expatriate management in asia

EXPATRI ATE
MANAGEMENT IN ASIA
23–24 APRIL, MADRID
E X PAT R I AT E M A N A G E M E N T I N A S I A
AGENDA
From macro-economic
trends to HR issues
Spotlight on locals and
outbound Asian assignees
Spotlight on Asia
inbound assignees
FROM MACRO-ECONOMIC
TRENDS TO HR ISSUES
M A K E T O M O R R O W , T O D AY
FROM M ACRO-ECO NOM IC T RENDS TO HR ISSUES
DIFF ERENT PLACES, DIFFER ENT PHASES
Inflation
10
8
6
4
2
0
2
4
6
8
10
GDP
Source: Mercer Global Compensation Planning Report Q1 2015
FROM M ACRO-ECO NOM IC T RENDS TO HR ISSUES
OPERAT ING IN ASIAN MARKET S
Overall
Starting a
Business
Dealing with
Construction
Permits
Getting
Electricity
Registering
Property
Getting
Credit
Protecting
Investors
Paying
Taxes
Enforcing
Contracts
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 M ACRO-ECO NOM IC T RENDS TO HR ISSUES
CHINA IN TRANSITION: THE ELEPHANT IN THE ROOM
GDP
18
16
CPI(Inflation Rate)
Staff Voluntary Turnover
14.6
13.5
14
12.2
12
13
13.6
13.4
11.6
11.4
10.4
9.6
10
9.6
9.4
9.1
8.2
8.2
8.6
8.5
6.9
5.9
3.3
2
1.5
2005
2006
0
2007
-2
Source : National Bureau of Statistics of China IMA Asia
2004-2014 Mercer Total Remuneration Survey
2008
7.7
7.5
8.0
7.3
8.0
2.6
2.6
3.0
2.5
5.4
4.8
1.8
8.1
9.3
8.7
6
4
13
11.3
10.4
8
Salary Increase
16.3
15.7
2009
-0.7
2010
2011
2012
2013 2014(E) 2015(F)
T H E “ L O C A L S ” : C O M P E N S AT I O N I S S U E S
I N T E R N AT I O N A L P E R S P E C T I V E
Japan
Hong Kong
Singapore
Philippines
Thailand
China
400,000
350,000
Para-professional
Professional
Specialist
Manager
Director
V.P
300,000
250,000
200,000
150,000
100,000
50,000
0
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
Source: Mercer Total Remuneration Survey 2014 - USD
FROM M ACRO-ECO NOM IC T RENDS TO HR ISSUES
PAY PROG RESSIO N TO HIGHER LEVEL
BEIJING ALL INDUSTRIES
( A N N U A L
B A S E
S A L A R Y
I N
VS.
TIANJIN ALL
INDUSTRIES
C N Y )
x2.6 x2.4
x15
x18
x2.4 x2.8
x2.5 x2.8
1 USD = 6.20 CNY; 1 EURO = 6.72 CNY (as of 1 April 2015)
Source: Mercer China TRS – Beijing All Industries Office and Tianjin
FROM M ACRO-ECO NOM IC T RENDS TO HR ISSUES
IMPLIC AT ION S FO R MO VES FRO M, TO AND
W IT HIN ASIA
• The local talent pool and potential Asia outbound
expatriates have high turnover rate and salary
increase expectations
• Attractiveness imbalance between locations
• Cost effectiveness remains a complex picture
• The salary structures in the region make using a
mix of compensation approaches possible and
even desirable
• Different employees categories on the market:
locals, expatriates, locally-hired foreigners and
returnees
SPOTLIG HT ON LOCALS
M A K E T O M O R R O W , T O D AY
M O B I L I T Y I N A S I A : A S S I G N E E C AT E G O R I E S
LOCALS AND ASIAN OUTBOUND ASSIGNEES
• Greatest planned increase of
assignments are assignments from
and within Asia
• Talent is scarce. Premium on
international experience and
managerial skills
• Competitions between local and
foreign multinationals and across
industries (e.g. from manufacturing
to IT)
• Same mobility approaches as in
other region but more local plus
and increasingly different
expectations
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 A
TOP 10 BEST EMPLOYERS RANKED BY
UNIVERSITY STUDENTS
2003 Best Employers
2014 Best Employers
1
Haier
1
China Mobile
2
IBM
2
Bank of China
3
Microsoft
3
Huawei
4
Lenovo
4
Microsoft
5
P&G
5
Baidu
6
General Electric
6
ICBC
7
Motorola
7
P&G
8
Huawei
8
QQ
9
China Mobile
9
Alibaba
10
Siemens
10
Dalian Wanda Group
Among top 50, 16 were local
companies and 34 were
multinationals
Among top 50, 35 were local
companies and 15 were
multinationals
Source: 2003-14 HR Best Employers Survey
AT T R A C T I O N A N D R E T E N T I O N
CAREER AND R EW ARD DRIVER S FOR ASIAN EMPLO YEE S
China
Japan/Korea
• Becoming
performance
driven.
• Age, service, and
level drive
structure.
• Quick pay and
career
progression.
• Levels strictly
defined.
• Vertically minded.
• Employee owns
career.
• Vertically minded.
• Many grades.
• Company owns
career.
Singapore
• Partly westernised
in thinking, but
tempered by
Asian needs for
hierarchy.
• Compensation
structures
comparable to the
US and Europe.
• Employee owns
career.
India
• Competition for
talent.
• Performance
orientation.
• Best practice.
• Variable pay
critical to
managing
performance
and cost.
AT T R A C T I N G T O P T A L E N T
Increase starting salary, allowances and sign-on
bonus
• 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.
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.
R E TAI N I N G T O P TAL 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
Do not apply mature market HR/staff headcount
ratios
Training and development critical
• Develop the skills in the job, not before
Need frequent salary increases – not just annual?
Impact on expat packages
Need to consider criteria for promotion
M OBILISING TOP TALENT
Repatriation promise?
Duration of assignments:
Risk of being passed in terms of promotion
Short –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 issues
Family responsibilities, extended families, limited assistance for the
elderly available at home
Schooling – a differentiator
Quality of living
From hardship to non-hardship but with a decrease in lifestyle?
The cultural aspect of hardship
SPOTLIGHT ON ASIA-INBOUND
ASSIGN EES
M A K E T O M O R R O W , T O D AY
INBOUND ASSIGNEES
T R A D I T I O N A L E X PAT R I AT E S
The traditional expatriate is not quite dead
yet… but the business case for sending one is
subject to discussion
Still widely used for new operations (e.g. tier 2
locations), skills transfer and developmental
moves
Balance sheet is prevalent but local and local
plus are increasingly used
Location attractiveness is a challenge: e.g.
Singapore and Shanghai versus tiers 2
Chinese and India cities
INBOUND ASSIGNEES
L O C A L LY H I R E D F O R E I G N E R S
• Foreigners hired on local terms
and conditions.
• Increasingly found in China,
Singapore and Hong Kong
• This category is one of the drivers
behind the growth of Local/Local
Plus approaches
INBOUND ASSIGNEES
RETURNEES
• Western-educated professionals
returning to mainland China.
• Number are increasing and are
competing for jobs with both locals
and expatriates
• A diverse group including both
international experts and young
graduates with limited work
experience who have lived abroad
only for a few years
• Not all returnees receive a market
premium but some still do
海归 / 海龟 hǎiguī (“sea-turtle”)
LOCAL PLUS IN ASIA
VA R I AT I O N S O F L O C A L P L U S I N A S I A
Traditional
expatriates
China
Singapore &
Hong Kong
Locally hired foreigners
Balance sheet
approach
Local Plus
Local Plus
Local
Balance sheet
approach
Local Plus
Local Plus
Returnees
Local
Local
Local
India,
Indonesia,
Philippines
Balance sheet
approach
Balance sheet
approach
Local Plus
Local Salary
L O C A L P L U S PA C K A G E S I N A S I A
HOW TO DETERMINE THE BASE SALARY?
Net to
Gross
Local
Pure Local
Tax
difference
Inflated
Local for
foreigners
Purchasing
power
difference
Local for
returnees
Housing
costs
difference
Moving to a new
salary
Taking into account
current salary
L O C A L P L U S PAC K AG E S I N AS I A
HOW TO DETERMINE THE PLUS?
Expatriate allowances / benefits
China
Hong Kong
Singapore
Cost-of-living allowance
Mobility / foreign service premium
Hardship allowance
Housing
Usually cash and phased out, typically a reduction from “full”
expatriate housing amount
Education
Home leave
Social security / pension
Social Insurance
plus supplement
Mandatory
Provident Fund
(MPF)
Central Provident
Fund (CPF) or cash
in lieu
Medical
Enhanced or Int’l
Plan
Local
Local
Common
Less common / limited
Never or rarely provided
HOUSING ISSUES
Monthly rents in USD
2-bedroom unfurnished apartment
12000
10000
8000
6000
4000
2000
2-bedroom unfurnished
apartment - Monthly
0
Source: Mercer‘s Cost-ofLiving September 2014
surveys – Table 2
COST-OF-LIVING ISSUES
Cost-of-iving
140
120
100
80
60
40
20
Cost-of-Living
0
Source: Cost of Living
(Mean to Mean) September
2014 surveys.
COST-OF-LIVING ISSUE:
C U R R E N C Y F L U C T U AT I O N S
EURO – April 2014 to April 2015
Exchange Rate EUR 1 =
Currency
Country
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
Quality-of-Living
120
100
80
60
40
20
Quality-of-Living
0
Source: Mercer‘s Quality of
Living September 2014
surveys.
SPOTLIGHT ON HARDSHIP
D 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 AT
TO MOBILITY?
• Steady improvement (China, India) but the gap
remains 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 sometimes
considered
– One of the reasons why Beijing and Shanghai are not
exiting the hardship category
• Hardship remains a key part of the package but
prevalence and amounts are slowly going down
FOOD FOR THOUGHT
M A K E T O M O R R O W , T O D AY
FOOD FOR THOUGHT
“Traditional expatriates”
are still a key
component of a mobile
workforce in Asia but
their legitimacy can be
under scrutiny
Mix of compensation
approaches
including balance
sheet and the
different forms of
local and local plus:
Asia is leading the
charge
Allowances, premiums
and benefits: slowly
decreasing but flexibility
needed to
accommodate new
expectations
Managing locals and
Asian expats: need to
change pace to keep up
with high turnover, salary
increases and
expectations
The clear cut between
expatriates and locals
is disappearing fast .
Policies need to
accommodate multiple
categories/scenarios