VIENNA TOPS QUALITY OF LIVING

Trade tensions and populist undercurrents continue to dominate the global economic climate. Combined with the spectre of monetary policy tightening and volatility looming over markets, international businesses are under more pressure than ever to get their overseas operations right. Mercer’s 21st annual Quality of Living survey shows that many cities around the world still offer attractive environments in which to do business, and the best understand that the quality of living is an essential component of a city’s attractiveness for businesses and mobile talent.

 

Globally, Vienna tops the ranking for the 10th year running, closely followed by Zurich (2). In joint third place are Auckland, Munich and Vancouver – the highest ranking city in North America for the last 10 years. Singapore (25), Montevideo (78) and Port Louis (83) retain their status as the highest ranking cities in Asia, South America and Africa respectively. Despite still featuring at the bottom of the quality of living list, Baghdad has witnessed significant improvements related to both safety and health services. Caracas, however, saw living standards drop following significant political and economic instability.

 

“Strong, on-the-ground capabilities are integral to the global operations of most international businesses and are in large part driven by the personal and professional wellbeing of the individuals that companies place in those locations,” said Ilya Bonic, Senior Partner and President of Mercer’s Career business. “Companies looking to expand overseas have a host of considerations when identifying where best to locate staff and new offices. The key is relevant, reliable data and standardised measurement, which are essential for employers to make critical decisions, from deciding where to establish offices to determining how to distribute, house and remunerate their global workforces.”

Mercer’s authoritative survey is one of the most comprehensive of its type in the world and is conducted annually to enable multinational companies and other organisations to compensate employees fairly when placing them on international assignments. In addition to valuable data on relative quality of living, Mercer’s survey provides assessment for more than 450 cities throughout the world; this ranking includes 231 of these cities.

This year, Mercer provides a separate ranking on personal safety, which analyses cities’ internal stability; crime levels; law enforcement; limitations on personal freedom; relationships with other countries and freedom of the press. Personal safety is the cornerstone of stability in any city, without which business and talent cannot thrive. This year, Western Europe dominates the rankings, with Luxembourg named as the safest city in the world, followed by Helsinki and the Swiss cities of Basel, Bern and Zurich in joint second. According to Mercer’s 2019 personal safety ranking, Damascus ranked bottom in 231st place and Bangui in the Central African Republic scored second lowest in 230th place.

“The security of the individual is informed by a wide range of factors and is constantly in flux, as the circumstances and conditions in cities and countries change year over year. These factors are crucial for multinationals to consider when sending employees abroad because they consider any concerns around the expat’s own safety and can have a significant impact on the cost of international compensation programmes,” said Slagin Parakatil, Principal at Mercer and Global Product Owner for its Quality of Living research. “In order to stay abreast of the quality of living across all the locations where staff are deployed, companies need accurate data and objective methods to help them determine the cost implications of changing living standards.”

 

Regional breakdown   

Europe

European cities continue to have the highest quality of living in the world, with Vienna (1), Zurich (2) and Munich (3) not only ranking first, second and third in Europe, but also globally. As many as 13 of the world’s top 20 spots were taken by European cities  The major European capitals of Berlin (13), Paris (39) and London (41) remained static in the rankings this year, while Madrid (46) rose three places and Rome (56) climbed one. Minsk (188), Tirana (175) and St. Petersburg (174) remained the lowest ranking cities in Europe this year, while Sarajevo (156) rose three places due to a fall in reported crime.

The safest city in Europe was Luxembourg (1), followed by Basel, Bern, Helsinki and Zurich in joint second. Moscow (200) and St. Petersburg (197) were Europe’s least safe cities this year. The biggest fallers in Western Europe between 2005 and 2019 were Brussels (47), due to recent terrorist attacks, and Athens (102), reflecting its slow recovery from economic and political upheaval following the global financial crisis.

 

Americas

In North America, Canadian cities continue to score highest with Vancouver (3) ranking highest for overall quality of living, as well as sharing the top spot with Toronto, Montreal, Ottawa and Calgary for safety. All US cities covered in the analysis fell in the rankings this year, with Washington DC (53) the biggest faller. The exception was New York (44), rising one place as crime rates in the city continue to fall. Detroit remains the US city with the lowest quality of living this year, with the Haitian capital of Port-au-Prince (228) the lowest in all the Americas. Internal stability issues and public demonstrations in Nicaragua meant that Managua (180) fell seven places in the quality of living ranking this year, and ongoing cartel-related violence and high crime rates meant that Mexico, Monterrey (113) and Mexico City (129) also remained low.

In South America, Montevideo (78) again ranked the highest for quality of living, whilst continued instability saw Caracas (202) fall another nine places this year for quality of living and 48 places for safety to 222ndplace, making it the least safe city in the Americas. The quality of living remained broadly unchanged from last year in other key cities, including Buenos Aires (91), Santiago (93) and Rio de Janeiro (118).

 

Middle East and Africa

Dubai (74) continues to rank highest for quality of living across the Middle East, closely followed by Abu Dhabi (78); whereas Sana’a (229) and Baghdad (231) rank lowest in the region. The opening of new recreational facilities as part of Saudi Arabia’s 2030 Vision saw Riyadh (164) climb one place this year, and a decline in its crime rate and a lack of terrorist incidents over the last twelve months saw Istanbul (130) rise four places. The Middle East’s safest cities are Dubai (73) and Abu Dhabi (73). Damascus (231) is the least safe city, both in the Middle East and the world.

In Africa, Port Louis (83) was the city with the best quality of living and also its safest (59). It was closely followed for overall quality of living by the South African cities of Durban (88), Cape Town (95) and Johannesburg (96), though these cities still rank low for personal safety, and issues around water scarcity contributed to Cape Town falling one place this year. Conversely, Bangui (230) scored the lowest for the continent and also ranked lowest for personal safety (230). Gambia’s progress toward a democratic political system and improved international relations and human rights meant that Banjul (179) had the most improved quality of living in Africa, but also in the world, rising six places this year.

 

Asia-Pacific
In Asia, Singapore (25) has the highest quality of living, followed by the five Japanese cities of Tokyo (49), Kobe (49), Yokohama (55), Osaka (58), and Nagoya (62), and then Hong Kong (71) and Seoul (77), which rose two places this year as political stability returned following the arrest of its president last year.

 

In South East Asia, other notable cities include Kuala Lumpur (85), Bangkok (133), Manila (137), and Jakarta (142); and in mainland China: Shanghai (103), Beijing (120), Guangzhou (122) and Shenzhen (132).

 

Of all the cities in East and South East Asia, Singapore (30) ranked the highest in Asia and Phnom Penh (199) the lowest, for personal safety. Safety continues to be an issue in the central Asian cities of Almaty (181), Tashkent (201), Ashgabat (206), Dushanbe (209) and Bishkek (211).

 

In Southern Asia, the Indian cities of New Delhi (162), Mumbai (154) and Bengaluru (149) remained unchanged from last year’s ranking for overall quality of living, with Colombo (138) topping the ranking. In 105th place, Chennai ranks as the region’s safest city, while Karachi (226) is the least safe.

 

New Zealand and Australia continue to rank highly in quality of living, with Auckland (3), Sydney (11), Wellington (15), and Melbourne (17) all remaining in the top 20. Australia’s major cities all rank within the top 50 for safety, with Auckland and Wellington topping the safety ranking for Oceania in joint 9th place.

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Mercer Notes

Mercer produces worldwide quality of living rankings annually from its Worldwide Quality of Living Survey. Individual reports are produced for each city surveyed. Moreover, comparative Quality of Living indexes between a base city and host city are available, as are multiple-city comparisons. Details are available at www.mercer.com/qualityofliving.

The data was analysed between September and November 2018, and it will be updated regularly to account for changing circumstances. In particular, the assessments will be revised to reflect significant political, economic, and environmental developments. The list of rankings is provided to media for reference, and should not be published in full. The top 10 and bottom 10 cities in either list may be reproduced in a table.

The information and data obtained through the quality of living reports are for information purposes only and are intended for use by multinational organisations, government agencies, and municipalities. They are not designed or intended for use as the basis for foreign investment or tourism. In no event will Mercer be liable for any decision made or action taken in reliance of the results obtained through the use of, or the information or data contained in, the reports. While the reports have been prepared based upon sources, information, and systems believed to be reliable and accurate, they are provided on an “as-is” basis, and Mercer accepts no responsibility/liability for the validity/accuracy (or otherwise) of the resources/data used to compile the reports. Mercer and its affiliates make no representations or warranties with respect to the reports, and disclaim all express, implied and statutory warranties of any kind, including, representations and implied warranties of quality, accuracy, timeliness, completeness, merchantability, and fitness for a particular purpose.

 

Quality of Living – City Attractiveness: Dedicated for Cities

Mercer also helps municipalities to assess factors that can improve their quality of living rankings. In a global environment, employers have many choices about where to deploy their mobile employees and set up new business. A city’s quality of living can be an important variable for employers to consider.

Leaders in many cities want to understand the specific factors that affect their residents’ quality of living and address those issues that lower a city’s overall quality of living ranking. Mercer advises municipalities by using a holistic approach that addresses the goals of progressing towards excellence and attracting both multinational companies and globally mobile talent by improving the elements that are measured in its Quality of Living survey.

 

Mercer Hardship Allowance Recommendations

Mercer evaluates local living conditions in more than 450 cities surveyed worldwide. Living conditions are analysed according to 39 factors, grouped in 10 categories:

  • Political and social environment(political stability, crime, law enforcement, etc.).
  • Economic environment(currency exchange regulations, banking services).
  • Socio-cultural environment(media availability and censorship, limitations on personal freedom).
  • Medical and health considerations(medical supplies and services, infectious diseases, sewage, waste disposal, air pollution).
  • Schools and education(standards and availability of international schools).
  • Public services and transportation (electricity, water, public transportation, traffic congestion, etc.).
  • Recreation(restaurants, theatres, cinemas, sports and leisure).
  • Consumer goods(availability of food/daily consumption items, cars).
  • Housing(rental housing, household appliances, furniture, maintenance services).
  • Natural environment(climate, record of natural disasters).

The scores attributed to each factor, which are weighted to reflect their importance to expatriates, permit objective city-to-city comparisons. The result is a Quality of Living index that compares relative differences between any two locations evaluated. For the indices to be used effectively, Mercer has created a grid that enables users to link the resulting index to a quality of living allowance amount by recommending a percentage value in relation to the index.

 

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About Mercer

Mercer delivers advice and technology-driven solutions that help organisations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 23,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With nearly 65,000 colleagues and annual revenue over $14 billion, through its market-leading companies including MarshGuy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer. In the UK, Mercer Limited is authorised and regulated by the Financial Conduct Authority.

Mercer talks about BREXIT

Memo from GLOBALHRnews:   This was prepared/written prior to the House of Commons vote March 12

By Kate Fitzpatrick, Mercer

 

At the time this article is published at the beginning of March 2019, the United Kingdom is legally set to leave the European Union without a deal on 29 March 2019, unless a breakthrough on the current political impasse can be achieved.

Such a breakthrough would either result in a version of the current proposed deal being ratified by UK and EU parliaments, or an extension to the Article 50 agreement to be agreed by both parties.

Whatever happens, the ongoing uncertainty has made it difficult for companies with operations in the UK to plan effectively with regard to short-, medium-, and long-term investment, supply chain management, talent acquisition, and retention strategies, and the management of their cross-border EU workforces.

Preparations for all scenarios are being made in the UK and EU at a government, industry, and organization level, and individuals directly impacted by this situation (i.e. UK nationals living and / or working in the EU, or EU nationals living and / or working in the UK) are seeking legal clarification on their residence and right to work status.

While many have taken a ‘watch and wait’ approach to this issue from a Mobility perspective until recently on the expectation that a deal would be passed to allow further time to plan for future changes, most are now taking steps to be prepared should a ‘no deal’ Brexit on 29 March 2019 come to pass.

IMMIGRATION, SETTLED STATUS, AND EMPLOYEE SUPPORT

The most pressing personal and legal issue for most employees and employers is the post-Brexit immigration status of UK nationals in the EU, and EU nationals in the UK. Should the current Withdrawal Agreement be approved, free movement will continue until 31 December 2020, and a transition period for EU nationals to acquire ‘settled status’ in the UK will apply until 21 June 2021.

While the majority of impacted jurisdictions have confirmed that those already in country on 29 March 2019 will have their rights protected and be granted leave to remain regardless of whether a formal deal is reached, the rules and mechanisms for achieving this status vary from state to state, and much of the detail is yet to be clarified.

BE PREPARED ACTIONS

  • Audit your current assignee and cross-border worker population into the UK and EU to determine their nationality(ies), as well as those of any accompanying family members.
  • Flag any assignments into the UK or EU with start dates post-29 March, which had until this point relied upon EU freedom of movement rules for the right to work and reside in the host location (including assignments from third countries where the employee or their accompanying family members may be EU or UK nationals). Manage expectations with the business and employee, and consider bringing start dates forward if practical to do so.
  • Determine what level of support – if any – you will provide to impacted assignees and their family members, and communicate this to them. Support may range from ‘light touch’ (i.e. directing employees to relevant government websites), to covering formal legal advice and processing support for more complex cases on a case-by-case basis. Consider the support being offered to EU or UK nationals employed locally in each country, to ensure a consistent experience for all those impacted by this change.
  • Consult with your immigration provider to see what resources they have available to support you.

PREPARE YOUR EU AND UK EMPLOYEES FOR BREXIT: RESOURCES FOR EMPLOYERS

The UK’s Settlement Scheme to register EU nationals in the UK for settled status after Brexit is already open in pilot phase and launches in full on 30 March 2019. EU member states are also now implementing their plans to settle UK nationals in the EU.

Business immigration specialists Newland Chase have covered many of the latest updates in their new white paper BREXIT: Current Status for EU and UK Nationals in the Event of Either an Orderly or Disorderly Brexit and live webinar Remaining in the UK after Brexit: Essential Settlement Guidance for EU Nationals on 11 March.

 

SOCIAL SECURITY AND PAYROLL

As with the immigration situation outlined above, if the EU and the UK agree the proposed Withdrawal Agreement, current UK / EU social security arrangements will continue on an ‘as is’ basis, and employers will  be able to continue to obtain A1 certificates during the transition period, expected to last until 31 December 2020. Should the UK leave the EU on 29 March 2019 without a deal however, the UK would no longer be party to existing EU social security regulations, effective immediately. In that case, existing bilateral Social Security Agreements between the UK and certain EEA countries may came back into force, however these agreements are generally limited in scope, are by definition outdated, and do not exist with all of the current EU member states.

The consequences of a no deal arrangement therefore fall into three main categories: cost, coverage, and compliance.

  • Cost and Coverage: Additional social security liabilities may be incurred as a result of the application of higher host country rates of social security, or because dual liabilities in both the UK and EU member states will apply. There may also be a cost impact to individuals in terms of reduced access to state benefits like pensions, welfare, and healthcare if home country contributions are not maintained, and associated company costs to provide insurance coverage in lieu of access to state benefits, in particular regarding healthcare.
  • Compliance: Accurate and timely reporting of company sourced income is already a challenging part of mobility administration and compliance, and any changes to the status quo will result in further complexity and levels of activity, particularly regarding payroll.

 

BE PREPARED ACTIONS

  • Audit your current assignee and cross-border worker population to identify those who would be no longer eligible for an A1 certificate from 29 March in the event of a no deal.
  • Identify any assignments between the UK and EU with start dates after 29 March.
  • Work with your tax, payroll and benefits providers to identify and calculate any additional potential costs (e.g. liabilities, additional administration costs, the provision of expatriate benefits in lieu of those covered by the state (e.g. healthcare).
  • Manage expectations with the business and employee: pro-actively communicate any information regarding additional costs, compliance activities, risks and support provisions.

COMPENSATION, ALLOWANCE, AND CURRENCY CONSIDERATIONS

As many will recall, GBP suffered a significant depreciation immediately after the result of the referendum to leave the EU was announced in June 2016. This impacted the spendable or savings portions of income for assignees both into and out of the UK to varying degrees, and many organizations conducted interim cost of living or currency protection reviews later that year to address this issue for international assignees negatively impacted at that time.

While we cannot predict the impact of either a deal or no deal on currency markets towards the end of March this year, there are well-established protocols for addressing currency volatility and inflation fluctuations depending on policy type, the use of home or host compensation models, the ability to deliver split payroll, and company policy and processes.

For further information on these approaches, please refer to our article on this topic, Talent Strategy in Times of Currency Volatility and Inflation Fluctuation.

 

With regard to the specific actions Mercer’s Mobility research teams will be taking in the coming weeks and months, we will be actively monitoring the following:

  • Exchange Rates. As part of our core service offering, Mercer publishes updated exchange rates on a regular basis, and will continue to do so. Please do note however that any volatility will not be evident in the rates available online immediately. The ICS/ORC data set uses a weekly average exchange rate, and the GHRM data uses a monthly average. As such, Mercer generally advises to wait for at least one full FX rate cycle to pass before making any off-cycle adjustments. However, both methodologies and online data platforms allow you to override these default rates with your own spot rate if required.
  • Cost of Living. Mercer will be publishing our March survey data for all locations including the UK in early May as scheduled. That said, it is widely anticipated that in the event of a no deal Brexit, there will be disruption to UK / EU supply chains which will impact the availability (and therefore potentially the costs) of some goods in the short to medium term. As such, Mercer will, if necessary, conduct interim surveys in June 2019 to assess the impact of such a scenario, and monitor prices of some key items more frequently if needs be. (To the extent such a scenario could impact other locations outside of the UK (e.g. the Republic of Ireland), then these locations will be also be considered for interim updates at the appropriate time).It is important to note however that there are almost 200 items in the cost of living market baskets, including goods and services, and only some of these items are heavily dependent on just-in-time UK / EU supply chains (e.g. seasonal fresh produce).
  • Housing and Quality of Living. We will continue to monitor the cost and availability of housing, and all of our Quality of Living factors in the usual way during this period, and conduct interim surveys and issue alerts should there be any significant changes.

 

BE PREPARED ACTIONS

  • Identify the assignee population eligible for any currency protection or interim cost of living review after 29 March.
  • Validate your policy positions with regard to any thresholds which would need to be met in terms of currency volatility or inflation, to trigger eligibility for any interim review / adjustment.
  • Proactively communicate your approach to assignees who may be impacted if you have not already done so.
  • Contact Mercerfor guidance if needs be.

 

WORKFORCE PLANNING AND SITE SELECTION

Any practical interventions required to mitigate the impact of a ‘no deal’ Brexit – should it come to pass – will create disruption in the short to medium term, but as mobility professionals we are experienced at dealing with such matters.

The longer term impact of the UK’s withdrawal from the European Union is already having far wider implications from a strategic workforce planning perspective, however, in the UK, the EU, and beyond. Cities like Dublin, Paris, Frankfurt, and Amsterdam have all seen an increase in the number of expatriates as multinational companies open branch offices in alternate EU markets, and other companies are relocating some of their operations out of the EU altogether to align with key markets, especially in Asia.

For those interested in Mercer’s research and expertise on these matters, we encourage you to access the following insights, and speak with your Mobility Consultant in the first instance to direct you to the relevant people in your local market.

Mercer’s Workforce Monitor Reports: Exploring in-depth the issue of UK talent shortages in light of Brexit, an aging workforce and the digital future of work, these reports highlight the impact of such changes by industry, region, and demographic, and encourage organizations to think more creatively about talent, development and productivity.

 

BE PREPARED ACTIONS

  • Engage with business leaders to understand future company strategy with regard to the opening or scaling up of operations in new or smaller locations. The earlier Mobility can be brought into the conversation, the more effective your planning for such cross-border talent deployments can be.
  • Collaborate with Talent colleagues to understand how cross-border work opportunities can be used to address talent shortages and develop skills and leaders for tomorrow, and ensure you have the policies and programs in place to support this.

CONCLUSION

Brexit is one of many geopolitical and economic issues impacting multinational organizations today, but it does present some unique challenges to HR and Mobility professionals trying to manage a complex issue in a time of particular uncertainty. We will provide further updates as and when there is further clarity on the legal – and therefore practical – way forward.

Should you have any queries in the meantime, please do not hesitate to contact Mercer.

 

Mercer.Mobile talent risks

Managing Mobile Talent Risks; What are we talking about?

Physical Health and Mental Health, Financial, Security, Data, Reputation, Diversity

By Olivier Meier, Mercer

 

This topic will be among those discussed at the 2019 Mercer Expatriate Management Conference in Brussels on 6-7 June. Early registration discounts are available through 31 March 2019.

The recently released 14th edition of the Global Risks Report, prepared by the World Economic Forum with the support of Marsh & McLennan Companies and other partners, examines the evolving macro-level risk landscape and highlights major threats that may disrupt the world in 2019 and over the next decade.

It describes the major challenges that governments, companies, and individuals will have to face, including abrupt technological changes, more frequent natural disasters, geopolitical tensions, and risks of social turmoil.

At a time when many mobility discussions are focused on flexibility, self-service, and the long-heralded disappearance of the traditional expatriate assignments, this depiction of global risks provides a stark reminder that international talent mobility remain a complex exercise that can put employees in harm’s way physically, emotionally, and financially.

The new generations are not necessarily better equipped than their predecessors to manage security issues, financial problems, health considerations, and other types of risks. More than ever, companies need well-thought strategies to manage risks.

 

IDENTIFYING RISKS

Risks linked to global mobility cover a much bigger range of issues than just security and compliance. Risks impacting the assignee and the organization can be:

  • Physical: for example, health or security issues threatening the employees.
  • Psychological: repeated stress affecting assignees and their families – ultimately impacting performance and leading to talent attrition.
  • Operational: disruptions to the business in the host location.
  • Data-related:  moving talent implies circulating their personal data across jurisdictions – this leads to increased compliance risks.
  • Financial: ultimately many of the issues are likely to result in additional costs for the organization and in some cases for the assignees themselves.
  • Reputational: mismanaged assignments can lead to a negative perception of mobility programs and even impact the overall employer branding.

It is important to bear in mind that risks can be invisible. An invisible risk is one that results from an issue that the HR department is not aware off. It could be the result of an assignments happening under the radar – moves that are not tracked by mobility team. A risk that increases with the multiplication of new assignments types such as commuters and extended business travelers. It could also be related to a family issue that has not been discussed with the company.

In all cases, organizations have duty of care and are likely to be held accountable if problems arise.

 

UNDERSTAND THE TRUE MEANING OF DUTY OF CARE

The concept of duty of care is coming back in force, and it is not only limited to a legal obligation to preserve employees; it also extends into reputation and moral issues.

In the strict sense, duty of care is about taking all possible steps to ensure the safety, health, and wellbeing of employees. This is a legal requirement that companies cannot ignore. But the scope of duty of care is wider than many think and applies, to a large extent, to the family of the assignees – it is applicable if the family is relocated to the host location with the employee but sometimes also when the family doesn’t live abroad and just visits the assignee for a short period of time.

If a problem arises, the impact to the company’s reputation could be disproportionate: the news that the company is not looking properly after its assignees would spread fast on expat networks and in discussion groups. It requires a proper assessment.

 

ASSESSING RISKS: PROBABILITY, IMPACT, AND PERCEPTION

Potential issues that could affect the organization and the assignees need to be analyzed across three dimensions:

  • Impact
  • Probability
  • Perception

Integrating these dimensions is important because ignoring one of them (most frequently the actual probability or the perception) could lead management to focus on the wrong priorities or misread assignees’ apprehensions.

For example, when asked about the main risk when sent to a hardship locations, many employees and line managers would mention personal safety and terrorist attacks. However, statistically the right answer when considering frequency and fatality is driving. Accidents happen in developed countries, but driving is significantly riskier in some hardship locations where the condition of the roads and the behavior of local drivers depart markedly from the situation in the assignee’s home country. Furthermore, in countries with a weak rule of law, even a minor traffic incident could lead to entanglement with the local police or violent disputes with locals.

 

In practice this means that while companies still need to have comprehensive security measures to prevent terrorist attacks – no compromise is possible on security measures – they also need to address the more frequent practical issues, as well as the overall risk perception bias of assignees. Terrorism is rare but foremost among assignees’ concerns, while driving, although not perceived as problematic, is a far more likely cause of personal injury.

This perception gap need to be addressed – a succession of negative experiences for assignees due to ongoing dissatisfaction, excessive stress, miscommunication, and more generally an accumulation of minor incidents in the host location could lead to talent loss.

 

EXPANDING THE DEFINITION OF RISK: TALENT RISKS

Many organizations take for granted that expatriate turnover is higher than for locals. Many figures circulate about typical expatriate attrition, but the validity of these figures is dificult to gauge due to the absence of common definition and lack of contextual information. In any case, losing highly qualified mobile talent can become a significant burden for the company. Assignee attrition can result in:

  • A loss of know-how: assignees are usually selected for their skills and high potential.
  • Wasted investments: assignees are more expensive than local employees, and the companies invest a lot to support assignments.
  • Unbudgeted costs might result from the need to replace talent.
  • Delayed business development and lower productivity might occur until a suitable replacement for the expatriate is found.

The lack of clear definition of failed assignments is another problem when trying to evaluate talent risks: in Mercer’s 2017 Worldwide International Assignment Policies and Practices, 52% of respondents indicated they didn’t have a definition of failed assignments.

 

The organizations who do have a definition commonly use criteria such as assignment completion and meeting business objectives. However, these criteria remain vague and don’t capture all possible scenarios.

Failed assignments are not just about employees terminating assignments prematurely. They are also about low productivity while on assignment, assignees who leave the company shortly after the end of the assignment, or even the lack of succession planning in the host location.

Digging deeper through the roots causes of failed assignments and their consequences through the use of detailed metrics and analytics can shed a new light on the question of cost containment and reveal that the high cost of expatriate packages – often the cause of uproar and criticisms – pale in comparison to the cost of missed business opportunities and talent loss.

The first step to assess risks that could lead to failed assignments is to understand the degree of hardship in the host location.

 

ASSESSING THE DEGREE OF HARDSHIP OF A LOCATION

Companies need clarity about the situation on the ground to make informed decisions. The governmental sources provide reliable high-level information at country level and on major cities but the level of details might not be sufficient. Governmental and other publicly available sources also tend to a have a scope and purpose than it not relevant for companies. Companies require a different yet objective source to assess the quality of living of assignment locations.

The level of granularity of the assessment matters. In some locations crimes involving mafia and various traffics can inflate crime figures but don’t constitute a threat to assignees. In others countries, on the contrary, wealthy foreigners are prime targets.

Furthermore, not all expatriates are equal when facing risks or, more precisely, risks might be different for various assignee groups.

 

RISK AND TALENT DIVERSITY  

Assignees can be the target of discrimination because of their nationality, ethnicity, religion, social class, gender, sexual orientation, disability, or age. This is further complicated by the fact that some minorities are invisible. Family members of the expatriates themselves can also be the target of discriminations. These issues could be easily overlooked by the company unless they are flagged by the assignees themselves.

An accurate assessment of the degree of discrimination for all assignee groups in each location is needed. A difference should be made between objective barriers (legal or widespread problems) and subjective perception or prejudices that can addressed through training and communication. Whenever possible prejudices should be fought, but it is important to recognize objective difficulties. The assessment of objective hardship levels is important to differentiate real barriers to mobility from simple preference or convenience matters. Compliance and legal teams should be involved in the process for the most problematic locations.

 

DIVERSITY LOCATION RISK ASSESSMENT

Risk level Issues Examples of possible actions
5- Extreme Severe legal restrictions/risk of criminal charges (imprisonment/death) or widespread problems leading to violence ·        No go.

·        Engage with career management team to find alternative.

4– Very high Legal restrictions including visa issues and risk of fines or common issues with serious consequences when dealing with locals. ·        Avoid in the absence of practical solutions to address issues.

·        Involve compliance and risk management teams.

·        Exploring alternative assignment setup (commuting, single assignment) if family is the issue.

·        Engage with career management team to find alternative.

3- Moderate Common issues due to customs/cultural issues with moderate impact on assignee’s daily life ·        Awareness and intercultural training.

·        Proactive facilitation to address common questions.

·        Mentoring.

·        Consider alternative assignment setup.

2-Low Occasional issues with low impact on assignee’s daily life. ·        Awareness and intercultural trainings for assignees, HR and management. Mentoring.
1 -None or very low There are rarely problems ·        Communication on the importance of diversity

 

EXPATS VERSUS LOCALS

Treating expatriates differently from local employees can damage the credibility of the company and lessen employee engagement. In worst case scenario, it raises ethical questions and could trigger liability issues.

The Fukushima disaster provides a good example: expatriates in Tokyo were not in direct danger but there were health concerns that were difficult to evaluate at the time of the disaster.

Companies had to determine if they were going to evacuate their assignees, only the families of the assignees, or ask everybody to stay as the situation was expected to be soon under control. The challenge for the companies was to understand the implications of these decisions and what message it was sending to both expatriates and Japanese employees.

The 2014 civil war in Libya provided an even more dramatic example with the evacuation of thousands of foreigners and the relocation of locals. Many multinationals recognized that leaving some of their local workers was not an option. This was the right choice but it stretched the resources of these organizations to the limit and proved to be difficult from a logistic perspective.

Furthermore, boundaries between expats and locals are often blurred. The multiplication of employee categories – including global nomads or locally hired foreigners who don’t benefit from a guarantee of repatriation and who were not relocated by the company in the first place – can complicate the task.

In case of emergency, this could lead to situations where the company has to evacuate employees to a third country which is not their home location or repatriate them to a home country that they left so long ago and where they don’t have accommodation, a local support network, or family left.

There are also situations where expatriates prefer to make their own choices and companies are tempted to grant them more flexibility

 

THE RISK OF EXCESSIVE FLEXIBILITY AND LAISSEZ FAIRE

Determining how much flexibility you can give to assignees is a delicate exercise. Experienced expatriates might be tempted to decide for themselves. Too much flexibility is a risk – and it is not a question that can be mitigated by putting disclaimers in employees’ contracts. Companies cannot wash their hands of these issues.

 

This flexibility has to be managed carefully and done within reason. Employees might sometimes be willing “to take a chance” but companies have a duty of care and cannot put assignees in harm’s way. Good communication, cultural training, and careful planning can sometimes alleviate some concerns but not always solve all problems in all locations.

 

TIPS TO MITIGATE RISKS

  • Audit what risks, compliance issues, and problems international assignees could face in the host destinations. Establish a duty of care checklist to ensure that no issue is being left out. Establishing this checklist might involve different departments – take a broad definition of duty of care and don’t limit it to the most obvious security risks.
  • Understand that the new types of mobility (such as short assignments, locally hired foreigners, and gig workers) as well as the increasing diversity of expatriate population could increase risks or at least make them more difficult to track.
  • Ensure integrations of the different tracking systems: assess the need to better link travel or tax system to the HR and mobility management systems. Make data submission and reporting easier though mobile apps and real-time reporting systems.
  • Assess your company’s resources in each host locations and if other companies operate in these locations. It makes sense for organizations with more limited resources to pool resources with other companies and develop a network to provide a detailed evacuation strategy as well as on-going support for assignees and their families. Reaching out to other companies operating in the same hardship area is a priority for HR teams.
  • Ensure that assignees are fully prepared for assignments. Cultural trainingsshould be provided not just to understand the basic of the host country culture but also to increase awareness of potential issues. Anticipate health problems by providing pre-assignment health screening and explore new solutions like virtual doctors.
  • Encourage open communication: provide communication channels to allow employees to speak up about possible issues but without intruding into their personal lives. Involve the family in the discussion whenever possible. The role of the receiving country is important: local HR, line management and coworkers should be involved in the discussions.
  • Allow employees to turn down assignments without facing consequence for their career. Give them the possibility to discuss concerns with someone who is not their direct manager. Similarly, the HR or the mobility teams should be in a position to say no to management and employees if the level of risk is not acceptable.

 

THE ROLE OF TALENT MOBILITY TEAMS

HR and Mobility managers are not always directly responsible for all compliance and risk management issues, but they are in a unique position to act as expert advisers and educate the business about potential problems in an internal context, coordinate activities, and anticipate issues.

Furthermore, they are on the front line when it comes to assessing the risks of losing mobile talent.

The increasing involvement of mobility managers in major business issues lead to questions about the responsibilities and purview of the talent mobility function.

It opens up more opportunities for talent mobility team to play a more strategic role in the organization and get recognized for that.

 

For a closer look at this topic, register to attend the 2019 Mercer Expatriate Management Conference, 6-7 June in Brussels.

 

Leadership Development; Helping managers to thrive in their complex leadership roles

I help global business leaders to thrive in today’s complex, uncertain and rapidly changing world.

I worked in International Sales at Mercedes Benz in Germany, Singapore and South Korea for 11 years before starting my own consultancy for International Business Development in 2002. In 2008 I transitioned to professional coaching, and since then I’ve been working with managers and teams at all levels, from high potentials to CEOs in multinational organizations.

My experience and extensive research allow me to understand the complex challenges that managers are facing at leadership, business and individual levels, and to help them to overcome these challenges more effectively.

The managers who work with me:

✔ Increase their confidence and agility leading people and projects across functions, hierarchies and cultures in their complex global business roles.

✔ Learn to ignite their people’s’ intrinsic motivation to contribute and turn them into their strongest allies, achieving outstanding business results with them even in challenging foreign markets.

✔ Stop feeling stressed and start enjoying more ease and success at work and in their personal life.

This Linkedin article includes a success story: http://bit.ly/FromManagerToGreatLeader

I work globally in English, German, and Italian, and deliver my programs in person, via video-conference and online.

My references include Mercedes-Benz (Daimler), Ford Motor Company, Luxottica, Roche, Chiesi, UniCredit, Banca Intesa San Paolo, FCA Bank, E.ON, World Food Programme (United Nations) and many more. I also teach Cross-Cultural Management within the Executive MBA Program at the CUOA Business School in Vicenza, Italy.