Flexibility is a key to the realities of globalisation.

For many companies today, globalisation is no longer a concept but a reality. As cross-border transactions and employee relocations become the norm, the effective management of international and regional transfers is an essential element of corporate global expansion.

Managing the costs of international assignments while maintaining competitive advantage and attracting the right employees is a delicate balancing act. When entering new markets, the leading company representative is usually a senior assignee with a proven track record, he/she has a family who accompanies them, and they are usually assigned to the new country for two to three years. The cost to the company is often significant, and although it is accepted that costs range between two to three times the assignee’s annual salary, in real terms the costs can be significantly higher.

In light of these high costs, many companies are considering new options for their global mobility programmes. The current economic crisis and the increasing availability of skilled and talented individuals willing to relocate internationally has enabled companies to embrace other options than the traditional expatriate-type package.

Responding to the challenges
The critical concept the company must embrace is flexibility. Firstly, there should be flexibility in making the decision as to who is the most appropriate person for the role – that is, not basing the decision on the potential applicant’s technical ability alone, but on their suitability for an international assignment. Secondly, there needs to be flexibility in the development and implementation of support packages, which reflect a variety of assignment types and roles. Allowances should be designed to reflect a cost-effective yet supportive package, relevant to the nature and length of the assignment and the employee most suitable for the role.

Once a company has embraced such flexible solutions for international employees, it is in a far better position to control the costs of international assignments through the use of specific policy provisions and tax mitigation strategies.

One KPMG client, for example, has a long history of international ventures and affiliations. To provide benefits relevant to all the different types of overseas business ventures, the company developed a comprehensive set of international travel and relocation policies which encompassed one-day business visits through to long-term three-year international assignments. Flexible policies enabled the company to tailor support packages to the needs of particular assignees or the projects they worked on.
In one case, the company won a large-scale installation project. The company staffed the project with several project groups rotated on a three-monthly basis. This produced benefits via a reduction in relocation costs (from a shorter assignment length) and the added benefit of enhancing the skill base of a larger number of employees. In turn, a far greater number of employees benefited from the experience than would have been possible with a smaller group of longer-term assignees.

Even within KPMG, international assignees have taken advantage of flexible assignment packaging, providing far greater numbers of employees the opportunity to obtain valuable experience in an international setting.

An increasingly common option for those who have regional or interstate responsibilities is the ‘commuter assignment’, with company-provided accommodation, and frequent travel between the home and host locations. This gives the commuter the flexibility to be on-site when needed yet keep the stability of family and community support networks. The company thereby benefits by reducing the incremental costs of relocating a whole family.

Other avenues
Cost mitigation can also be achieved with flexibility in the delivery of package items, or the timing of departures and arrivals. In Japan, for example, an international assignee can reduce their Japanese tax liability for the previous year by ensuring that they depart the country before the first day of the following year. Similarly, a contract which stipulates an assignment period in the UK of less than two years can, in some circumstances, assist with the mitigation of certain taxes.

Finally, strong mentoring and communications networks provided by the company throughout the assignment, in collaboration with a clear career development plan, will ensure that the cost of any type of international assignment will be an investment in the individual, rather than a drain on the finances of the company, and that the international assignee will be retained by the company upon their repatriation.

How KPMG can help
KPMG is a global network whose aim is to turn understanding of information, industries and business trends into value for its clients.

KPMG’s International Executive Services practice assists companies to respond to the challenge of a rapidly growing global workforce in today’s volatile, ever-changing market. With a fully-integrated global network of experienced tax, international human resources and migration professionals, KPMG can provide creative, value-added International Executive Services anywhere in the world, leaving you to do what you do best.

For further information regarding
KPMG International Executive Services, please contact:
Rosheen Garnon, Sydney
Telephone: +61 2 9335 7255
Sandra Cittadini, Sydney
Telephone: +61 2 9335 7357
Email: ies@kpmg.com.au
Website: www.kpmg.com.au