For most companies with globally mobile employees, there is constant tension between the need to deploy and retain key talent where it is needed and minimising the costs of doing so. It’s no secret that international assignments are expensive, so when employees have been on long-term assignment terms and conditions for five years or more, transitioning them on to local terms of employment may present an opportunity for significant cost savings. ECA’s recent Localisation Survey found that more than two-thirds of companies expect their number of localisations to increase in the next three years, with cost saving given as the main reason for this. Highlights from the survey are shown below.
While localisation has obvious advantages for the company, the local salary package on offer may not be competitive enough to motivate the employee to localise, which presents a challenge where the business needs them to stay longer, perhaps permanently, in the host location. Individual circumstances and local labour law can also have an impact on the extent to which localisation can be achieved. A fully localised employee should receive a host-based salary and benefits package, including host-based pension provision, and be contracted to the host country entity, yet only 56% of companies report that they localise their employees to this extent.
The survey explored the compromises companies make to achieve at least some of the savings that localisation offers. Companies most commonly remove assignment-related pay such as COLA, mobility and hardship allowances completely at the point of localisation, although a minority remove them more gradually, partially or not at all. Companies are more cautious about how quickly they remove education and housing benefits, commonly phasing them out over three years to give employees time to adjust.
Employees who are told at the start of their assignment about the potential for localisation and what that means should have more reasonable expectations than those who are told nothing and might therefore expect their assignment to continue indefinitely. Currently, only a third of companies communicate their localisation policy at the start of the assignment, due in part to only 42% having one. Having a robust policy in place can help to achieve the desired cost savings by defining when localisation should happen and limiting the extent to which employees negotiate the retention of certain long-term assignment benefits.
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Interested in learning more? Our recent webinar features ECA experts discussing how companies manage the process of localising assignees and overcome common challenges.
To benchmark and review your localisation policy based on best practice in the industry, you can purchase a copy of the survey results from the Surveys area of our website.
Our experienced consultancy team can help you to design global mobility policies, whether you are creating them for the first time or reviewing existing approaches. Contact us to find out more.
ECA's Net-to-Net Calculator provides the information you need to negotiate and explain a local salary offer to your employees. It applies ECA’s dependable tax data to gross salaries to compare the net salary of a local package against the home net salary, helping you to quickly assess the suitability of a local salary and the adjustment required, if any, to deal with any shortfall. Contact us for a demonstration of the tool or for our team to carry out a calculation for you.