Packaging the deal

There is always demand for top talent, whether it be local or foreign – and organisations are often prepared to fight tooth and nail to secure such talent for themselves. However, the costs that come with hiring top performers cannot be negated; often, organisations need to offer good remuneration in order to entice them and hold them.

Organisations need to offer the right type of compensation for skilled foreign employees; getting it wrong can mean losing the potential hire to your competitor. According to research, many organisations use an expatriate package that is normally based on the employee’s home currency, plus a range of incentives such as housing allowance and personal insurance to attract employees into the country. Experts also say that such a package is used to attract foreign employees with specialised skills into industries that lack local talent.

However, there is a growing trend of companies looking to cut the costs of expat hires. The alternative remuneration packages these companies offer include national local plus – a local salary with fewer benefits or benefits converted to cash allowance. According to consultancy firm ECA International’s ECA Alternative compensation and benefits survey, about 53% and 56% of organisations in Hong Kong and Singapore, respectively offer this type of compensation.

Employers say that this option helps decrease the burden of cost of a full expatriate compensation package. Also, they state that this remuneration suits junior level employees as well as those who would like to remain in their host countries.

Sweetening the deal: Foreign or local?

Which type of remuneration and benefits will attract talented foreign workers, especially if they have a family to relocate? This is something each company needs to weigh up against the potential cost. According to a Benefits Survey by ECA International, school fees for international students in Singapore can be 80% higher than what locals are charged, so education benefits come in handy when attracting a skilled expatriate with a family – but it will also cost the company more.

Brent Tignor, Regional HR Manager Asia-Pacific of manufacturing organisation Stepan Asia-Pacific, says that for his company, the reason for offering a salary with numerous added incentives is two-fold: the company gains a talented employee, and the employee gains the opportunity to acquire new experiences during secondment.

“In many cases, the primary reason for providing these incentives is to motivate a ‘high potential’ employee to move overseas to not only fill a particular role here in Asia but to also gain some experience outside of the US for future global roles,” he notes.

Stepan Asia-Pacific offers a full expatriate remuneration package with a range of benefits to these high-potential employees on international assignments. “We will typically offer them a traditional expat package that involves covering all costs related to the assignment including relocation, housing, car and children’s education,” he says. Also, the expatriate is paid in home currency, which is in US dollars.

However, for foreigners hired from outside of the company, Stepan Asia-Pacific offers a local plus package that includes a basic salary and a monthly lump sum payment to offset living costs, explains Tignor.

Saturno Marda, HR Director, Asia-Oceania of Heidelberg Cement Asia, says that her organisation offers two out of three compensation packages to expatriate employees – a full expatriate package and a hybrid-expatriate package.

Only “international assignees”, those who are expected to return to their home countries once their assignments are completed, are offered a full expatriate package. This deal comes with a great many perks which include relocation, housing, transportation, schooling, home leave allowance, full medical, hospitalisation and life insurance, and tax equalisation. However, Marda highlights that though all levels of employees who are in this group enjoy the numerous benefits, the limits are dependent on the positions in the company.

Another group of expatriate employees, known as “transferees”, who work in different locations but have not committed to going back to their home countries, are given a hybrid-expatriate package.

The package includes some of the same items as in the full expatriate packages, such as housing allowance but not tax equalisation. “The hybrid-expatriate is responsible for his or her own tax,” she says. In addition, most benefits are converted and given as cash allowances which gives expatriates more flexibility to manage their own costs.

As Heidelberg Cement operates in a specialised industry – manufacturing building materials globally – finding local talent for specific positions is no easy feat, explains Marda. For example, some positions have taken over a year to fill. Despite a succession planning framework as well as development plans, Heidelberg Cement Asia has to employ more foreign talent. “We therefore rely much on expatriates and continuously take care of them,” she says.

Companies also say that foreign employees have opportunities to negotiate their salaries, but this is limited. Tignor explains that though his organisation tries to keep benefits consistent with the assignments, additional benefits can be given to the individual due to the “level of the position, criticality of having a particular internal candidate in the role or a location that is particularly unattractive”. In such cases, signing bonuses or extra perks can be given, such as an increase in the home leave trips provided, he notes.

The curious case of the shrinking package

Experts say that many organisations around the Asia Pacific region (and also globally) are moving away from offering their foreign employees full expatriate packages. A recent Mercer study of 36 multinational companies revealed that two-thirds offered local plus packages to their foreign employees.

Experts and employers alike attribute this change to many reasons, but cite a major factor as reducing costs incurred through employing expatriates, especially those in junior positions.

Also, employers believe that they do not need to dangle many carrots in order to attract foreign talent into mature markets. Tignor affirms this statement, saying that he believes that Singapore and some other Asian cities are becoming global, which make it easier to attract expatriates to work in Asian destinations without providing many extra benefits.

As a contrast, research shows that developing countries like to sweeten the deal more in order to attract skilled foreign talent. Another study by Mercer showed that some expatriate packages include a full-time driver with a vehicle. Over 60% of expatriate packages in Mumbai and Bangalore include this benefit compared to only 10% and 15% in Singapore and Hong Kong, respectively.

Marda notes that though she thinks organisations are moving towards offering expatriate employees more local or hybrid packages, it will depend on several factors including the maturity of the industry, unavailability of local talent and willingness of expatriates to stay longer in the host country due to lack of opportunities back home, or their preference for their host country.

Ultimately, it is understandable that companies would like to keep their costs down, but full expatriate packages are not going to be done away with anytime soon, if ever. In order to attract the best talent, the organisation needs to sweeten the deal as much as it can, particularly for senior roles, since they are a different kettle of fish when it comes to core skills and expertise.

“For more senior level positions, expat packages still seem to be quite common as companies are willing to pay whatever it takes to have the right leadership in their regional offices,” concludes Tignor.