When should HR choose a permanent move and when an international assignment? A guide to both types - plus strategies for identifying the best candidates and best practices for permanent international moves.

In the seemingly never-ending quest to cut workforce mobility programme costs, managers have been vigorously pursuing alternatives to expensive long-term assignments. For some, permanent international moves have become a viable and more cost-effective option. But the savings are not automatic, nor are they guaranteed.

Understanding key differences

All household goods are shipped for employees on permanent moves

Before a company relocates any of its valued employees to another country, there are a number of pertinent questions that need to be asked.

• What is the objective of the move?
• What will the move do for the employee’s career?
• Will the employee be returning to the home country, or heading off to another country?

The answers to these questions will help the company determine if its best course of action is an international assignment or a permanent international move.

Typically, international assignments are used to achieve specific goals within a specific time frame; for example, an employee is needed to help open an overseas office, and then will be returning home. They also are used to provide critical developmental training for key talent, helping these employees hone their skill sets for future application, and for knowledge-transfer, such as training locals on new systems. International assignments also are useful to cross-pollinate corporate culture, by transferring employees between offices in different countries and continents.

 Conversely, permanent international moves are used primarily to satisfy longer term goals and objectives with no set “end date”, and are ideal for those instances where skilled talent is required to manage change, develop other employees, and leverage their expertise to help generate results. A good example would be a company permanently moving a manager to oversee a newly-opened office or plant.

Factors to consider

The simple fact is that relocating an employee overseas is a costly affair, no matter how many ways you slice it. Yet, there can be tangible cost differences between permanent moves and international assignments.

For example, because international assignments assume that the employee eventually will return to the home country, employees are kept on their home payroll. This means they will be looking for cost-of-living and tax assistance from their companies, both of which can inflate overall assignment costs.

On the other hand, employees taking a permanent move are “localised” to the payroll and tax of their destination country; if a Canadian is moving to France, for example, he or she will be paid in euros and taxed according to local laws and regulations. This fact alone can mean substantial savings for companies that will not have to “keep their employees whole” for tax purposes.

Further, employees being sent on an international assignment likely will request some sort of property management package to keep their home residences secure while they are on assignment, not to mention return home trips for the entire family. If the destination locale is considered somewhat of a hardship, the employee can expect even more ongoing premiums on top of those.

Permanent moves eliminate the need for most of these premiums. The trick is to avoid offering additional provisions that can push permanent move costs to meet or exceed those of an assignment. For example, some companies will give employees taking permanent moves an ongoing payment intended to bridge the difference in tax, housing and goods and services costs. Once established, such a payment can be difficult to take away from the employee.

Also, some companies give their permanent move employees an “R&R” allowance in lieu of home leave. But if a company does not give this sort of allowance to a local, why would it give one in this situation?

Who wants to go away

Of course, while permanent moves minimise the need for cost-of-living or tax adjustments, they can give rise to other problems, namely, convincing an employee to take a permanent move.

As you might assume, finding an employee who is willing to take a one-way ticket to a foreign land can be much more challenging than finding someone willing to take on a one- or two-year assignment. Finding an employee who is willing to be placed on a local payroll package in a country that lacks the amenities that he or she currently enjoys in the home country? That can be even tougher.

Someone who will be moving to a higher standard of living is not likely to have a problem with a permanent move. This is why countries such as the United States, Canada and the United Kingdom are among the more popular permanent move destinations. Companies hoping to move someone from, say, the United States to India, however, could encounter problems, as that employee might perceive being placed on a local package as “taking a step down” in his or her standard of living.

But even in these situations, finding a likely candidate is not impossible. Companies have found success targeting employees who either already live in the host country and want to stay, who were educated or lived in the host country, or who had taken on a previous assignment in the region. Overall, not surprisingly, the most common candidates for permanent international moves include younger, single employees without families or deep roots in their communities, or spouses accompanying other transferred employees.

The most important factor in the decision is what you are planning for the employee. If there is no set plan to bring the employee back or relocate him or her to another location, then a permanent move makes the most sense. Because he or she will be put on the same benefits package as his or her peers in the new location, there is a greater sense of assimilation and acclimation.

Best practices for permanent moves

In preparing your employees for permanent international moves, make sure that you consider the following best practices that effectively balance employee concerns and corporate cost containment.

Candidate assessment and pre-decision. Candidate assessment is always a good idea, no matter on what move your employee will be embarking. Given the sizable investment involved in any global relocation, it just makes sense to perform the appropriate due diligence, and make sure the employee you select is indeed the best suited for success in the new location and assignment. Once the ideal candidate is selected, arrange a visit to the host country for the employee and the accompanying family members; this gives the family the opportunity to know exactly what they are in for in the new location, and helps to limit any “unfortunate surprises”.

Cross-cultural and language training. When you are preparing to send your employee to live and work permanently in another country, it is easy to overlook the need for cross-cultural and language training. The sentiment is that an international assignment, with its built-in deadlines, offers a greater sense of urgency than the permanent move. While it is true that an employee who is only going to be living there for a couple years and has to accomplish a lot in a set period of time should be able to hit the ground running, the same can be said for those who will be living their much longer. Remember, your company is expecting these employees to fully adapt to their new environment, to live and breathe like locals, and that requires professional counseling and training. And cultural training should not be neglected for intra-European moves, either; the differences that exist between neighboring countries are often the most dramatic.

Benefits planning. Before your employee sets foot in the host country, you should be closely examining how the move will impact his or her benefits, including health, welfare and pension. Today, many companies perform net-to-net calculations of the home and host countries to fully understand how the move will impact the employee. Compare the two and ask yourself, “Will this be a real “take away” from the employee?”

Transition allowance. If there is a significant differential between the home and host countries, companies should consider giving the employee an allowance to help expedite their assimilation, helping them do such things as identify places to shop, learn locations of local amenities and services, and arrange for such things as banking services. How much to give? Allowances can be tied to performance or length of service. And steps should be taken to ensure that the company does not take the loss if the move fails or the employee quits; establish a payback agreement that protects the employee and spells out a repayment agreement in case the employee leaves.

Household goods for permanent moves. For permanent moves, everything goes. No storage. For those appliances that cannot be used or simply are not necessary in the new location, the company can buy them out at fair market value.

Get destination region HR involved. If your company has a local HR department in the destination region, it is a good idea to get them involved from the very beginning. After all, essentially they are going to own this employee from here on out.

Jane Malecki, GMS, is vice president, Weichert Relocation Resources Inc. (WRRI), Morris Plains, NJ. She can be reached at 973-397-3529 or e-mail jmalecki@wrri.com

Reprinted with the permission of Worldwide ERC(R) from the October 2004 issue of MOBILITY".