Editor's Note: We have often, here at the Cafe, discussed the challenges faced by HR and Compensation pros who serve smaller companies - not the least of which is recognizing (and getting leadership to recognize) the importance of moving beyond informality and complete discretion in making critical people decisions. In today's Classic, Chuck Csizmar addresses this challenge relative to expatriates and overseas assignments.
Recently a U.S. client asked me to explain why I recommended that they create an international assignment letter for their expatriates. They only had a few employees overseas and previously had resisted the call to what they described as “playing the lawyer card.” They felt that management could effectively deal with the circumstances of each expatriate situation 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 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 quickly. However, in most cases such casual and hurried arrangements have proven painful and expensive experiences for all concerned.
- The shock employees and their families faced when they came to grips with actually living in a foreign country, vs. simply visiting.
- The constancy of unforeseen and confusing localized situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction for the employee that they lost focus on the job.
- Relationships with headquarters suffered as the employee asked for more and more consideration to redress what they considered coverage gaps in their terms and conditions.
Providing an assignment letter is a smart idea.
- Protection: Confirming the assignment terms & conditions 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 their affected family members. Clarifying the assignment terms and conditions ensures a smooth assignment for all parties involved.
- Cost control: Define company-paid expenses and conversely what they will not cover. An understanding will mitigate issues from arising once the expatriate reaches the host country.
- Standardization: Your international policy should treat all expatriates in the same fashion. Unique circumstances do occur but the basic principles should be repeated for every assignee.
So how bad can it be, playing it by ear and leaving terms and conditions to be developed over the duration of an employee’s international assignment? Aren't flexibility and quick thinking positive management traits?
When you court the inherent risks that accompany an undocumented assignment, you should be prepared for:
- Unplanned additional costs
- Constant re-negotiations with the expatriate
- Disgruntled employees and / or affected family members
- Greater risk of assignment failure
Short cuts usually limit the financial and emotional protection the expatriates are going to rely on - at the same time that the company has committed a substantial amount of money to place them far from home.
When preparing an international assignment letter, you should include the following (as applicable):
- 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 the frequency of review.
- Benefit coverage: How will home country benefit protections be handled in the host country.
- Relocation: The policy coverage for the employee’s residence, to include movement of household goods overseas.
- Property management: What will happen to the home country residence?
- Tax preparation: Assistance provided in both countries.
- Home leave: How often, and in what circumstances?
- Schooling, language, cultural orientation.
- Repatriation: Strike a balance between the employee’s concerns and the company’s natural vagueness for what the future might bring.
These represent only a portion of the questions that your expatriate candidate will have. Should your company consider taking a casual approach to sending an employee overseas, 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.
Comments