Understanding Global Assignment Costs
Confidence in the U.S. economy is rising, and with it, the number of companies seeking to establish, strengthen or expand their global positions is increasing. Often, this involves expatriating talent to fill key positions in other countries. Some companies will also provide global assignment opportunities to expand their employees’ knowledge and skills.
Whether your company is well versed or new to managing global assignments, the
cost of them can be daunting. However, when appropriately managed, global assignments can positively impact a company’s global business goals.
Sending an employee and a family of three on a three-year global assignment could
cost in excess of USD $1 million. So, it’s not surprising that many global companies
believe traditional overseas assignments are cost-prohibitive. Some companies have
reduced, frozen or even eliminated their global assignment programs. However, to
remain competitive, companies still need to place the best talent at the appropriate
locations, and often that talent isn’t available without a global transfer. This is when
the proper management and oversight of relocation costs becomes imperative.
Understanding the Costs
If you’re planning global assignments, there are ways to scale back costs without
compromising operations or impacting employee productivity. Finding that balance
between employee support and cost management to successfully oversee global
assignments is a challenge, but it can be done. Below is a list of some of the expenses
associated with a global assignment:
- Candidate Assessment – Conducted by the company to determine if the employee is the right candidate for the global assignment.
- Pre-Decision Assessment – Aligns the individual needs of the employee and the employee’s family with the business goals of the assignment.
- Immigration – Obtaining the appropriate documentation for the assignment. The reason for the assignment will dictate the appropriate visa type.
- Tax Implications – Determining the tax implications of the assignment and responsibilities of both the company and the employee.
- Tax Assistance – Providing the employee with tax assistance, which could include consultation; preparation (for both home and host countries); filing (for both home and host countries); tax equalization.
- Host Country Housing – Providing reasonable and customary rent and utility costs for the employee’s housing in the host country according to regional guidelines based on family size and location.
- Allowances – Ongoing payments made, separate from base salary, during the assignment:
- Cost-of-Living Allowance (COLA) – An allowance or differential paid to the employee for similar goods and services in the host location that they have in the home location based on family size and salary. Intended to cover costs to purchase host country goods and services over those from the home country.
- Transportation – An allowance for a car for the duration of the assignment, the amount of which may vary by location and family size.
- Hardship – An allowance paid in addition to salary and COLA for assignments in locations designated as a hardship for the employee based on factors that include potential violence, incidence of disease, medical care quality, geographic isolation and availability of goods and services.
- Miscellaneous Expense Allowance – One-time payment made, separate from base salary, intended to cover expenses not expressly covered in the Letter of Understanding, like renter’s insurance, obtaining a new driver’s license, immunizations, taxis, etc.
- Cultural/Language Training – Provided to the employee and the family to assist in understanding the host country culture and language.
- Home Finding and Destination Services – Locating housing in the host country, as well as registering with local authorities and setting up accounts.
- Departure Services – Home sale, property management, lease termination, etc.
- Global Household Goods – Transporting (via land, air and/or sea) or storing household goods and personal effects.
- Temporary Living – Fully furnished housing at the destination location.
- Repatriation – Return of the employee to the home country following assignment completion.
To learn more about managing global assignment costs, download our free guide.