In recent years, employers of globally mobile employees have been focused on maximizing the return on their investment.  This has been approached in a number of ways, including:

  • Tailoring mobility packages to fit the type of assignment and its value to the business
  • Increasing flexibility to ensure proper support in new locations
  • More robust links to talent management programs
  • More permanent transfers or assignments on “local terms”

While much can be said about each of these trends, let’s focus on the increasing number of permanent assignments and localizations. 
Both practices involve the movement of employees to a version of host local employment terms.  Some of the more popular destinations for “localized” employees include the US, the UK, Switzerland and China.  Depending upon the home and host location, a move to host terms can sometimes result in unintended consequences to the detriment of the employee and/or the employer.  When considering a permanent move or localization, employers and employees alike should consider the following issues, especially if the employee would be terminating their employment at home:

  • Is this really a permanent move?  If not, severing employment ties at home may not make sense.
  • What is the difference in total rewards, before and after tax?  Does this translate into a sustainable standard of living in the new economy?
  • Can “localized” employees be retained in hot talent markets such as China?  A fully localized package is an invitation to attrition in China.
  • Will the employee need to pay greater social charges for benefits they may never receive, i.e., retirement, free education, etc.? 
  • Will employees continue to be fully eligible for retirement plans at home? This can be an issue for US transfers who sever their US employment relationship.
  • If employment at home is terminated, will the employer be required to make mandatory severance payments?  How would such a termination affect their equity compensation?

The goal here is to identify and avoid unexpected burdens on the employee, especially those that may put them at a disadvantage when comparing them totheir new local peers. As a result, many companies do not apply a consistent approach to moving employees to “local terms” and prefer to study the implications of a move on a country by country basis
Rebecca Powers is a senior director of Global Mobility and Rewards Consulting and Donna Chamberlain is a managing principal of Expatriate Tax Services at BDO USA.

 

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