He Said / She Said Is Always Expensive

Recently I was asked by a U.S. client why I recommended that they create an international assignment policy for their expatriate employees.  After all, they only had a few employees overseas and previously had resisted the call to “play the lawyer card.” They felt that management could effectively deal with the circumstances of individual situations as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

It's not unusual for small companies or non-profit organizations to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quick.  However, often these casual and hurried arrangements have proven painful experiences:

• The shock faced when coming to grips with actually living in a foreign country.  The realities of daily life, combined with cultural differences compared against “back home” become quite a wake-up call when no longer insulated by the transitory nature of a business or vacation trip.

• The constancy of unforeseen and confusing local situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction that employees lost focus on the job – the reason they were there in the first place.

• Relationships with headquarters suffered as the employee asked for consideration (increased coverage) to redress what they considered gaps in their terms & conditions.  The trust element was weakened as employees felt they were being short-changed.

Coming from an environment where every expatriate was given a detailed assignment letter “before” getting on the plane, I was taken aback by the client’s question – because the absence of mutually agreed terms and conditions is almost certain to prove disruptive.

So why is providing an assignment letter good practice?

• Protection:  Like any contract, confirming assignment details protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.

• Clarity:  Accepting an overseas assignment is a major step for any employee, as well as for family members.  The more you clarify the assignment terms, the more likely you are to ensure a smooth experience for everyone.

• Cost control:  Defines expenses that the company will pay for and conversely what they will not.  An agreement will mitigate issues arising once the expatriate is on the ground overseas.  Concerns raised once the assignee is relocated usually result in increased company costs, as negotiating leverage is lost and the company feels compelled to avoid alienating an expensive investment.

• Standardization:  Your international policy should strive to treat expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be followed for every assignee.

So how bad can it be, playing it by ear and leaving terms & conditions to be developed over the duration of an employee’s assignment?   Prepare yourself for:

• Higher and unbudgeted costs.

• Frequent negotiations to improve the expat's situation.

• Disgruntled assignees and / or affected family members.

• Greater risk of failed assignment.

Short cuts usually limit the financial and emotional protection the employee and their family rely on, after the company has committed  substantial monies to place them overseas. 

Terms and Conditions

When preparing an international assignment letter, certain key elements should be included.

• Title, compensation and assignment duration – critical elements of status and reward in the host country.

• Housing and cost of living allowance – should include the amounts involved and frequency of review.

• Benefit coverage (medical, dental, life, vacation, etc.) – how home country benefit protections are handled in the host country.

• Relocation – overseas movement of household goods, both ways.

• Property management (as applicable) – managing the home country residence.

• Tax preparation – employee obligations in both countries.  Usually a statement of company liability for “additional” taxes.

• Home leave – how often, and under what circumstances?

• Schooling, language, cultural orientation (as applicable).

• Repatriation – a balance is usually struck here between employee concerns and the company’s natural vagueness for what the future might bring.

These items represent only a portion of the questions that your expatriate candidate will have.   So if your company considers taking a casual approach to sending an employee overseas, unsupported by a signed assignment letter, be aware of the risks involved.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a clowder of cats.

Creative Commons image, "ber-antem," by Dimaz Fukhruddiny

Comments

[E. James (Jim) Brennan]

The importance of your advice, Chuck, will only be fully appreciated by those who did not follow it. The value of a prescription is directly related to the amount of pain it stops. Your points here can save much money, a lot of distress and some careers.

[Jacque Vilet]

I understand why small companies want flexibility and to cut individual deals tailor-made for each individual going overseas. But I worked with one company that work up one morning and realized they had over 50 expats and each had a different package. It was costing them an arm/leg to manage just from a legal and tax perspective alone. Once they decided to move toward a single package model the current expats communicated via the grapevine and came up with what they thought was the ideal one! This, despite none of them were affected -- they were all grandfathered!

[Bee Z.]

It's scary that people don't realize that an expat assignment is an investment and done wrong is very costly. My company is a very small privately held company. When I suggested that we look into creating a policy and connecting with vendors, they looked at me like I had 10 heads. The response was to just give them more money. The process isn't thought out at all and the scarier part is that they don't partner with any vendors. I'm not sure why people have accepted assignments with my company since they are beyond vague and no assistance is provided. I don't have a vast knowledge in the area of mobility, but it's a topic that I'm interested in. I do have enough sense to know that just providing money to someone doesn't help to provide a successful experience.

[Tony Bergmann-Porter]

As Sam Goldwyn famously said: "a verbal contract isn't worth the paper it's written on."