How to reduce the cost of expatriation?
It’s a secret for nobody: large companies’ current trend is to reduce expatriation’s costs.And in this process, the winners are the young employees: they “cost” less than employees with families…
The VIE contracts (“Volontariats Internationaux en Entreprise”), which do not include accommodation or transport, are still widely preferred by French firms and young employees.In Europe, more and more executives are called “commuters” because they shuttle between Paris and other European capital, in order to reduce mission costs.
Time for tailored packages!
There are now fewer and fewer expatriate contracts and more and more local contracts “Plus” also including rent, transport and sometimes even school children…
A trend that has not always proved to be advantageous for the company, as acknowledged by Marie-Odile Affholder, director of international mobility at Alstom, which after analysing the costs of local contracts “Plus”, has found that some are more expensive than conventional expatriates!
Because expatriation is more and more expensive, mobility managers, in order to control costs, have now established scales of cost of living by country and even by city!
Some large French companies have recently chosen to reduce their number of expatriates to make big savings: “The 10% decrease in the number of expatriate, allowed to save seven million euros. No other policy review would give this result.” says Olivier Burger, director of Areva overall remuneration.
Relocating experts to manage expatriates
Many companies, such as Schneider Electric, create platforms for “relocation”. They consist of experts to deal with immigration issues, expense reports, leave, etc…
Their role is to deliver a financial analysis of expatriation integrating criteria such as inflation, taxation and currency effects.
“When the same company has to manage different status (junior contracts, expert mission, VIE, nomads) and streamline, the regional centre of excellence is the right solution,” approves Yves Girouard, president of Magellan.
Offshoring but not outsourcing!
Offshoring does not mean outsourcing! Indeed, outsourcing is similar to deal with subcontractors and presents many risks for the company “because it erases the memory of operations” according to Yves Girouard.
This is the experience that many Anglo-Saxon companies have encounter trough their outsourcing policy: “Stripped of its expertise, the company does not know anymore how to decompose remuneration and to reply to employee’s questions. Seeking answers generates a waste of time and energy for HR teams “says a responsible at Comp & Ben (salaries and benefits).
Towards a globalization of mobility management
Large groups are now using a different legal form called GEC (Global Employment Company), which is similar to a subsidiary.
It is very popular with oil companies, automotive and chemical industry; these subsidiaries can be found mostly in Geneva, Hong Kong, Singapore and several South American capitals.
As explained Yves Girouard: “Not everyone needs an expatriate management hub, [...] these structures are used to manage social coverage internationally, secure pension funds of employees and to ensure their retirement. In terms of taxation, it enables centralized taxation and avoidance of double taxation between host countries and countries of origin. “
Source: Les Échos Business