EXPATRIATEMANAGEMENT IN ASIA

2 3 – 2 4 A P R I L , M A D R I D

E X P A T R I A T E M A N A G E M E N T I N A S I AA G E N D A

From macro-economictrends to HR issues

Spotlight on locals andoutbound Asian assignees

Spotlight on Asiainbound assignees

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

FROM MACRO-ECONOMICTRENDS TO HR ISSUES

FROM MACRO-ECONOMIC TRENDS TO HR ISSUESDIFFERENT PLACES, DIFFERENT PHASES

Source: Mercer Global Compensation Planning Report Q1 2015

2

Inflation

GDP

10

8

6

4

2

0 4 6 8 10

FROM MACRO-ECONOMIC TRENDS TO HR ISSUESOPERATING IN ASIAN MARKETS

Overall Starting aBusiness

Dealing withConstruction

Permits

GettingElectricity

RegisteringProperty

GettingCredit

ProtectingInvestors

PayingTaxes

EnforcingContracts

Singapore 1 3 3 6 28 3 2 5 12

Malaysia 6 16 43 21 35 1 4 36 30

Thailand 18 91 14 12 29 73 12 70 22

China 96 158 185 119 48 73 98 120 19

Vietnam 99 109 29 156 51 42 157 149 46

Philippines 108 170 99 33 121 86 128 131 114

Indonesia 120 175 88 121 101 86 52 137 147

India 134 179 182 111 92 28 34 158 186

Source: Doing Business 2013, International Finance Corporation (FC) / World Bank

FROM MACRO-ECONOMIC TRENDS TO HR ISSUESCHINA IN TRANSITION: THE ELEPHANT IN THE ROOM

10.411.6

13

9.69.1

10.4

9.3

7.7 7.5 7.3

1.8 1.5

4.85.9

-0.7

3.3

5.4

2.6 2.6 3.0 2.5

8.2 8.2 8.6 8.7

6.9

8.5

9.6 9.48.1

8.0 8.0

12.213.5

14.613.4

11.3

15.7 16.3

13.6 13

11.4

-2

0

2

4

6

8

10

12

14

16

18

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(E) 2015(F)

GDP CPI(Inflation Rate) Salary Increase Staff Voluntary Turnover

Source : National Bureau of Statistics of China IMA Asia2004-2014 Mercer Total Remuneration Survey

T H E “ L O C A L S ” : C O M P E N S A T I O N I S S U E SI N T E R N A T I O N A L P E R S P E C T I V E

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

Mercer IPE Position Class

Japan Hong Kong Singapore Philippines Thailand China

Para-professional Professional Specialist Manager Director V.P

Source: Mercer Total Remuneration Survey 2014 - USD

FROM MACRO-ECONOMIC TRENDS TO HR ISSUESPAY PROGRESSION TO HIGHER LEVEL

B E I J I N G A L L I N D U S T R I E S V S . T I A N J I N A L L I N D U S T R I E S( A N N U A L B A S E S A L A R Y I N C N Y )

x2.8x2.5

x2.8x2.4

x2.4x2.6

Source: Mercer China TRS – Beijing All Industries Office and Tianjin

x18x15

1 USD = 6.20 CNY; 1 EURO = 6.72 CNY (as of 1 April 2015)

FROM MACRO-ECONOMIC TRENDS TO HR ISSUESIMPLICATIONS FOR MOVES FROM, TO ANDW ITHIN ASIA

• The local talent pool and potential Asia outboundexpatriates have high turnover rate and salaryincrease expectations

• Attractiveness imbalance between locations

• Cost effectiveness remains a complex picture

• The salary structures in the region make using amix of compensation approaches possible andeven desirable

• Different employees categories on the market:locals, expatriates, locally-hired foreigners andreturnees

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

SPOTLIGHT ON LOCALS

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

• Greatest planned increase ofassignments are assignments fromand within Asia

• Talent is scarce. Premium oninternational experience andmanagerial skills

• Competitions between local andforeign multinationals and acrossindustries (e.g. from manufacturingto IT)

• Same mobility approaches as inother region but more local plusand increasingly differentexpectations

C H A N G I N G TA L E N T L A N D S C A P E - C H I N AT O P 1 0 B E S T E M P L O Y E R S R A N K E D B YU N I V E R S I T Y S T U D E N T S

1 Haier2 IBM3 Microsoft4 Lenovo5 P&G6 General Electric7 Motorola8 Huawei9 China Mobile10 Siemens

2003 Best Employers

Among top 50, 16 were localcompanies and 34 were

multinationals

Among top 50, 35 were localcompanies and 15 were

multinationals

2014 Best Employers

1 China Mobile2 Bank of China3 Huawei4 Microsoft5 Baidu6 ICBC7 P&G8 QQ9 Alibaba10 Dalian Wanda Group

Source: 2003-14 HR Best Employers Survey

• Becomingperformancedriven.

• Quick pay andcareerprogression.

• Vertically minded.

• Employee ownscareer.

• Competition fortalent.

• Performanceorientation.

• Best practice.

• Variable paycritical tomanagingperformanceand cost.

• Partly westernisedin thinking, buttempered byAsian needs forhierarchy.

• Compensationstructurescomparable to theUS and Europe.

• Employee ownscareer.

China• Age, service, and

level drivestructure.

• Levels strictlydefined.

• Vertically minded.

• Many grades.

• Company ownscareer.

Japan/Korea IndiaSingapore

A T T R A C T I O N A N D R E T E N T I O NCAREER AND REWARD DRIVERS FOR ASIAN EMPLOYEES

A T T R A C T I N G T O P T A L E N T

Fast recruitment process• Quick approvals and offers• Be willing to take calculated risks

Show them a future• Typical development plan and career path• International assignment as part of development• Future salary progression• Beware of the perceived “bamboo/glass ceiling” in

multinationals.

Increase starting salary, allowances and sign-onbonus• Local companies may have deeper pockets and more flexibility

Work on the brand recognition• Understand the brand is not as strong as in Europe/US• Participate in local community

Up to 1/3 of workforce with less than 1 year service• Pressure on induction, culture, training, managers, etc.

R E T A I N I N G T O P T A L E N T

Employees in Asian markets expect frequent“promotions” … break up your grades• Instead of B, C, D … have B1, B2, B3, C1, C2, C3, etc.

Title expansion is a common practice• Use one set of titles externally, e.g. director in China• A different set internally

Training and development critical• Develop the skills in the job, not before

Need to consider criteria for promotion

Do not apply mature market HR/staff headcountratios

Need frequent salary increases – not just annual?Impact on expat packages

M O B I L I S I N G T O P T A L E N T

Repatriation promise?

Duration of assignments:Risk of being passed in terms of promotionShort –term or short long-term developmental moves

Talent segmentation is essential:Are assignees part of a regional talent pool or a global one?Once assignees are out of the region, they are harder to repatriate

Family issuesFamily responsibilities, extended families, limited assistance for theelderly available at home

Schooling – a differentiator

Quality of livingFrom hardship to non-hardship but with a decrease in lifestyle?The cultural aspect of hardship

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

SPOTLIGHT ON ASIA-INBOUNDASSIGNEES

I N B O U N D A S S I G N E E ST R A D I T I O N A L E X P A T R I A T E S

The traditional expatriate is not quite deadyet… but the business case for sending one issubject to discussionStill widely used for new operations (e.g. tier 2locations), skills transfer and developmentalmovesBalance sheet is prevalent but local and localplus are increasingly usedLocation attractiveness is a challenge: e.g.Singapore and Shanghai versus tiers 2Chinese and India cities

I N B O U N D A S S I G N E E SL O C A L L Y H I R E D F O R E I G N E R S

• Foreigners hired on local termsand conditions.

• Increasingly found in China,Singapore and Hong Kong

• This category is one of the driversbehind the growth of Local/LocalPlus approaches

I N B O U N D A S S I G N E E SR E T U R N E E S

• Western-educated professionalsreturning to mainland China.

• Number are increasing and arecompeting for jobs with both localsand expatriates

• A diverse group including bothinternational experts and younggraduates with limited workexperience who have lived abroadonly for a few years

• Not all returnees receive a marketpremium but some still do

海归 / 海龟 hǎiguī (“sea-turtle”)

L O C A L P L U S I N A S I AV A R I A T I O N S O F L O C A L P L U S I N A S I A

Traditionalexpatriates Locally hired foreigners Returnees

China

Balance sheetapproach

Local Plus

Local Plus

Local Local

Singapore &Hong Kong

Balance sheetapproach

Local Plus

Local

Local Plus

Local-

India,Indonesia,Philippines

Balance sheetapproach Balance sheet

approach

Local PlusLocal Salary

L O C A L P L U S PAC K A G E S I N AS I AH O W T O D E T E R M I N E T H E B A S E S A L A R Y ?

Pure Local

InflatedLocal forforeigners

Local forreturnees

LocalTaxdifference

Purchasingpowerdifference

Housingcostsdifference

Net toGross

Moving to a newsalary

Taking into accountcurrent salary

L O C A L P L U S P A C K A G E S I N A S I AH O W T O D E T E R M I N E T H E P L U S ?

Expatriate allowances / benefits China Hong Kong Singapore

Cost-of-living allowance

Mobility / foreign service premium

Hardship allowance

Housing

Education

Home leave

Social security / pension Social Insuranceplus supplement

MandatoryProvident Fund

(MPF)

Central ProvidentFund (CPF) or cash

in lieu

Medical Enhanced or Int’lPlan

Local Local

Usually cash and phased out, typically a reduction from “full”expatriate housing amount

Common Less common / limited Never or rarely provided

H O U S I N G I S S U E S

0

2000

4000

6000

8000

10000

12000

2-bedroom unfurnished apartment

2-bedroom unfurnishedapartment - Monthly

Source: Mercer‘s Cost-of-Living September 2014surveys – Table 2

Monthly rents in USD

C O S T - O F - L I V I N G I S S U E S

020406080

100120140

Cost-of-iving

Cost-of-Living

Source: Cost of Living(Mean to Mean) September2014 surveys.

C O S T - O F - L I V I N G I S S U E :C U R R E N C Y F L U C T U A T I O N S

EURO – April 2014 to April 2015Exchange Rate EUR 1 =

Country Currency Apr 14 Apr 15 % Change of EUR

CHINA CNY 8.493.239 6.659.026 -21.60%

HONG KONG HKD 10.730.344 8.408.184 -21.64%

INDIA INR 84.404.633 67.706.538 -19.78%

INDONESIA IDR 15.791.312.881 14.170.373.313 -10.26%

JAPAN JPY 141.391.858 130.405.772 -7.77%

SINGAPORE SGD 1.752.292 1.492.034 -14.85%

SOUTH KOREA KRW 1.480.255.195 1.206.921.861 -18.47%

THAILAND THB 44.790.228 35.351.004 -21.07%

UNITED KINGDOM GBP 0.831289 0.722844 -13.05%

UNITED STATES USD 1.382.533 1.083.764 -21.61%

VIETNAM VND 29.160.108.930 23.221.172.486 -20.37%

H AR D S H I P / Q U A L I T Y- O F - L I V I N G I S S U E S

0

20

40

60

80

100

120Quality-of-Living

Quality-of-Living

Source: Mercer‘s Quality ofLiving September 2014surveys.

S P O T L I G H T O N H A R D S H I PD I S A P P E A R I N G O R B A R R I E R A T H R E A TT O M O B I L I T Y ?

• Steady improvement (China, India) but the gapremains between tiers 1 and tiers 2&3 cities

• Pollution: the remaining challenge– Still a major concern for China and India– Practical support provided air filtering, masks,

information rather than new allowances– Issue for assignments with family. More frequent

home leaves and single assignments sometimesconsidered

– One of the reasons why Beijing and Shanghai are notexiting the hardship category

• Hardship remains a key part of the package butprevalence and amounts are slowly going down

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

FOOD FOR THOUGHT

F O O D F O R T H O U G H TManaging locals andAsian expats: need to

change pace to keep upwith high turnover, salary

increases andexpectations

Mix of compensationapproaches

including balancesheet and the

different forms oflocal and local plus:Asia is leading the

charge

“Traditional expatriates”are still a key

component of a mobileworkforce in Asia but

their legitimacy can beunder scrutiny

The clear cut betweenexpatriates and localsis disappearing fast .

Policies need toaccommodate multiplecategories/scenariosAllowances, premiums

and benefits: slowlydecreasing but flexibility

needed toaccommodate new

expectations