Organisations generally spend insufficient time creating a well-designed mobility strategy and policy. This is dangerous given that the highest employee turnover is at the beginning and end of international assignments, indicating a lack of integration of mobility pay philosophy with the broader organisational pay philosophy.
The remuneration of regionally mobile employees often tends to be a rushed last minute decision due to urgent operational requirements. The resulting implications often only arise after the regionally mobile employee arrives in the host country, and when the assignment comes to an end.
Inconsistent treatment of regionally mobile employee quickly leads to unhappy employees. Once an organisation has more than 1 or 2 regionally mobile employees in the field, it becomes vital to have a defensible pay philosophy in place. This philosophy should clearly convey the organisation’s remuneration principles regarding both short- and long-term assignments. The pay philosophy is intended to provide guidance in the consistent and equitable treatment of all regionally mobile employees and forms the basis of the organisation’s Mobility policy.
Most large global organisations have over time, established a clear policy for remunerating regionally mobile employees. This is often a legacy policy, where past practice has become policy. However regionally mobile employee pay is a complex area of remuneration with complex issues such as volatile exchange rates, weak and strong currencies, constantly changing differences in cost of living between countries, different tax regimes, as well as the reality that there are attractive and not so attractive countries to work and live in. This is an area where a clear philosophy and an aligned practical policy are required to ensure attraction, fairness, equity, motivation and retention.
The overall aim of the remuneration charter is to develop remuneration practices that support the achievement of the strategic goals of the client. The philosophy underpinning the policy is that people should be rewarded for their performance within the context of the client.
The objective is therefore to create reward processes that are based on beliefs about what the client values and is prepared to pay for.
To achieve this purpose, the following best practice criteria are adhered to:
- The remuneration charter aims to attract, retain and motivate superior performers.
- The remuneration charter reflects the dynamics of the market and the context in which the client operates.
- The remuneration charter shall ensure internal equity and alignment, and consistency within the client.
- The remuneration charter will also take cognisance of external equity and market practice.
The remuneration charter will support a drive for real growth. The Remuneration charter will provide a relevant framework and approach to remuneration decision making, whilst retaining flexibility to respond to bespoke remuneration challenges.
The success of the client will be dependent on the ability to attract, retain, motivate and reward highly skilled and productive employees. This will need to be done in a transparent, competitive and fair manner.
This Remuneration charter will ensure the formulation and implementation of strategies and policies that will reward people fairly, equitably and consistently in accordance with their value to The client. This remuneration charter will form an integral part of the entire employee value proposition and will serve to position The client as a leading employer. The client will provide a holistic and balanced portfolio of competitive remuneration, recognition and development opportunities, where high performing individuals will receive competitive rewards and career advancement.
The overall aim of the Mobility Policy is to develop remuneration practices that support the achievement of the strategic goals of organisations. The philosophy underpinning the policy is that people should be rewarded for their performance within the context of the organisation.
The objective is therefore to create reward processes that are based on beliefs about what an organosation values and is prepared to pay for.
To achieve this purpose, the following best practice criteria are adhered to:
- The Mobility Policy aims to attract, retain and motivate superior performers.
- The Mobility Policy reflects the dynamics of the market and the context in which an organisation operates.
- The Mobility Policy shall ensure internal equity and alignment, and consistency within the organisation.
- The Mobility Policy will also take cognisance of external equity and market practice.
The Mobility Policy will support a drive for real growth. The Mobility Policy will provide a relevant framework and approach to remuneration decision making, whilst retaining flexibility to respond to bespoke remuneration challenges.
The success of an organisation will be dependent on the ability to attract, retain, motivate and reward highly skilled and productive employees. This will need to be done in a transparent, competitive and fair manner.
This Mobility Policy will ensure the formulation and implementation of strategies and policies that will reward people fairly, equitably and consistently in accordance with their value to the organisation.
The mobility policy is specifically focused on the needs of globally mobile employees, whether it is a short- or long-term assignment. The benefits of this policy development include:
- Consistency in decision-making regarding remuneration, thereby enhancing internal equity;
- Differentiation based on assignment duration, and level within the business;
- A record of the guidelines that inform all remuneration decisions; and
- Determination of the strategic intent of remuneration decision-making, thereby enhancing the organisation’s profile as an employer of choice.
- Guide decision making not only in respect of globally mobile employees, but also for employees that are mobile within a specific region.
Emergence Growth has pleasure in describing our approach for this element of the project. In order to derive robust compensation data, South Africa will form the basis of the analysis. We will construct the model in such a way that additional countries could be added to the model at any point in time.
The specific approach to this can be summarised as follows:
- 83% of organisations that employ Expatriates use the build-up methodology, based on the home base salary.
- Using data provided by Emergence Growth regarding expatriate Cost of Living (COL) and Hardship Allowances, Emergence Growth will conduct build-up calculations and formulate accurate pay data for staff recruited across the different countries in which the organisation operates;
- Make recommendations as to the most appropriate pay structure for The client;
- Data would be presented in the form of Guaranteed Pay (Basic Salary plus Allowances and company contributions).
- Emergence Growth will deliver a report covering the basis for remuneration for all staff recruited into different countries.
- The build-up model will allow the client to be flexible regarding structuring of remuneration packages, in line with the requirements of both the business and the specific markets in which the client operates.
The output of this component of work is an Excel based model that can be flexibly utilised when sending staff on long-term assignments.
A sample of the output is shown below:
Cost of Living
When staff are relocated to either other cities/countries, it becomes important to ensure that the remuneration they receive does not get impacted negatively through differing costs in the new location.
Cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time are often operationalised in a cost of living index. Cost of living calculations are also used to compare the cost of maintaining a certain standard of living in different geographic areas. Differences in cost of living between locations can also be measured in terms of purchasing power parity rates.
Employment contracts, pension benefits, and government entitlements (such as Social Security) can be tied to a cost-of-living index, typically to the Consumer Price Index (CPI). A Cost of Living Allowance (COLA) adjusts salaries based on changes in a cost-of-living index. Salaries are typically adjusted annually. They may also be tied to a cost-of-living index that varies by geographic location if the employee moves. In this later case, the expatriate employee will likely see only the discretionary income part of his salary indexed by a differential CPI between the new and old employment locations, leaving the non-discretionary part of the salary (e.g. mortgage payments, insurance, car payments, etc.).
Annual escalation clauses in employment contracts can specify retroactive or future percentage increases in worker pay which are not tied to any index. These negotiated increases in pay are colloquially referred to as cost-of-living adjustments or cost-of-living increases because of their similarity to increases tied to externally-determined indexes.
Emergence Growth is able to assist by providing Cost-of-Living data for 182 city combinations globally. The data is collected throughout the year, and can be provided within 2 – 3 days of receipt of the request.