HR directors eyeing costs, benefits associated with ex-pats
Managing expatriates in a global company brings challenges large and small, from whether to guarantee them a position when they return home to whether to pay for their nanny to join them abroad.
At LAN airlines, the company offers tax counseling, relocation services, help with permanent residency visas and many other perks to ease the transition of moving abroad and either staying or returning home, said Debra Hernandez, LAN’s human resources director for North America.
Hernandez led the discussion on expatriate issues at the July 16 meeting of HR Connections attended by nearly 20 executives of multinational companies, including at least one that no longer offers expat compensation packages for top executives because of their higher costs and headaches.
In general, Hernandez and others said companies are limiting expat packages nowadays, because they can cost as much as two or three times more than local hires. That’s in part because of tax payments often required in both countries for the same executive.
“It’s really the taxation that will kill you. It drives the cost up,” said Linda Schneider, senior manager for Total Rewards at Miami-based restaurant giant Burger King.
But today’s strong economic growth in Brazil and some other Latin American nations means some companies have no choice but to offer the packages to ensure experienced managers from elsewhere can build up a new, emerging market and help groom a local successor there, participants said.
Diversified Search’s Lorean Keough said companies must weigh the benefits of hiring an ex-pat in a fast-growing market vs. the costs.
“With Latin America growing so fast, although the policy may be to limit expatriates, companies have had to bite the bullet,” said Lorena Keough, managing director of Diversified Search Odgers Berndston, one of the event sponsors along with the University of Miami School of Business.
Hernandez said at LAN’s Miami offices, 22 of 49 top executives are expatriates, many relocated from the airline’s headquarters in Chile. Expatriates receive allowances for housing, schools for their children, bringing in a nanny and other perks generally for a period of four to six years.
After that, the executive can stay on as a local hire with fewer perks or return home, but LAN does not guarantee them a job back in their homeland. That policy can cause problems, if a family wants to return home to educate their children and be closer to relatives. If the executive comes from a nation where LAN has smaller operations, there may no job open there. So, LAN runs the risk of losing talent it groomed.
“Unfortunately, some of them end up leaving the company,” said Hernandez.
Geodis Wilson tries to adapt more to U.S. norms in its ex-pat program to keep costs under control.
Other multinationals face the challenges of relocating executives differently. Freight forwarder Geodis Wilson USA adapts more to local U.S. norms and won’t let an expatriate bring in a nanny from Latin America, said Marta Ramirez, human resources director for the Americas region.
Pharmaceutical maker Novartis offers a tiered program for managers going abroad: the most generous expat packages for a small number of senior executives; an international assignment package for mid-level managers; and a local-plus package for lower-level managers, said Marcelo Fumasoni, who runs human resources for Novartis for the Latin American region.
Lexmark International, the printer manufacturer based in Lexington, Ky., last year halted its expat program, partly because of headaches with managers transferred to factory sites in Mexico, where gang violence is an issue, and the Philippines, said Rocio Sarabia, human resources director for Latin America. One problem with the Philippines: a 12-hour time difference with the United States made it difficult to communicate by phone.
But this summer, Lexmark began a program where country mangers in Latin America fill in for counterparts in neighboring countries during multi-week vacations. The short transfers aim to strengthen the regional team and increase feedback to its top executives, said Sarabia.
WorldCity conducted an informal survey on expat issues before the meeting and found: 81 percent of respondents said expats make up fewer than 5 percent of their company’s employees; and about half said their company guarantee expats a position back in their homeland, according to Ken Roberts, president of the Coral Gables-based media company.
HR Connections is one of six event series hosted by WorldCity to discuss international business topics. The next HR Connections is set for Sept. 10.