Professional expatriation has become a major element for multinationals. Expatriates represent 10% of their workforce. Nowadays, it is essential for employees to be mobile and able to adapt to any kind of environment. Peter Clarke, a Partner at PWC, gives us an overview of new practices and trends on international mobility.
In the "Talent Mobility 2020" issue, PwC predicts a further 50% growth in international assignments by 2020. Is this figure still relevant today, as many countries are tempted by inward-looking attitudes and international trade growth is flat?
Due to the advent of modern mobility (e.g., short term assignment, rotational assignment, frequent business travel, commuting, etc.) this figure is relevant and may be increasing. Although governments may be exhibiting protectionist policies, businesses continue to strive to achieve the right skills in the right place at the right time. Now more than ever those skill sets may not be found in the headquarters location, and mobility in some form will be required to facilitate growth.
Emerging countries are developing highly qualified local talents. Shouldn't it reduce international assignments?
It is true that highly qualified talent is being found in emerging markets, however the need to develop well rounded leaders with a truly international perspective continues to drive mobility even as emerging markets increase their talent pool. We are seeing an increase in “reverse transfers” where top performers from emerging markets are moved into developed markets to gain valuable skills and experience. Additionally, executive leadership teams of western multinational corporations are increasingly comprised of individuals who are not from the headquarters location.
What mega trends have or will have an effect in personal and professional expatriation?
We have already seen major changes to personal and professional expatriation resulting from technological breakthroughs and demographic and social change. Technology is driving efficiency into every aspect of mobility from tax return compliance to destination services. For example, PwC is collaborating with clients and government agencies to increase so called “cooperative compliance” in particular with frequent business travelers. Technology also facilitates choice in mobility programs by allowing companies develop on-line applications to offer personalized assignment packages (e.g., choose additional home leave instead of a hardship allowance, etc.).
In terms of demographic and social change, PwC's most recent study, which focused on millennials, found that 71% of female millennials want to work outside their home country during their career. To create a sustainable talent pipeline, employers must actively focus on retaining its talent.
Mobility offerings will be key to this goal. With more participation in mobility programs, companies are being forced to rethink the benefits that are being offered. According to PwC's March 2016 publication, “Moving Women with Purpose,” 71% of females surveyed would be more likely to accept an international assignment if they had the option to select personally from a menu of benefits.
Additionally, much of the economic growth over the next 30 years will happen in urban areas of developing markets. To take advantage of this new customer base, multinational corporations will change the location where their business is transacted. While the availability of talent in emerging markets is increasing, the strategic alignment of the right people in the right place at the right time will continue to drive mobility into these markets. Resource scarcity and shifting economic power will have similar impacts on mobility, making the pairing of talent and opportunity all the more key to multinational corporations business strategies of the future.
Mercer has recently issued its cost of living index for 2016. From your experience, does cost of living influence global organizations' strategy in terms of talent mobility and relocation?
Increasingly, cost of living does not influence mobility strategy, as mega trends are driving business into emerging markets where cost of living is flat or negative in comparison to the developed markets from which the talent is moving. Conversely, where the need is strategic, businesses are willing to make the investment to align talent and opportunity. Additionally, nontraditional mobility is also increasing in particular to developed markets. For example, long term (12 months or more) commuting assignments are replacing traditional expatriate moves (e.g., NY to Dubai, LA to London, etc.).
What cities and countries could see a sharp rise in the number of foreign workers in the near future?
According to PwC's “Cities of Opportunity 6”, Canada (Toronto), Malaysia (Kuala Lumpur), the UK (London) and US (New York, San Francisco) all rate high in ease of doing business. Because of this we would expect the number of expatriates into these cities and countries to increase. It remains to be seen what impact Brexit will have on London and the UK as a whole.
Do you see external factors, apart from currency fluctuation, that could influence Global mobility and international assignments?
Factors such as quality of life definitely have an impact on decisions to move. Because more and more of the mobility opportunities are in locations that may be less traditional for expatriates (China, India, Africa), we are seeing increased use of frequent business travel and commuting assignments. Due to the cost effectiveness of these types of mobility, we expect that the trend will only increase. The desire to keep the family at home in their community also plays a role in the popularity of this type of mobility.
Attracting talents (workers & entrepreneurs) has become a key component in countries' integration strategy in recent years. Apart from Singapore, what countries lead the game?
Paris, France leads the way in intellectual capital and innovation according to “Cities of Opportunity 6”. Stockholm, Sweden and Sydney, Australia also rate in the top 10 in this category. These same cities also rate high in ease of doing business and health, safety, and security, making them destinations for business and expatriates.
Have you seen new mechanisms recently put in place by governments to smooth foreign workers' entry to their host country (or on the contrary make it more difficult to get a visa)?
Singapore, France, Switzerland and China all have tax regimes that provide tax incentives to expatriates. Recently, we have seen a tightening of the rules by these governments so that the tax advantages are being claimed appropriately and not abused. Canada has also recently enacted legislation that eases the administrative burden for companies who have short term travelers that will ultimately be exempt from taxation due to a tax treaty.
There have been many recent changes from a global immigration perspective that could make it both easier and more difficult for foreign workers in a number of host countries. Although it appears that many of these changes are beneficial to foreign workers, many countries while streamlining processes have tightened restrictions. For example, in Singapore, the Ministry of Manpower has made it more difficult for foreign workers to apply for an Employment Pass by increasing the minimum monthly salary required. A similar change was passed by the Danish Parliament. Additionally, according to new law, EU employers sending intra-company transferees to Slovakia must now notify the National Labor Inspectorate of the transfer no later than the foreign worker's start date. Moreover, Saudi Arabia now requires labor market testing to be undertaken as part of the work authorization process, meaning employers are now required to publish job openings locally.
Although the above countries have introduced stricter rules, other countries have made amendments that are much friendlier and more streamlined towards foreign workers. For instance, the Department of Jobs, Enterprise & Innovation in Ireland plans to introduce a new online system that will allow online completion of employment permit application forms which should benefit foreign workers by streamlining the application process and reducing processing times. In addition, in hopes of attracting more high-net worth individuals, the Dutch government has relaxed some of the eligibility criteria for a residence permit under the foreign investors program, including an extension in duration of such permit and an expansion as to the types of investments that can be made.
Countries in North and South America have also introduced amended legislation and programs which should benefit foreign workers. The United States has revised a current program to allow students who have obtained a US degree in a designated science, technology, engineering or math (STEM) field the opportunity to extend their Optical Practical Training (OPT) designation (which acts as work permit) by an additional 24 months, following an initial 12 month grant. Furthermore, Brazil has announced that dependents of temporary work visa holders, who are over sixteen years old, will now be authorized to work from the day of their arrival in the country.
