measuring the cost of international assignments · measuring the cost of international assignments...

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Measuring the cost of international assignments

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2 Measuring the cost of international assignments

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Cost containment remains the biggest issue for Global Mobility (GM)managers, with 61% quoting cost-effectiveness as a key driver for policyreview, according to recent ECA statistics.

One of the major challenges in managing the costs of a global mobilityprogramme is collating all the information required to see, predict andcommunicate to all the relevant areas of the business the likely cost ofpotential assignments before they are approved, in order to be able toaccurately assess their viability and value to the business.

Cost estimates can provide this transparency, forming a strong tool in theGM arsenal to support the business.

What are cost estimates?

Cost estimates are detailed calculations predicting the total expense to the business ofinternational transfers. Salaries and bonuses are by no means the only costs, although theyclearly form a large component. In order to correctly assess the full costs a number of otherissues also need to be considered.

Whether using a home-based salary system or one based on host country norms, mobilitypremia and/or a number of benefits are likely to be provided including, but not necessarilylimited to, accommodation, education costs for children, company car, medical insurance, tax return preparation, pre-assignment visit, language and cultural training, work permitand/or visa, flights, temporary accommodation and other relocation costs. Some of these willbe one-off payments and others will be spread throughout the assignment. Either way, they canhave a considerable impact, so the better these expenses can be itemised, the more representativethe view of total costs will be.

Two of the most difficult components to quantify, and often the largest, are the taxes payableon the entire remuneration package for the whole of the assignment, and both employee andemployer social security costs. To correctly assess these, ongoing support of home countryobligations, such as contributions to the home social security system and pension funds, willalso need to be factored in.

In summary, a cost estimate goes beyond the salary calculation to provide a comprehensiveinsight into the costs to the business of an international transfer.

Cost Estimates

3Measuring the cost of international assignments



Using cost estimates

Cost estimates can be used in a number of ways to improve the approval and managementprocesses surrounding international assignments and enhance the GM programme.

For budgeting: A cost estimate will give the business unit bearing the expense of any individualassignment a clear indication of the potential total costs, allowing these to be correctly budgetedbefore the assignment goes live.

For evaluating different resourcing scenarios: Cost estimates make it easy to compare thecost of sending an employee abroad with that of making a local hire, for example; to analysethe cost impact of using different policy types and provisions (e.g. international assignment orshort-term assignment, ‘light’ packages etc); the different outcomes of sending individualswith differing family circumstances, or to see how basing the employee in a different location(if possible) might affect overall costs.

For producing project bids: If your business requires the submission of bids, an estimate of potential assignment costs is essential for incorporation into calculation of the project’soverall costs.

For improving management approval workflow: Using cost estimates will enable you toincorporate the preparation and sign-off of an assignment instigation into a standard businessauthorisation process, ensuring that assignments and all their related costs can be reviewed andapproved in advance.

For designing and maintaining a business-enabling GM programme: Ultimately, if GMmanagers can demonstrate a strong grip on the costs at the same time as supporting thebusiness, they will be able to demonstrate the value of their programme.

The benefits of cost estimates

Making cost estimates an integral part of a rigorous assignment management process will resultin better control, cost-efficiency, and more accurate reporting.

Improving cost awareness and controlOften the only part of the business with a good idea of the total costs of an assignment will bethe GM function. Cost estimates allow better communication of these costs to the relevantstakeholders in a clear and accessible way, promoting cost control by:

n Allowing the host business and other key stakeholders to see the added value an assigneewould need to provide to the business to justify the significant outlay, and to confirm thatthe request meets a clear business rationale.

n At the end of the assignment, helping in the decision-making process on whether torepatriate or localize the assignee, or to extend the assignment.

n Highlighting expensive exceptions to company policy. By showing itemised costs agreed byline management in negotiations outside of policy, the GM function will have the means todemonstrate the cost savings of adherence to policy. On the other hand, if a particularexception has become commonplace across assignments it may be a useful indicator thatthere is a fundamental issue within the policy framework that needs to be addressed.




n Consolidation of data into one central resource to analyse total, actual, historical and futureassignment programme costs. When cost estimates are incorporated into a centralisedgo/no-go decision-making process, the business will have a much clearer concept of the sizeof the expatriate workforce and its overall cost, both now and in the future.

Cost reductionIf cost reduction is a priority, cost estimates will help the business to:

n Determine whether the benefit to the business of any international assignment is likely tooutweigh the cost. If not, an alternative and cheaper solution may be sought.

n Evaluate the cost of an expatriate versus a local hire and consider both options fully.

n Choose the correct assignment type and policy to apply through a comparison of packagesin the context of each assignment. For example, is a development move on a lighter packagefeasible? Could the assignment length be reduced?

n Find the most cost-efficient expatriate for the job. Cost estimates will illustrate the impact ofthe potential assignees’ personal circumstances on the overall costs. Factors such as seniorityand family size, for example, can make a considerable difference to the overall costs ofassignment, so if cost is a major factor and there is a choice of people for the job, costestimates will show the best options financially.

n Choose the right location in which to base the assignee. The host location can make asignificant difference to the cost of an assignment and so comparisons to see where best tobase an assignee can be extremely valuable if there are a number of options.

Cost tracking and reporting Cost estimates provide a solid basis for tracking, reporting and communicating the total costs ofassignments to relevant stakeholders by supplying:

n Information on the number of proposed assignments across the business and their associatedcosts, providing management with the data to assist in managing the company’sinternational mobility programme.

n Breakdowns of the individual components of assignment packages (salary, annual benefits,one-off costs, tax and social security etc), allowing the business to allocate the correctassignment costs to the appropriate stakeholders.

n Reports on specific assignment benefits to see where vendor cost-savings may be possible orpolicy adjustments made.

n Reports on estimated costs versus actual assignment costs to inform future budgeting.

n Information that passes directly to payrolls, itemising which payments and benefits theassignee will receive gross or net of tax.




Maximising the benefits of cost estimates using software

The use of cost estimates has a great number of business advantages, but manual creation ofthem can be a time-consuming process. In order to maximise the benefits, consider usingspecially designed software to facilitate the calculation of these detailed reports.

Save timeA cost estimate calculator that can be configured to auto-populate with your benefits dataaccording to your company policy and perform tax and social security calculations to arrive atgross assignment package costs will save you considerable time.

Some cost estimate software will be able to ‘batch process’ cost estimates, meaning that youcan explore different scenarios by creating multiple cost estimates for any assignment at onestroke, saving even more time.

Reduce human errorAutomation of cost estimate generation reduces the possibility of human error in calculations bylimiting the potential for input mistakes or manual computation errors.

Promote complianceCost estimate software makes it easy to apply consistent company policy to cost estimates,ensuring that comparisons across assignments are made on a like-for-like basis, and thereforeaccurate. Standardisation of cost estimate methodology using software should result in bettertracking and reporting of costs. Most cost estimate software will include reporting functionality,allowing users to report directly on cost estimates from the system.

Deliver data direct to payrollCost estimate software is often able to integrate with other HR systems allowing for faster andbetter communication of the costs of an assignment across an organisation (for example,automatically communicating pay and benefits to a payroll system). This can reduce costs andlead to further efficiency gains as duplication of effort is eliminated.

Gain a macro view and share your knowledgeCosting software should be able to provide you with configurable reports allowing analysis ofpopulations, assignment types or locations, business units, individual benefits etc – whateveryou need. These will allow you to communicate to and support all the areas of the business forwhom international assignments are important and to hone and improve your global mobilityprocess going forward.




Screenshots from ECAEnterprise

The ability to see all the costs in a number of different ways will provide the informationthe business needs to make the most of its GM programme.




About ECA International

Recognised since 1971 as a world authority in its field, ECA remains a leader in the provision ofknowledge, information and technology, offering organisations of all sizes an unrivalled portfolioof data, calculation aids, salary management software, reports, guides and surveys to help themstructure and manage their international rewards programmes.

About ECAEnterprise, ECA’s global mobility management software

ECAEnterprise is a market leading, comprehensive software system and database for managingmobile staff. It provides full salary and cost-estimate calculation and reporting functionality fororganisations managing globally mobile staff and has optional additional modules includingworkflow and batch processing for managing the full assignment life-cycle.

Designed in collaboration with practising global mobility managers, ECAEnterprise incorporatesECA’s proven cost of living, hardship, tax, social security and costing benefits data, deliveringquality data and exceptional functionality through a single software system.

ECAEnterprise is available off-the-shelf, configured or customised to best meet customerrequirements. A large client base gives testament to ECA’s expertise and experience in providingbest-in-class assignment software solutions.

As a Software-as-a-Service application hosted by ECA, ECAEnterprise eliminates the need forclient IT overheads and provides for efficiencies in release of software updates and upgrades.

To find out more about ECA or ECAEnterprise please contact:

Londont: +44 (0)20 7351 5000e: [email protected]

Hong Kongt: +852 2121 2388e: [email protected]

New Yorkt: +1 212 582 2333e: [email protected]

Sydneyt: +61 (0)2 8923 5400e: [email protected]

ECA International

London +44 (0)20 7351 5000Hong Kong +852 2121 2388New York +1 212 582 2333Sydney +61 (0)2 8923 5400

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measuring the cost of international assignments · measuring the cost of international assignments...

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