mobility in new and emerging markets · 2013-03-26 · mercer webcast 9 mobility as part of global...
TRANSCRIPT
MERCER WEBCAST
MOBILITY IN NEW AND EMERGING MARKETS20 March 2013
Olivier Meier, Principal, Munich
Sandra Huertas, Senior Consultant, Mexico City
2MERCER WEBCAST
What we will cover today
• Defining emerging markets– So what?
• Fitting mobility in emerging markets into your global talent strategy
• Challenges– Better policy segmentation– Understanding pay complexities– Rethinking expat package components– Rethinking balance sheet approach and
exploring “local plus” options
DEFINING “EMERGING MARKETS”
4MERCER WEBCAST
Source: Citi Report 2011, Global Growth GeneratorsNote: “Developing Asia” is Asia excluding Japan
2%3%
4%5%
7%8%
AsiaAfric
aME
Latam
US
Europe
60% of global growth in next 5 years to come from Emerging Marke60% of global growth in next 5 years to come from Emerging Marketsts
Emerging Markets – The engine of global economic growth
Vast economic growth: GDP expansion in growth markets will dramatically outpace the rest of the world
Rapid population growth: almost all population growth (92%) to come from growth markets in the next 5 years
Demographic advantage: By 2040, 80%+ of global working-age population will be in emerging markets, while the workforce in the rest of the world will be in decline
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OverviewGlobal GDP growth projections by region, 2012 and 2013
Source: Mercer – Global Compensation Planning Report October 2012
Asia 2012 2013
China 7.8% 9.2%
India 4.9% 6.0%
Indonesia 6.0% 6.3%
Vietnam 5.1% 5.9%
LatAm
Brazil 1.5% 4.0%
Colombia 4.3% 4.4%
Mexico 3.8% 3.5%
W Europe/NA 2012 2013
Germany 0.9% 0.9%
United States 1.3% 1.4%
E Europe
Russia 3.7% 3.8%
Kazakhstan 5.5% 5.7%
MidEast
Qatar 6.3% 4.9%
8.4%7.5%Mozambique
Africa
Ghana 8.2% 7.8%
Nigeria 7.1% 6.7%
Rwanda 7.7% 7.5%
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Emerging Markets region witnessing dynamic and exciting trendsSo what?
RAPID ECONOMIC GROWTH
VIGOROUS WARFOR TALENT
GLOBALIZATION
URBANIZATION
EXPANDINGMIDDLE CLASS
MORE MOBILEWORKFORCE
Moving East and South is major strategy for more and more multinational companies
Managing Lateral Moves (from developing countries to other developing countries) is becoming essential
FITTING MOBILITY IN EMERGING MARKETS INTO GLOBAL TALENT STRATEGY
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Mobility as part of global talent strategyDispelling talent and mobility myths
Myth #1: Traditional expatriates are disappearing• Numbers still going up• Many different types of packages offered, but incentives still needed• Highly skilled workers from emerging markets can be high-cost expats, too!
Myth #2: New generations are more mobile• Not a myth, but companies are losing control over employees’ mobility• More skilled employees are willing to market themselves globally• Locations, organisations not equally attractive; employers must consider
their “talent brand” and site attractiveness
Myth #3: Local professionals and returnees will replace expatriates• Global talent landscape much more complex than many anticipate
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Mobility as part of global talent strategyContradiction in global talent: Both shortages and surpluses
• Only 25% of Indian and less than halfof Brazilian and Chinese professionals considered employable by global standards
• 45 million new entrants in the global job market annually
• 300 million new jobs needed between now and 2015
• By 2030, United States will need to add ~ 25 million workers, and Western Europe ~ 45 million workers
• 214 million migrants worldwide; 40%move between developing countries
• Reverse “brain drain” – top talent increasingly returns to emerging market
• Significant attrition at mid-career levels, employees move 2–3 times per yearto advance their career
• Labor laws and visas – complexity limits mobility and development
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Mobility as part of global talent strategyNeed for a new global mindset, new definition of mobility
People movements considering their experience and jobs
Career MobilityPeople move where
the jobs arePositions movements where
workers with the needed talent are
Geographic Mobility Position Mobility
Increase in Expats by Nationality - 2000 to 2010
731%
467%427%
280%
177% 176%
87% 79% 75%17%
Asia (exChina &Japan)
China Africa Caribbean LatinAmerica
EasternEurope
Australia/NZ WesternEurope
NorthAmerica
Japan
CHALLENGES
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Challenges to current mobility practices
Need to rethink traditional components of the expatriate package
Need to address the challenges to traditional compensation approaches: rethinking the balance sheet approach and exploring “local plus” options
Need to dispel myth of low-paying emerging countries versus high-cost mature markets and understand the complexities of pay practices
Need a different mindset integrating more granular segmentation
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Policy issues: Four-box modelA new mindset beyond traditional segmentation?
GlobalGlobal?
Global or Regional?One-time?
Seasoned Technical Experts
Providing specialist skill/expertise to fill
local gap or to complete a specific
project/task
Transfers/ Volunteers
Int’l experience to fulfill personal objectives
(opportunistic, employee-driven
moves)
Strategic Business Leaders
Fill mission-critical roles and deliver
specific, strategic business results
Emerging/High-Potential Talent
Int’l learning/ development to grow
next generation of leaders
DEV
ELO
PM
EN
TAL
VALU
E
BUSINESS VALUE
INTRA-REGIONAL MOVES VS. GLOBAL MOVES
Is your company globalizing or regionalizing?Should the policy be driven by regional/global considerations?How to integrate the regional and the global dimensions?
ONE-TIME MOVERS VS. HIGHLY MOBILE EMPLOYEESShould the employees be considered as globally mobile when moving just once?
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0
50,000
100,000
150,000
200,000
250,000
300,000
2002 129,400 66,600 92,000 82,900 31,400 95,600 37,8002012 214,000 131,300 191,000 186,500 79,200 273,500 148,700% difference 65% 97% 106% 125% 152% 186% 293%
Germany Poland China-Shanghai Turkey India Brazil Vietnam
14
Policy issues: CompensationAnnual Total Cash, 2002 to 2012, selected locations
Source:2002 and 2012 Total Remuneration Surveys
Senior Management (PC 60) (in USD)
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Purchasing Power Comparison: Secretary
0
10,000
20,000
30,000
40,000
50,000
Brazil China India Russia Germany
Gross Net COL-adjusted
Source: all data Global HR Monitor September 2011
PC 45 = Secretary (Comp 5) –Gross, Net and COL-adjusted, married + 1 (EUR)
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Purchasing Power Comparison: General Director/President
0
200,000
400,000
600,000
800,000
Brazil Russia India China Germany
Gross Net COL-adjusted
PC 65= General Director/President (Comp 5) –Gross, Net and COL-adjusted, married + 1 (EUR)
Source: all data Global HR Monitor September 2011
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Home Salary
Home Salary
Build-UpHQ
Base
Inter-national
Scale
Hybrid/ Expat
“Light”Local Plus
Local Salary
Long-term Assignments
Short-term Assignments
Extended Business Trips
Permanent Transfers
HQ Secondments Locally Hired Foreigners
Global Nomads/Career Expats Localised Expatriates
Returnees“Prevailing Wage” Assignments
Net Salary
x$
tax
x
tax
$
tax
Policy issues: Pay approaches vary by purpose
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Policy issues: Limits of the balance sheet approachAnnual Guaranteed Cash (USD)
IPE Position Class
Source: Total Remuneration Surveys
Brazil
China
India
Russia
Base salary too lowNeed for spendable income supplement
Balance sheet too expensive?
Local Plus approaches?
Germany
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
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 65
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Policy issues: CompensationChina: Salary vs. Spendable Income (USD)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
42 44 46 48 50 52 54 56 58 60 62 64
Mercer IPE Level
Salary
Spendable Income
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Policy issues: Compensation China to Tokyo: Family Size 3, COL Index = 201 (USD)
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
42 44 46 48 50 52 54 56 58 60 62 64
Mercer IPE Level
Spendable Income
Spendable Income plus COLA = Host
Spendable
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0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
42 44 46 48 50 52 54 56 58 60 62 64
Mercer IPE Level
Spendable Income
Spendable Income plus COLA = Host
Spendable
Peer Local Japan Employee
Spendable
Policy issues: Compensation China to Tokyo: Family Size 3, COL Index = 201 (USD)
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0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
42 44 46 48 50 52 54 56 58 60 62 64
Mercer IPE Level
Standard COLA may be insufficient
Spendable Income plus COLA = Host
Spendable
Peer Local Japan Employee
Spendable
Policy issues: Compensation China to Tokyo: Family Size 3, COL Index = 201 (USD)
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0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
42 44 46 48 50 52 54 56 58 60 62 64
Mercer IPE Level
Standard COLA may be too generous
Spendable Income plus COLA = Host
Spendable
Peer Local Japan Employee
Spendable
Policy issues: Compensation China to Tokyo: Family Size 3, COL Index = 201 (USD)
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Policy issues: CompensationLimits of balance sheet approach: Equalizing to peer spendable income
HomeSpendable
Income
Differential(COLA)
Equivalent Peer
Spendable Income
Equalization Allowance
HomeSpendable
Income
Host Country Peer Employee
SpendableIncome
Differential(COLA)
Balance SheetHost-Country
Spendable
Host-Country Peer Spendable
25MERCER WEBCAST
• Used for lower-wage positions from developing countries
• Substitutes “International Spendable Income” based on comparable salary levels in developed countries using Mercer’s IPE methodology
• Int’l Spendable Income can be based on single country or groups of countries
• Calculates COLA based on the Int’l Spendable Income amount
• Total allowance is COLA plus supplemental spendable income amount
• Results in an Assignment Spendable Income in line with peers in host location
Policy issues: CompensationLimits of balance sheet approach: International spendable income
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Fixed-term Assignment
Returnee
International Permanent Transfer
Localised Expatriate
Direct/Local Foreign Hire
Expatriate type Brazil?DubaiChina
Common Limited/less common Never/rarely provided
(Senior positions)
Prevalent
Policy issues: compensation:Alternative to balance sheet approach: Use of local plus packages
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Enhanced or Int’l Plan
Medical
End of service benefits
Social Insurance plus supplement
Social security / pension
Home leave
Education
Housing
Hardship allowance
Mobility / foreign service premium
Cost-of-living allowance
BrazilDubaiChinaExpatriate allowances / benefits
Usually cash, typically a reduction from “full”expatriate housing amount
Common Less common / limited Never or rarely provided
Policy issues: compensation:Alternative to balance sheet approach: Local Plus -Typical components
Senior managers only
Enhanced or Int’l Plan
Enhanced or Int’l Plan
Social Insurance plus supplement
28MERCER WEBCAST
Policy issues: allowances and premiumsRethinking traditional components of the expatriate package
• Cost of living: currency and inflation issues
• Housing– Link with hardship, pay for full housing cost only in difficult locations– Consider basing allowances on local housing cost
• Hardship and mobility premiums
• Introduce flexibility to resolve the expatriate dilemma:– Government limits on number of expatriates and perception that some
employees export their (costly) lifestyle– Emotional element: difficult locations can be a hard sell; some locations
are over-valued by employees
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Remuneration issues: allowances and premiumsRethinking traditional components of the expatriate package
• Family support: Need a new definition?
• Educate individual about financial choices (savings, retirement, housing)
• Avoid perception that employees are not paid well because wrong choices are made and communication inadequate
30MERCER WEBCAST
Concluding thoughtsNow what?
In a fast-changing world, mobility is a core component of the company’s global talent strategy (not just an admin function)
Mobility policies need to integrate a degree of regionalization and facilitate regional/”lateral”moves
Moves from and within emerging markets challenge traditional expatriate compensation approaches and force us to reconsider how we do balance sheets and explore new options such as local plus
Traditional expatriate allowances and benefits should be reviewed in the context of emerging markets
31MERCER WEBCAST
Resources
• Talent Barometer Report: Built on Mercer’s good practices research with The World Economic Forum, this new report identifies effective talent practices and key enablers. www.mercer.com/talentbarometer
• Worldwide Survey of International Assignment Policies and Practices (WIAPP): With the largest participant base in the market (over 750 companies), the WIAPP addresses the most critical policy and practice elements for all types of assignments. www.imercer.com/wiapp
• Expatriate Compensation Calculator (ECC): This online tool offers a fully automated approach to calculating expatriate compensation,providing a quick and consistent way of building expatriate pay packages. www.imercer.com/ecc
32MERCER WEBCAST 32March 21, 2013
Questions
Olivier [email protected]
Sandra HuertasMexico [email protected]
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