Cost of International Relocations For Employers
Dating back to the Dutch East India Company, sending an employee to work in another country (sometimes called a "global assignment" in current HR jargon) has carried considerable costs while theoretically opening the potential for financial returns for the employer. However, companies contemplating increased expatriate placements, within their home countries (inbound) or overseas in host countries, are frequently penny-wise and pound-foolish with respect to real vs perceived costs.
Perceived relocation costs are easier to identify and therefore receive the most critical attention. Real costs are the sum of all direct and indirect expenses associated with the transfer. Compounding this challenge is the current state of many corporate finance systems, which are not designed to track relocation or to assign management cost data. Relocation cuts across many areas, including travel, transportation, human resources and payroll.
With tax equalization, housing allowance, cost-of-living adjustment and other benefits, the typical expatriate compensation package is two to three times the home-country base salary. For example, an expatriate with a €100,000 annual salary will cost the employer €200,000-300,000 per year incl. the relocation costs. Other factors influencing international service assignment cost are the host destination, the size of the family (for accompanied assignments where the family relocates with the expatriate to the host country), the expatriate benefits as per the employer's International Service policy, and home-host taxation. Shorter term assignments have lower costs, especially when they avoid taxation thresholds, so the recent trend has been more short-term assignments and extended business trips. The savings pendulum will swing the other way, however, if expatriate employees are not given enough time to produce its host country to accomplish their assignment’s specified business objectives, whereby the position becomes a "revolving desk" lacking in continuity or operational momentum.
Additionally, companies with global ambitions have historically moved their employees (domestically) using several decentralised relocation departments, and they often face serious financial and regulatory risks unless they refit or re-educate organisation structures for cross-national transfers.
Read more about this topic: Relocation Service
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