/2013/wc=2093The cachet of working abroad no longer exists for childrenof baby boomers.CommentaryMobile employees and the stay-put generationBy Paul PittmanSpecial to The Northern MinerIf you manage a mining company with assets abroad, sooner or later you will have toconsider whether you are going to staff up the key positions there with local nationals orsend someone from the home office. Earlier this year, we wrote about employee benefits for the mobile workforce (“Howto craft benefits packages for globe-trotting employees”, T.N.M., Jan. 14-20/13). Now,we expand that discussion into the other areas that employers must consider whentransferring staff — particularly younger managers — into positions outside of Canada. “Now let me make sure I understand this offer: you are going to send me to anotherpart of the world to work, cover all of my relocation expenses and pay me more than Iwould earn at home . . . when do I start?” may have been the reaction in the past from ababy boomer to an offer to go and work abroad, but dont expect the same response fromtheir kids. The children of the generation that put McDonalds and Starbucks on every corner, thathelped homogenize the world, that have already been everywhere, traveling with theirparents, during their gap year or as part of their education. The cachet of working abroad no longer exists. Later generation’s values are different and lie in community, a safe environment, andthe raising of children close to support systems that accommodate dual parental careers.Consequently the same relocation arrangements, compensation systems and assistanceprograms that were used with their parents are not going to work. A successful international company will have at the top, experienced management thathave lived and worked abroad, that are able to make better informed internationaldecisions. Companies that try to do without this depth of experience (say by substituting foreignassignments with travel and video conferencing) will likely see subpar performance. Atlower levels in the organization, successful organizations will need the best availabletechnical skills to get the job done in the most efficient and productive way and thesemay only be available in another country. Using mobile talent is a requirement today atall levels in the organization. Globalization has narrowed cultural gaps and cost of living differences, and theinternet age has further contributed to a more globally aware workforce. In fact today,there are very few attractions to a young family in taking on an international work
assignment. Media and peer pressure place enough stress on those raising young families,without the added dynamic of foreign schooling, healthcare and social development. For their baby-boomer parents, an international assignment was appealing because itwas well-compensated, with some inconvenience rewarded by later promotions during along career spent with one employer. And it provided an exciting opportunity for a familyto experience another part of the world. Their children, on the other hand, see fewer tangible rewards coming from overseasassignments and consider time away from the head office as career idling, especially if toa location that they may have visited already. They also witness few companiesattempting to retain an internationally experienced workforce through well-managedcareer pathing. So the best candidates for international assignment are single? Well, if you can findsomeone with the proper level of experience, of course. Or maybe empty nesters with noelderly parents, but will they still have the energy and commitment to drive your projectin line with the demands of shareholders? If you cant find the perfect applicant at the ends of the age spectrum whats to bedone? Heres a checklist of ideas that may be helpful when it comes time to buildingexperienced international bench strength: 1. Recruitment — The days of reaching out to headhunters to solve mid-level hiringproblems are disappearing. The more reputable ones are now turning away those searchesthat appear too difficult, and international assignments certainly fall into that bracket. Toattract a young family, you will need to answer every single question that they have aboutthe location, the assignment and so on. The one-page brief traditionally given to therecruiter is not enough. A web-based solution, where candidates can choose you via the brand and culture thatyour company promotes, is rapidly becoming the proven approach. However, dontassume that your HR person working LinkedIn for a few hours a day will solicit the rightcandidate. Whether the appointment is a single key manager or a group of skilledworkers, they are likely to be potentially high-risk for your company and you will wantthe best possible candidates to minimize the risk of failure. Spending the time to discussthe most cost-effective and productive method of recruiting mobile talent with an expertor a recruiter that understands this trend will be worthwhile. 2. Compensation — What do we need to pay these new mobile workers? Thetraditional method of compensating expatriates was developed around the assumptionthat they would return to a role in the home location after the assignment andconsequently, they had to remain in the home country’s pay system. This meant a costlyand administratively cumbersome method of equalizing costs of living, housing and taxesbetween home and host country. Today, a variety of alternate approaches should be considered that, as a generalization,reflect the likely career path of the individual following this assignment, its term and/orthe nature of the host location. Differences in the costs of living and taxation levels have reduced with globalization.However, they continue to exist and in some circumstances remain significant, but themanner in which they are recognized and compensated for has changed. This might be amodified local pay scale if the expatriate is likely to remain in the host country for sometime, it could be a fixed allowance paid in addition to salary or a single “all in” contract
amount with appropriate back-end incentive if the employee is not expected to remainwith the company after the assignment. Finally, if there are a number of employees in thehost location from different home locations, an international pay scale might be the rightanswer. Factored into compensation potentially, should be recognition of whether food andlodging are provided. Host location accommodation is usually paid for the company,particularly if the employee has a home elsewhere with its associated ongoing costs. Thestyle and size needs to be in keeping with peers in the expatriate and/or local communityand appropriate for family or single living. 3. Taxation — No matter how hard you might try, taxation cannot be avoided. As ageneral rule, expatriates will be subject to tax, often on worldwide income in the locationin which they are resident. Residency is complicated and professional advice needs to be sought on itsdetermination in the host and home countries. If the expatriates enjoy a locallycompetitive salary or a contract amount, you may conclude that your employees shouldbe responsible for their own taxes and simply seek confirmation each year that tax returnshave been submitted (to protect your companys legal position and reputation with localauthorities). However, if your employees remain on the home country compensation system, youmay choose to adopt a formal policy that ensures that either, they pay no more than theywould at home or one that reimburses just any excess tax (i.e. they keep the differences ifhost taxes are less). Such decisions should generally flow from the career-path decisionsoutlined earlier. There could be circumstances where an employee is resident in more than one countryand — notwithstanding the type of policy adopted — may be taxed on non-cash elementsof compensation, e.g. home leave (see below), housing, relocation expense, etc. There may be a legal obligation for the company to collect taxes in two or morecountries. A well-defined policy outlining the companys commitment regarding taxreimbursement (if any) aligned with your career strategy and culture, needs to beconsidered and communicated to the transferring employees. We briefly discussed social security in our earlier article on employee benefits.Contributions during employment are often regarded as a tax by employers and treatedsimilarly to income tax however, it must not be forgotten that contributions confer abenefit at retirement or some other life event. Preventing employees from contributing orplacing them in a position where they cannot contribute by virtue of a payroll decisionmay result in a loss of state benefits at some point in the future. Further, many foreigncountry social security plans require minimum periods of contribution before any benefitat retirement is payable, often 10 or more years. Any contributions made that do notresult in the required minimum are forfeited. 4. Benefits — We covered employee benefits for mobile employees extensively in ourearlier article and wont repeat that here other than to point out that a younger workforceperceive employee benefits as not only providing security for some of lifes challengesbut also providing lifestyle features such as massage, chiropractic, Employee AssistancePrograms, legal services and other features that will be expected to continue while onassignment. An assignment will be more attractive to a younger mobile family if benefitsand perquisites enjoyed at home remain unchanged.
5. Relocation — Travel expenses including some hotel time until localaccommodation is found or made ready, and the transportation of reasonable householdgoods and personal effects will have to be provided. Possibly an allowance is needed too,as an offset for all of the one-time costs associated with replacement of electricalequipment, disconnection and reconnection of utilities, the replacement of licences, etc. 6. Home Leave — Ongoing, there will be the question of home leave. So manyquestions crop up: How often can the employee (and family) return home each year?What is defined as the home country? What class of travel is allowed? Is car rentalincluded? Is accommodation included if the employee has no retained home? Do businesstrips to the home office count as home leave? Can family members travel separately? Canfamily members not resident in the host location use home leave to visit? Is travel timededucted from vacation? The answers will all need to be considered in your policy, andpreferably in advance. If people are working in hardship locations, you may also need toconsider R&R leave to a local destination. A large organization does not succeed globally by travelling business class, staying atthe Four Seasons and using video conferencing. There is no substitute for internationalexperience at the top, and the best return on investment may be from using skilledexpatriates in other parts of the organization. The supply of mobile talent is diminishing and employers will need to work harder toattract and retain this competency. Younger people who regard work as a commodity arefar less inclined to rely on the “trust me” response that their parents accepted whencompanies were in the throes of developing international assignment programs andcareers last a life time. Thoughtful, informative and exhaustive policies will need to beavailable during recruitment of potential new recruits that cover not only security andcare, but also career and post-assignment opportunities. When developing international terms and conditions for their mobile employees,companies typically benchmark the prevalence of their program against otherorganizations to determine “competitiveness”. In other words, if we do what everyoneelse is doing we shall be in good company. But this is not like domestic compensation. The international project that you aretrying to staff is more often than not crucial to your business and so developing programsthat uniquely support your strategy, and align with your culture and values will be key toretention and attraction. Most mobile employees tend not to job hop because of features in internationalprograms. Your organizations success will be measured by how it deploys talent globallyto execute key strategies ahead of its competition. These measures include: the return from talent deployed internationally; how wellskills are matched to assignment objectives; how the competency of mobility is used andretained; how international experience is utilized post assignment; and increasing thespeed and effectiveness of skill and technology transfer to local operations. As international projects become more important and the supply of employees willingto relocate diminishes, employers following these principles may help reduce risk andimprove the effective deployment of this new breed of mobile employee.— Paul Pittman is the senior partner and founder of The Human Well(www.thehumanwell.com), a collaborative HR consulting practice located in Oakville,Ont., with clients globally that helps mining companies developand manage expatriate
programs. He previously held executive HR positions with Alcan, RJR Nabisco/JapanTobacco, Laidlaw and Massey-Ferguson, and was the Canadian HR practice leader forArthur Andersen. He has lived in the U.K., Canada and Switzerland, and managedpension, benefit and compensation plans globally.