Mobility in the Middle East and Africa

Nancy HaynesRegional Research Manager for Africa and EuropeMercer - London

Olivier MeierSenior ConsultantMercer- London

MERCER

Mobility in the Middle East and AfricaWhat are the current challenges?

Addressing issues created by the instability in the region, hardship and “soft issues”

Introducing flexibility in remuneration approaches: balance sheet, “Expat Lite”, “Local Plus”, ad-hoc deals

Reconciling cost control and international expansion

Dealing with an heterogeneous workforce composed of traditional expatriates, short-term assignments, foreigners hired locally, region transfers and returnees

Align expatriate policies with business expansion objectives in the region and the war for talent

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Mobility in the Middle East and AfricaAddress the challenges: a roadmap for 2012

Family support

Expatriate cost of living and housing

Providing incentives: hardship, mobility premiums and types other incentives

Localisation and “local plus” versus expatriate packages

Defining a compensation approach, policy segmentation and local practices

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Compensation approaches From the global picture…

Home country or balance sheet approach

Host country approach

Local plus approach

Hybrid approach

International structure

All MNCs

4.6

5.5

73.0

7.89.1

Home Country ApproachHost Country ApproachLocal PlusHybrid ApproachInternational Structure

Source: Mercer’s International Assignment Survey 2010/2011

Compensation approaches used for long-term assignments (1-5 years)

Daily allowances (short-term only / up to 1 year)

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Compensation approaches…to the complex reality of expatriate compensation in the Africa Middle East region

4

Local Plus / ad-hoc dealsReturnees

Reduced balance sheet / local plusRegional moves and local competition

Local Plus, local Market (Middle East) / ad-hoc deals

Transfers / foreigners hired locally

Reduced balance sheet / local plusDevelopmental moves / “Low-pats”

Home-based/ balance sheet approached

Traditional expatriates / Long-term assignments

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The increasing influence of local companies on expatriatemanagement practices in the Middle East and Africa region

• Many Middle Eastern and African companies do not (yet) have a detailed expatriation policy

• Terms and conditions vary significantly between companies and countries and many case by case solutions have been developed

• Practices such as “Multiplier systems”, completion bonus and other culturally different benefits influence traditional policies

• Specific (International) pay structures are sometimes used for locally hired Expatriates from emerging countries

• Different approach to family issues

5

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Target: High-potential employees; future talent

Package: Expat light, Local +

Target: Top 250 roles

Package: Enhanced package / support

Package: Local terms or Local +, relocation support

Target: Key professionals

Package: Standard (home-based)

Career development Strategic

Transfers and Employee-initiated

Professional

Business value

Developmentvalue

Using segmented Global Mobility frameworksExample of matrix

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The localisation decision tree

How do we Localise?

Local Market Home salary only orBuy-out

The Hybrid Local / Local +

UAEQatar

South Africa

Ghana

Tanzania

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Localisation verus expatriatesLocal markets for expatriates / case study: UAE

Expatriate in DubaiBalance sheet

COLATax equalisation?

HousingSchooling

CarHardship

Mobility premiumsSettling-in allowances and

home leave

Foreigner hired locally or local+ package

Base salary (pay structures by nationality)

Core components of remuneration: base pay,

housing and carSchooling depending on

employee levelOther items depending on level and nationality (may

include settling-in allowances and home

leave)End of service benefits

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Compensating for hardship locationsHardship and mobility / foreign service premium

Hardship – based on host location• Viewed as important: two third of companies pay a hardship allowance• 69% of companies base the hardship on a percentage of base pay; 10% provide a cash amount• Capped by only 15% of companies based on a predefined salary threshold (average: USD 177,000) or as a flat amount by 10% of companies (average: USD 23,000)• Typically 0 to 30% of gross base salary

Mobility Premium – incentive for all assignees• Used to encourage mobility for specific types of assignees or assignments• Typically 0 to 15% of gross base salary

Source: Mercer’s Worldwide Policy and Practices Survey 2010/2011

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Compensating for hardship locations in the Middle East and Africa: more than just hardship allowances?

Har

dshi

p

Low hardship: quality of living allowance, mobility premium

No hardship: mobility premium

Moderate hardship: quality of living allowance, mobility premium

High hardship: quality of living allowance, mobility premium, Rest & Recreation, remote location allowance

Extreme hardship: candidate selection, ad-hoc deals, danger pay, Rest & Recreation, remote location allowance

0%

10%

15%

20%

30%+

Allowance level as % of gross salary

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Compensating for hardship locationsHardship in the Middle East and North Africa

Quality of living index

020406080

100

Algiers

Amman

BagdadBeirut

Cairo

Casablanca Doha

Dubai

ManamaMusca

t

R iyadh

Sanaa

Tel Aviv

Mercer’s quality of living survey – September 2011 (base: London)

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Quality of living index

0102030405060708090

Abidjan

Accra

Conakry

Dar Es S

alaam

Joha

nnesb

urg

Kinsha

saLa

gos

Luan

da

Maputo

Nairobi

Compensating for hardship locationsHardship in Sub-Saharan Africa

Mercer’s quality of living survey – September 2011 (base: London)

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Compensating for cost of livingCost living in the Middle East and North Africa

Cost of living

020406080

100120

Algiers

AmmanBeir

utCairo

Casabla

ncaDoha

Dubai

Manam

a

Musca

t

Riyadh

Tel Aviv

Mercer’s Cost of living survey Mean to Mean Index September 2011 (base: London, exchanges rates as of February 2012)

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Compensating for cost of livingCost living in Sub-Saharan Africa

Cost of living

020406080

100120140160

Abidjan

Accra

Dar Es S

alaam

Joha

nnes

burg

Kinsha

saLa

gos

Luan

da

Maputo

Nairob

i

Mercer’s Cost of living survey Mean to Mean Index September 2011 (base: London, exchanges rates as of February 2012)

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Compensating for cost of living

• Exchange rate fluctuations and inflation• The correlation between cost of living and hardship

- Quality (brands, expiry dates)- Availability- Food preparation precautions- Traffic to even get to the shops- Alcohol: available?!?!

• Cost of living allowance or per diem?• Not all bad news – increasing number of South African

outlets/brands (Game, Shoprite)

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Expatriate housing costs

• Amounts driven by the degree of hardship and availability of suitable accommodation. Cost is becoming a major concern in African countries where there is a rush for natural resources (Angola, Mozambique,Nigeria…)

• Holistic view of housing issues: include utilities (generators a requirement in sub-Saharan Africa), security (e.g. compounds, fences, guards), location of shops and schools for expatriates

• In Gulf, the housing allowance is part of the package for foreigners

• Increasingly in part of the Middle East and Africa, landlords ask to receive the rent for 6 months or one year in advance

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Expatriate housing costsHousing cost in the Middle East and Africa

Mercer’s Housing table September 2011 – 2-bedroom furnished apartment in areas preferred by expatriates (table 2)

Monthly rent

0100020003000400050006000

Algiers

AmmanBeir

utCairo

Casabla

ncaDoha

Dubai

Manam

a

Musca

t

Riyadh

Tel Aviv

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Expatriate housing costsHousing cost in Sub-Saharan Africa

Monthly rent

02000400060008000

100001200014000

Abidjan

Accra

Conakry

Dar Es S

alaam

Joha

nnesb

urg

Kinsha

saLa

gos

Luan

da

Maputo

Nairobi

Mercer’s Housing table September 2011 – 2-bedroom furnished apartment in areas preferred by expatriates (table 2)

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Family support

• Single status assignments particularly in hardship locations

• Compensation for the family at home?

• More “negotiable points”?

• Flexible home leave regulations

• Rest and recreation leave

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