28 Aug Foreign Talents: Are You with OK with Local-Plus Hiring? Same Salary yet Perks-Driven
The traditional expatriate package is becoming more expensive for organizations to shoulder. Yet paying an assignee or an employee relocating to another country the local rates of their local counterparts might prove too much of an adjustment, and might even demoralize them. Global mobility managers facing that dilemma have one option that is becoming more popular in the global mobility sector: the local-plus approach. It is the middle ground between the two aforementioned packages and salary structures, and yet it can be more attractive especially to millennial assignees.
As ECA International defines it, the local-plus approach offers assignees and/or expatriates the salary (and attendant bonuses) very similar to or practically identical with their local colleagues.
The rates would also be paid in the currency of the local or host country. But elevating this approach from the purely local one is that the organization adds benefits and perks that the local employees do not enjoy.
Some examples are as follows: children’s education allowance (which is not to be confused with tuition and school fees); housing allowance; home leave trips; relocation assistance; repatriation allowance; and allowances for costs associated with settling in.
The first advantage to the employer is obvious: cost reduction. The assignee would not be paid the usual executive salary given to expatriates. The other is workforce morale: any envy or resentment that the locals would feel at having a foreigner work with them is dissipated by the knowledge that all of them are being paid the same rates; at the same time, the assignee, sensing the lowering of emotional and professional barriers because of this aspect, would feel more accepted and perhaps adapt more quickly.
This new team player would not have to shoulder economic difficulties brought about by this transition. For example, while they might have to pay for their kids’ education in an international school, the allowance provided by the organization can be used to buy school books.
To make this approach effective, the global mobility manager would have to look at some of its aspects. First, obviously, this compensation package is not for everyone.
According to SHRM, it is best applicable for the following kinds of recruits: nationals from the home country who have been hired locally; international transfers who have been relocated without any definite date of return; and assignees who see it as an investment for their professional advancement.
Then there is the impact of the purchasing power of his salary in its current currency on the assignee in their new home region. While assignees might have to take a pay cut or a reduction in rate to avail of a local-plus assignment, they must not feel that same reduction in their purchasing power or quality of life. Otherwise, they just might pack their bags and request to return home ASAP.
This is where the global mobility manager and their accountants have to do some serious pencil-pushing. For example, a Canadian who transfers to Northern California and receives the local salary given their American counterpart may welcome the change, given the exchange value of the American dollar compared to the Canadian dollar. However, this does not mean that the global mobility manager can relax. Despite his dollar payment, the Canadian assignee would then check how much net savings he would have left, after spending for his daily needs and lifestyle habits in the United States.
On the other side of the coin, an American who is assigned to Canada and receives the same salary as a Canadian senior software engineer may no longer afford some indulgences he is used to at home. To make life more comfortable for him, and ensure productivity, the company could give him allowances for memberships in the gyms and restaurant clubs he enjoys as well as other perks.
The local-plus approach is more flexible than most other assignee compensation packages. Global mobility managers should explore it, hand-in-hand with assignees who have a knack for the adventurous and thus might be more open to it.