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On the move: the pros and cons of working abroad

Siobhan Cummins, partner at Mercer, the consultancy

Are more people becoming expatriates?

In spite of reports that cost-conscious companies have sent their expats home or cut the value of packages – while putting a halt on new assignments – the increased internationalisation of business means more overseas assignments for executives and employees.

Globally, the number of expats is in the millions and, while many companies cut back in the recession, the number of international assignments actually rose by more than 4 per cent during the past two years, according to Mercer research.

There are now more short-term assignments of up to 12 months – where companies don’t feel the need to fund a family move and generally look to save on costs – rather than the traditional three- to five-year term.

Western Europe and the US are the main sending and receiving locations for expats. However, Asia-Pacific and particularly China are seeing significant growth in numbers. Expats continue to pour into China, and Shanghai is seen as a regional hub for Asia. There is also more intraregional growth – for example, Thais going to the Philippines. By contrast, assignments into Africa have dropped in recent years, possibly reflecting instability in parts of the continent.

What is wrong with local staff?

The recession has led to more discussion in companies about the worth of sending an expat rather than using a local. The cost of sending an expat from Britain, for example, is typically three times their base UK pay. However, certain jobs require specialist skills that may not be available locally. And some companies prefer to put expats in senior positions in overseas subsidiaries – general manager and finance manager, for example – as a way of taking the company culture to those businesses.

Companies remain keen to give their “taleSiobhan Cummins, partner at Mercer, the consultancynt pool” experience of working internationally and managing in a new culture. For high-flyers, it is often a prerequisite to have worked internationally.

My employer wants me to move abroad. What should I ask for?

Most international companies have clearly defined policies that will set out the terms and conditions of assignments. So, while prospective expats may be able to negotiate some improvements, employers generally try to avoid creating too many special deals or setting precedents.

Typically, expats are transferred abroad on their existing salary and bonus package, with any additional cost in the host location covered by the employer. This will include housing, cost of living, local tax, schooling (for children) and “home leave” visits. Relocation expenses such as shipping of personal effects should also be paid.

Some employers pay a mobility or foreign service premium to recognise the disruption to a family in moving abroad – although this is increasingly not being offered, as mobility is seen as a key part of working for an international business. But there is usually a hardship or location allowance for assignments to countries that are dangerous or have difficult living conditions.

Most companies will provide an international medical plan and other insurance, and where possible retain expats in their home pension plan.

Many employers apply tax equalisation, which means expats pay the same level of tax while they are overseas that they previously paid in their home countries. But for moves to low-tax jurisdictions such as Dubai, Singapore or Hong Kong, some may pass the tax benefit on to the expat.

However, few employers will guarantee a specific job to come back to.

Is my employer just trying to get rid of me?

Gone are the days when employees were transferred overseas to get them out of the way. An assignment is an investment: the cost to employers is high, and they will expect a return on their money.

Where is the best place to go?

Certain locations are particularly popular among expats, including Singapore and Hong Kong in Asia, and Geneva and London in Europe. Bankers may want to go to New York for experience on Wall Street, while engineers in the oil and gas industries may be happy to go to destinations in the Middle East or Africa where living conditions may be tough but the rewards are high.

In Mercer’s annual quality-of-living ranking, Vienna last year retained the top spot as the city with the world’s best quality of living. European cities continued to dominate the top of the global ranking, with Zurich and Geneva second and third, respectively. Vancouver in Canada and Auckland in New Zealand were joint fourth, while Australian cities also ranked highly, with Sydney 10th, Melbourne 18th and Perth 21st. London was only 39th.

The ranking is based on criteria such as health and sanitation, public services and transportation, natural environment and the quality of international schools. However, the higher the quality of life, the lower the “hardship” allowance an employer may pay.

What is the secret of a good posting?

Success is about understanding where you are going and whether it is the right move for you, your career and your family.

If you have young children, then it’s important to have safe, secure accommodation, good schools and so on. If your spouse or partner has been working in your home country, try to establish what the job prospects will be in the host location; you could be losing a second salary. Many spouses cannot work, and this can place pressure on the family and even result in the assignment being terminated prematurely.

What is the worst place to be posted?

While this varies according to the individual, there are certainly some tough locations out there. Baghdad was again the bottom city (221st) of Mercer’s ranking in 2010, with its lack of security and stability a continuing negative. Dhaka in Bangladesh was next lowest, while the survey found a general decline in quality of life in South and Central America owing to factors such as energy shortages and high crime levels.

What if it does not work out?

Companies try to minimise the likelihood of assignment failure with the help of pre-assignment programmes such as a location visit and briefings. In practice, failure rates are generally quite low. But sometimes the family does not settle or there are cultural issues to deal with. If necessary, companies will normally agree to bring the family home.

What if I do not want to come home at the end of the assignment?

Most assignments are still for 3-5 years. Three years is increasingly the most common term with planned repatriation to the home location.

In some companies, expats stay on in the host location for extended periods on full expat benefits, but in most companies they will be localised – put on to local terms and conditions – after five years.