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Getting the expat formula right: A Mercer case study


Written by: Richard Payne,

 

The problem

A large Singapore organisation was faced with the problem of retaining employees who often returned from their overseas assignment only to pursue other career alternatives. The client was in a unique business, requiring a unique solution to handle the relocation of its expatriate staff.

 

The challenges

  • High employee turnover from those returning after a first expatriate assignment

  • Employees felt they were not prepared for their postings, nor supported upon their return

  • The client had to compensate for the needs of spouses who lost career and wealth-creating opportunities

  • Employees perceived the compensation structure to be inadequate for the opportunities offered by assignments

  • Employees also felt the Overseas Cost of Living Allowances needed to be revamped and brought up to date

One of the critical outcomes for the client was to bring its compensation system up to date. The new system also had to help the client address multiple needs – not only the financial aspirations of the staff, but also compensation for lost opportunities incurred by spouses and the disruption caused to the families. We also had to bear in mind the financial implications of introducing the new approach.

 

This Singapore organisation’s needs were no different from any multinational faced with the task of managing expatriates around the globe. But the unique demands of the Singapore market required an innovative approach to retain key resources.

The approach

In looking at ways to address the issues our client faced, we first looked at seven similar organisations around the world to form a picture of their common experiences, problems, and solutions. The organisations surveyed provided Mercer with a factual backdrop of common practices in base compensation systems, how cost of living adjustments were made, what quality of living adjustments were used, and other incentives that came with the industry.

 

As expected, the complex nature of the client's business made it difficult to find a common base to compare the treatment of expatriates. To provide a comprehensive assessment of the experience, we compiled extensive previously-published research on issues related to global expatriate assignments and approaches to handling them. Of particular importance were contemporary methods in arriving at cost of living allowances and how to account for the more esoteric nature of “hardship” allowances.

The solution

Our proposal was based on several cornerstone principles, including simplicity of use, ability of users to customise based on their preference, financial responsibility to the shareholders, and accounting for the entire family’s needs.

 

We proposed six major recommendations:

  1. A premium for the unique nature of the client’s business in line with best practices

  2. A flexible relocation budget that bundled all associated costs – this offered the user flexibility at no extra cost to the client

  3. A program to provide stability and unity for the family

  4. A program for the trailing spouse, including specific spousal allowances and payment for loss of CPF contributions

  5. A transparent balance sheet approach to make up for the client’s out-dated 1991 formula for calculating cost-of-living allowances

  6. A program that allowed for continuity of education for expatriates' children

     

    Mercer consultants designed a unique, comprehensive solution that would allow the client to simplify administration of the new system, minimise disruption, retain current staff entitlements, deal with new postings on a case-by-case basis, and minimise the financial impact.

     


    Contact us for more information about Mercer's expatriate services.