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Permanent transfers on the rise

Jun 11, 2018
Permanent transfers look set to change the world of global mobility as a survey revealed they are increasingly seen as an alternative to the traditional long-term international assignment (LTA).

The survey, by Crown World Mobility, targeted businesses across a wide range of industries including aerospace, retail, pharma, oil and gas, professional services, manufacturing, finance, telecommunications and automotive. It provided a fascinating insight into the way global mobility is changing, with close to half of businesses saying they now use permanent transfers more often than old-school LTAs. Additionally, a third of companies expect to see the number of permanent transfers increase this year.

Lisa Johnson, Global Practice Leader in Consulting Services at Crown World Mobility, believes those statistics highlight an underlying trend that could become increasingly significant for corporations and employees.

“It started a few years ago as a small shift in certain regions such as Asia, the EU and across Latin America,” she said. “We noticed companies were slowly losing tolerance for the traditional international long-term assignment (LTA) model. This was primarily because companies needed to reduce mobility-related costs. After all, a traditional LTA can cost anywhere between three and eight times the employee’s annual salary.”

However, Lisa said that what changed the agenda was an overall shift in what it means for companies to be global, and a desire to align global mobility with this new mindset.

“Early-career millennial employees are increasingly looking for international opportunities and, in the war for talent, if companies want to keep them then low-cost mobility options have to be available. Permanent transfers fit that bill.”

It seems today’s global mobility professionals, armed with new technology platforms, have made global mobility strategies smarter and are willing to look at alternative programmes which support a ‘new normal’. Therefore, fewer companies tolerate the ‘expat for life’ approach which spends lots of money to keep an employee on an expatriate lifestyle, believing there is no-one else who can fill that role.

“We see more and more companies implementing strong governance to ensure that the three-year LTA maximum length, with the option to extend for two years, is the programme norm.”

Permanent transfers are one-way international moves where the assignee and family live in the new location as locals. They come with fewer associated costs and benefits. For instance, the assumption is that the employee will sell their home (or end their rental lease), sell their car, ship their belongings and prepare for a new life abroad before they make the transfer.

Both businesses and employees are driving the change, according to Lisa. “Our survey showed 91% of companies had company-initiated transfer schemes – but 52% also had employee-initiated schemes. This supports the notion that employees want greater flexibility to move around an organisation and that companies want to support that. One of the companies in our survey even revealed they have set up a ‘Lifestyle Assignment’ for employee-initiated moves, where only limited benefits are offered.” Lisa said that some companies, new to global mobility, are choosing to offer only permanent transfers, setting the precedent that they do not need the expense or complexity of temporary international assignments.

“One of the key findings from our survey was that 45% of companies said they now use company-initiated permanent transfers more often than LTAs and 32% said they expect to see an increase in permanent transfers next year,” said Lisa. “The most popular reasons given were lower cost, growing demand and global business growth.”

But do permanent transfers work? Lisa said that it depends on putting the right employee in the right role and providing them with the right support. “More than a quarter of organisations admitted they have experienced failed company-initiated permanent transfers, requiring employees to be repatriated. Transferring employees from high cost-of-living and/or high quality of life locations to a lower one can be the most challenging situation. Companies also cited immigration difficulties, family adjustment, salary and employee expectations as common challenges.”

So, what are the alternatives? Lisa explained that permanent moves were originally intended to be used between like-to-like countries where the lifestyle, cost of living, salary and quality of life were similar and on-going support from the company would not be necessary. When that is not the case then ‘Local Plus’ policies are emerging which include benefits that meet the employee’s needs and understand the realities of the new location. “We have also noticed a rise in ‘localisation’ policies which help employees transition from a temporary assignee to a permanent local employee,” she said.

The bottom line is that global mobility is evolving and, with a growing reluctance to fund old school LTAs, new alternatives are emerging.

Photo: Middle right: Lisa Johnson.

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