expatriate management - imercer · expatriate management focus on the middle east 23–24 april,...

EXPATRIATE MANAGEMENTFOCUS ON THE MIDDLE EAST

2 3 – 2 4 A P R I L , M A D R I D

C O P Y R I G H T M E R C E R 2 0 1 5

F O C U S O N T H E M I D D L E E A S TA G E N D A

From political andmacro-economictrends to HR issues

Local (Local-Plus)packages versusexpatriate (home-based) packages

Spotlight onallowances andbenefits: housing,schooling, andhardship

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden

M A K E T O M O R R O W , T O D AY

FROM POLITICAL AND MACRO-ECONOMICTRENDS TO HR ISSUES

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden


T H E G E O P O L I T I C A L C O N T E X T

DJIBOUTI

CYPRUS

SUDAN

EGYPT

PAKISTAN

AFGHANISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ IRAN

JORDAN

ISRAEL

SYRIA

LEBANON

KUWAIT

QATARBAHRAIN

U.A.E

MediterraneanSea

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden

IRANMore positiveenvironment,outlook; easeof economicsanctions

UAEHosting the worldexhibition (EXPO)in 2020

SYRIAContinuing civil conflictaffecting neighbouringcountries

LEBANONRising instabilityover Syriancrisis

SAUDI ARABIAStrong governmentpush for SaudisationIntervention in Yemen

QATARHosting 2022FIFA World Cup

IRAQ/SYRIARise of theIslamic State

ISRAEL/PALESTINERevival of theintense Gazaconflicts

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden


N U M B E R O F N O N - N AT I O N A L S I NT H E G U L F C O O P E R AT I O N C O U N C I L( G C C ) C O U N T R I E S

31%SAUDI ARABIA

27%OMAN

55%KUWAIT

85%QATAR

54%BAHRAIN

87%UAE

Source: IMF; The World Factbook

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden


N AT I O N A L I S AT I O N P O L I C I E S I NT H E G C C

• In the GCC, various nationalisation policies have been adopted toincrease local nationals’ participation in the labour force.

• Several industries have been targeted throughout the region — energy,banking, and legal.

• Employers are trying to understand how to attract local nationals.• Qatar increased the salary of local nationals in 2012 by 60% at public and

semi-public organisations — causing a ripple effect.• Saudi Arabia has the most comprehensive system.• Employers in Saudi Arabia are rated on a “traffic light system” (green,

yellow, red) called Nitaqat.• Employers in Saudi Arabia face the biggest challenge in attracting Saudi

employees.• UAE has the most liberal laws, with free zones that allow organisations to

operate where Emiratisation is not applicable.

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden


D E P E N D E N C E O N N A T U R A L R E S O U R C E SI N T H E G C CP E R C E N T A G E O F O I L & G A S S E C T O R I NT O T A L G D P

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden


G C C L A B O U R M A R K E TDJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden

SponsorshipSystem ofEmployment

Suite ofAllowances

Tax-freeEnvironment

NationalisationDriven byGovernment

Local-Plus Structureof Compensation

End of ServiceBenefit

WorkforceDominated byForeign Expats


M O B I L I T Y A P P R O A C H E S F O RA S S I G N E E S I N T H E M I D D L E E A S T

Mobility Pattern Policy Approach

There and back(quick) Short-term Assignment

Balance sheetor Local-Plus?

Staying there Localisation Phasing out allowancesTransition to Local-Plus

Moving there Permanent Transfer Net to Net AnalysisLocal-Plus

Already there Locally Hired Foreigner Local-Plus

Long-term Assignment

Per diem

There and back

From there “Local Plus +”Local National

DJIBOUTI

PAKISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ

JORDAN

KUWAIT

QATARBAHRAIN

U.A.E

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden


LOCAL (LOCAL-PLUS)PACKAGES VERSUSEXPATRIATE (HOME-BASED)PACKAGES


S A L A R Y D I F F E R E N C E SA N N U A L B A S E S A L A R Y, P C 4 3 V S 6 3 ( U S D )

Source: Mercer Total Remuneration Surveys, 2014

0

10

20

30

40

50

60

0

55,000

110,000

165,000

220,000

275,000

330,000

PC 43 PC 63 Times more paid


T O T A L G U A R A N T E E D A L L O W A N C E SC O U N T R Y C O M P A R I S O N ( M E D I A N , U S D )

0

50,000

100,000

150,000

200,000

250,000

40-45Blue Collar

45-51Professional /Admin. / Staff

50-54Supervisors /Specialists

53-59Managers

58-62VPs / Directors

60-70General Directors

/ Presidents

Saudi Arabia UAE Qatar

Source: Total Remuneration Surveys, 2014


L O C A L P A C K A G E S : P AY M I X — U A E

GUARANTEEDALLOWANCESBASE SALARY SHORT-TERM

INCENTIVESLONG-TERMINCENTIVES BENEFITS

55% 58% 55% 57%

33% 30% 29% 21%

2% 5% 7%9%

2% 7%10% 8% 7% 6%

<50 50-54 55-59 >59

Benefits

Long-term Incentives

Short-termIncentives

GuaranteedAllowances

Base Salary


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Transportation Allowance

Housing Allowance

Meal Allowance

Shift Allowance

Furniture Allowance

Utilities Allowance

National Allowance

Other Guaranteed Allowance

Consolidated Allowance

L O C A L P A C K A G E S : A L L O W A N C E SP R E V A L E N C E O F A L L O W A N C E S — U A E


C O M P A R I S O N B A L A N C E S H E E T V E R S U SL O C A L S A L A R Y I N T H E G C C C O U N T R I E SE X A M P L E : D U B A I

COMPENSATIONELEMENT BALANCE SHEET APPROACH LOCAL SALARY

Home CountryBase Salary

Based on home country Local salary structure(highly competitiveinternationally)

Tax Tax equalisation with home No-tax environment

Mobility Premium Five to 15% of gross base salary — not providedby all companies or for all types of assignees

No

Hardship Premium Usually 0 to 10% of base salary No

Cost of Living Allowance based on home host differential No

Accommodation Reimbursement of housing costs or housingallowance with deduction

Cash allowance determinedas % of base salary

Education Reimbursement of international school costs Cash allowance dependingon position level

Home Leave Once per year Often provided


com

pens

atio

nU

SD

Source: Mercer Global HRMonitor 2015 – 1 USD = 3.67 AED; 1 USD = 0.88 Euro

136,000

79,54548,190

3360

53,620

795411,781

136,000124,905

0

100,000

200,000

Local UAE includingguaranteed allowances

Gross Home Salary(Spain)

Tax-equalised home-based approach

Education

Mobility

Hardship

Housing

COLA

Net base salary

L O C A L V E R S U S H O M E - B A S E D P A C K A G EM A N A G E R — I P E P C 5 5 ; M A R R I E D + 1 ;T R A N S F E R M A D R I D — D U B A I ( U S D )


L O C A L V E R S U S H O M E - B A S E D P A C K A G EM A N A G E R — I P E P C 5 5 ; M A R R I E D + 1 ;T R A N S F E R D Ü S S E L D O R F — D U B A I ( U S D )

Net

com

pens

atio

nU

SD

Source: Mercer Global HRMonitor 2015 – 1 USD = 3.67 AED; 1 USD = 0.88 Euro

136,000103,278

61,660

4780

62,795

103281032811,781136,000

161,672

0

100,000

200,000

Local UAE includingguaranteed allowances

Home Gross Salary(Germany)

Tax-equalised home-based approach

Education

Mobility

Hardship

Housing

COLA

Base Salary


I N B O U N D A S S I G N E E S : T Y P E S O F M O V E SL O N G - T E R M A S S I G N M E N T S ( O N E T OF I V E Y E A R S )

• Home-based approach prevalent, but localapproach also common.

• Tax-free local package can be moreattractive than tax-equalised home-basedpackage (but it depends on the home-hostcombination).

• Some companies give the employee thechoice to opt out of the mobility policy andreceive a local package.

• Degree of mobility of the employee needsto be clearly established: a local package isnot always recommended for an assigneestaying only for a few years.


I N B O U N D A S S I G N E E S : T Y P E S O F M O V E SP E R M A N E N T T R A N S F E R S

• Local approach most common.

• Local-Plus standard package combinedwith one-time relocation package,including settling-in allowance, temporaryaccommodation, and moving allowance.

• The objective is to avoid ongoing liabilitiesand links with the home countries.

• Could be a win-win for the assignee andthe employer.

• The risk is misjudging future plans. (Willthe employee be mobile again?)

• Link with talent management is essential.


I N B O U N D A S S I G N E E S : T Y P E S O F M O V E SL O C A L L Y H I R E D F O R E I G N E R S

• Local approach (Local-Plus)most common.

• Local-Plus standard packagecombined.

• No link with home country unlessthe intention is to relocate theemployee again.

• As with permanent transfers, therisk is misjudging future plans. (Willthe employee be mobile again?)


O U T B O U N D A S S I G N E E SL O C A L I S E D E M P L O Y E E S I N T H E G C C :M I T I G A T I N G C O S T S F O R T H E N E X T M O V E S

• Using GCC countries as base for a balance-sheet approach can prove verycostly. Possible options to mitigate costs:– Avoiding double provision of allowances (treatment of guaranteed

allowances).– Using a host approach and using the new country as base (valid for moves

to high-paying countries).– Running a balance sheet calculation based on the original home country of

the assignee (prior to localisation in GCC country).– Using a GCC country as base, but applying a hypothetical tax deduction to

lower the cost of the assignee.• Aside from these compensation approaches, many companies reported that,

from a talent management perspective, they would avoid this situationwhenever possible.


O U T B O U N D A S S I G N E E SE N C O U R A G I N G U A E N A T I O N A L S T O G O O NA S S I G N M E N T — I N I T I A T I V E S T O S U P P O R TE M I R A T I S A T I O N

• Developmental international assignments are a good way to developthe local workforce.

• The focus is on short-term assignments (up to six months), with clearlyoutlined learning objectives and possibly mentors.

• Characteristics of developmental assignments from the GCC:üComprehensive package, including per diem and full coverage of

housing costs.ü Additional mobility premiums, or higher premiums for nationals than for

foreigners sometimes provided.ü Female assignee on single status: a male family member should have the

ability to accompany the assignee.• For long-term assignments, higher mobility premiums are provided to

Emiratis by some companies.


SPOTLIGHT ON ALLOWANCESHOUSING, SCHOOLING,AND HARDSHIP


• During the “boom years” (2003–2009), housing prices steadily increased.• Employers tended to follow suit: the market was growing, voluntary turnover

was high, so housing allowances increased — consistently.• Finally, in 2009, the market crashed.• Yet employers typically did not reduce their housing allowances.• From 2009 to 2013, employees enjoyed a surplus:

– Housing prices of a recession.– Housing allowances of a boom.

• In 2013, the Dubai housing market started to spike again.• We believe the Dubai housing market has reached pre-2009 levels.• The main challenge for employers is to determine if their housing allowances

are still inadequate.

H O U S I N G A L L O W A N C E SA S T O R Y …


H O U S I N G A L L O W A N C E D U B A I2 0 1 3 V S 2 0 1 4 — M E D I A N ( A E D )

0

50,000

100,000

150,000

200,000

250,000

Para-professionals Professionals Management Executives

2013 2014

3%

3%

3%

5%

Source: UAE Total Remuneration Survey, 2014


34%

40%

Abu Dhabi

Dubai

Source: February 2015 UAE Housing and Schooling Increases Spot Poll (Prelim. Results)

% INCREASEMedian Average

10% 13%

10% 10%

H O U S I N G A L L O W A N C E I N C R E A S EI N T E N T I O N S F O R 2 0 1 5


Accommodation CostsTwo-bedroom furnished apartment — monthly rent (USD)

Source: Mercer Cost of Living Reports, March Editions, Table 2 Excellent Level Accommodation

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Dubai Riyadh Doha

2009 2010 2011 2012 2013 March 2014 Sep 14

H O U S I N GR E N T T R E N D S A C R O S S T H E R E G I O N


• Different logic:– Home-based expatriate package: covering all or part of the

housing costs.– Local package: % of base salary designed to contribute to housing

costs, but the amount is not always in line with the housing market.

• Is the company committed to paying for the full housing costs? If so, forwhat duration? There is a need to make a distinction between fixed-term assignments and permanent assignments.

H O U S I N G A L L O W A N C E SH O M E - B A S E D A N D L O C A L P A C K A G E S


% INCREASEMedian Average

10% 13%

10% 10%

Source: February 2015 UAE Housing and Schooling Increases Spot Poll (Prelim. Results)

S C H O O L I N G A L L O W A N C E I N C R E A S EI N T E N T I O N S F O R 2 0 1 5


SchoolingTuition trends across the region (in USD)

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Dubai Riyadh Doha

March 2012 March 2013 Sep 14

Source: Mercer Cost of Living Reports, Primary Education* English School in Riyadh

S C H O O L I N GT U I T I O N T R E N D S A C R O S S T H E R E G I O N


S C H O O L I N G A L L O W A N C E SH O M E - B A S E D A P P R O A C H E S A N D L O C A LA P P R O A C H

• Home-based expatriate packages usually cover full tuition fees forchildren ages four to 18.

• In local packages, schooling allowances depend on position level.• Locally hired foreigners and employees transferred permanently

usually receive a schooling allowance — but, unlike for a fixed-termassignment, the allowance is sometimes capped (maximum amountallowed or, less frequently, there is a cap on number of children).


A S S I G N M E N T S T O C O U N T R I E SI N T U R M O I LC U R R E N T H A R D S H I P T R E N D S

DJIBOUTI

CYPRUS

SUDAN

EGYPT

PAKISTAN

AFGHANISTAN

SAUD ARABIA

YEMEN

OMAN

IRAQ IRAN

JORDAN

ISRAEL

SYRIA

LEBANON

KUWAIT

QATARBAHRAIN

U.A.E

MediterraneanSea

Red Sea

PersianGulf

Arabian Sea

Gulf of Aden

Very low or no hardshipallowance 0 to 12.5%UAE

Extreme hardshipAllowance 30% to 100%Expat selectionNo-go zonesSyria, Iraq, Yemen

Medium hardshipAllowance 20%Jordan, Bahrain

High hardshipAllowance 20% to 30%Expat selectionSaudi Arabia, Lebanon

Low hardshipallowance 10 to 15%Qatar, Oman, Israel


A L L O W A N C E S A N D P R E M I U M S R E L A T E DT O H A R D S H I P

• Distinction between “office jobs” and “on-site jobs”.• Remote or site-specific location premium.• Pioneer premium.• Rotation allowance.• Completion bonus.• Danger pay.• Family separation allowance.


M O B I L I T Y I N T H E M I D D L E E A S TA C H E C K L I S T

• Defining the right mix of local and home-basedapproaches is key for moves to the Gulf.

• Talent management: Clear planning for futuremoves/next steps is crucial.

• Define clearly the logic of each allowance inlocal packages.

• The housing market is stabilising, but volatilitywill remain an issue.

• Check End of Service Benefits and double-payment of allowances and benefits.

• Hardship is not disappearing — finding theright incentive for each type of move isimportant.

• Keep an eye on nationalisation plans, ifrelevant for your locations and sector.

expatriate management - imercer · expatriate management focus on the middle east 23–24 april,...

Documents