This article originally appeared in the January 2019 edition of Mobility magazine.
It’s no secret that companies have been increasingly using alternatives to long-term assignments to manage their mobility programs in recent years. While many companies still expect their numbers of long-term assignees to increase, successive surveys by ECA International have found that the rate of increase is slowing each year. In contrast, the use of short-term assignments, commuter assignments, and permanent transfers is on the rise.
ECA’s January 2018 “Permanent Transfers Survey” found that nearly 40 percent of international transfers lasting more than one year are made on a permanent basis, where there is no expectation or commitment for the employee to return to the home country. Four years earlier this figure was only 22 percent. Nearly two-thirds of companies have seen the proportion of permanent transfers increase in the last three years, and a similar number forecast further increases in the next three.
Given this rate of increase, will traditional long-term assignments soon become a thing of the past?
Why Permanent Transfers Are On the RiseAs more employees want and expect to be internationally mobile to satisfy their own professional and personal ambitions, 38 percent of companies reported that they will increasingly use permanent transfers to meet employee demands. However, the results indicate, overall, that the rise is being driven primarily by the needs of businesses rather than employees.
The most common reason for the increasing use of permanent transfers, cited by 65 percent of companies, is that they are more cost-effective than traditional long-term assignments. This may be due to employees being more likely to be employed on local salary terms and provided with fewer benefits than assignees.
A little more than half of companies expect their permanent transfers to increase simply because the role requires the employee to be in the host location permanently. Where companies are struggling to fill a role with a local national, they must search internationally to source the talent they need. It makes sense to first advertise to interested parties, offering a cheaper permanent transfer package before resorting to incentivizing less-eager candidates with a more generous assignment package.
When to Use Permanent TransfersThe main reasons companies use permanent transfers are to fill skills gaps and to manage operations, which are also common purposes of international assignments. Companies are far more likely to use assignments, however, as a way of transferring expertise or corporate values. Broadly speaking, then, companies are more likely to use assignments for strategic purposes, whereas permanent transfers are more suitable when there is simply a job that needs to be done. That may depend on where the job is based, however; assignments are more likely to be used for postings to more challenging locations—the engineering and construction sectors, for example, use permanent transfers less than the finance and technology sectors, which tend to be based in well-established urban centers.
Permanent transfers work better for some combinations of home and host countries than others. The top 10 home-to-host combinations reported in the ECA survey suggest that geographical proximity and the existence of a common language influence the likelihood of a transfer being made on a permanent basis. Another finding was that companies headquartered in Europe are expecting a bigger rise in the use of permanent transfers than other regions; this may be because it is easier for Europeans to integrate into other European countries due to similarities in culture and the relatively short distance from home, plus the fact that it is easy for employees to relocate permanently within the European Union without visas.
Most importantly, unless they have personal reasons for wanting to relocate and request a transfer themselves, employees are unlikely to undertake an international move if it makes them poorer. Although companies look to provide leaner packages for permanent transfers compared with international assignments, if the employee is moving at the company’s request, the package on offer still needs to ensure that they will be no worse off than they would have been at home.
Relocation CostsJust over 40 percent of companies reported that they provide a less generous package of relocation assistance for their permanent transfers than they do for their long-term assignees, but this finding may be due to companies having different understandings of what counts as a “relocation benefit.” A comparison of one-time benefits typically provided within long-term assignment and permanent transfer policies suggests that average levels of provision are broadly similar for each, whereas ongoing benefit provision tends to be more generous for assignees.
SalaryIt is intuitive to pay a host-based salary for someone being transferred permanently to another country, and that is what the majority of companies do. Salaries for international assignments are more commonly calculated using a home-based approach, which is often perceived as being more expensive due to the various included allowances. However, paying a host-based salary does not automatically guarantee cost savings.
For more information and survey results, including an example comparing the costs of a typical home-based salary calculation, with COLA and mobility allowance, to the host-based salary for the equivalent job grade for a move from the U.K. to the U.S., read the rest of this article in the January 2019 edition of Mobility magazine.