The main findings
The payment of cash allowances in recognition of assignments to challenging or remote locations has long been a core element of expatriate compensation. Whether these allowances are calculated based on location assessments which focus on the living standards in just the host location, or compare the quality of living between home and host, their inclusion in traditional balance sheet compensation calculations is well-established. A quarter of respondents to Mercer’s 2015 Worldwide International Assignment Policy and Practices survey reported that the requirement to send employees to hardship or remote locations continues to be a barrier to mobilising their workforce however, which suggests that more still needs to be done to support employees and their families when asking them to move to locations which do not offer the equivalent standard of living to which they are accustomed.
When considering the most important criteria for determining location premiums, it is clear to see how poor scores in any of these categories would result in difficult living conditions by any objective measure. For example, the most heavily weighted criteria in Mercer’s Quality of Living assessments are:
- Political and Social Environment (e.g. international and domestic security, crime, law enforcement effectiveness).
- Medical and Health Considerations (e.g. medical/hospital facilities, pollution levels, hygiene).
- Public Services and Transportation (e.g. reliability of utilities such as electricity and water supply, availability of regular and safe public transport, level of traffic congestion, access to international airports).
While cash allowances certainly go some way to recognising and compensating for poor conditions in these areas, in reality additional support measures are often required to mitigate these risks in terms of day-to-day living. The most effective interventions will be those tailored to the nature of the challenges in each location, so it is important not to adopt a ‘one size fits all’ approach to such support. Equally, honest and constructive communication about risks and the support available to the employee and their accompanying family is essential with regard to exercising duty of care. The additional costs associated with the interventions highlighted below will vary, but are not significant when compared with the cost of a failed assignment, or being unable to mobilise the talent needed to the host location at all.
Particularly important when sending an assignee and their family to a recognised hardship location, a pre-assignment visit will allow them to experience the challenges and support provided first hand, which will in turn allow them to make an informed decision about whether to accept the posting, and/or identify what additional support may be required.
Access to safe and secure accommodation while in the host location is imperative for the assignee and their accompanying family. While this may seem self-evident, securing housing of a good international standard can be difficult in many challenging locations due to lack of availability, and additional services may also be required (e.g. back-up generators where electricity supply is unreliable; security guards and/or drivers where safety is a concern; air purifiers where pollution and air quality is a problem).
Understanding what to do and what support will be available in an emergency is clearly very important to assignees and their families. The provision of security briefings and training as appropriate, as well as access to professional security and evacuation services such as ISOS can provide a level of reassurance to the assignee and business alike.
Medical and health support
Pre-assignment medicals are recommended to enable preventative interventions in advance of expatriation (e.g. vaccinations, advance prescriptions for the management of pre-existing conditions). The provision of international medical insurance cover and emergency support are also critically important in hardship locations, as the cost and quality of medical care and facilities can vary dramatically even within a location without the right insurance levels in place. In some cases, treatment would be recommended in a neighbouring country or back in the home location as the risks in the host location are too great, so medical evacuation cover would also be recommended.
The ability to travel safely to and from the host location, and within the host location itself can have a significant impact on the experience of living and working there, as any restrictions on the freedom of movement can have a real impact on how isolated or integrated an assignee and their accompanying family can be. Ensuring the assignee and their accompanying family have access to safe private transportation, including with a driver if required, is another important level of support which can transform the experience of living in a hardship location.
The deployment of talent into emerging markets and developing economies continues to challenge many businesses as they expand their spheres of operation into new geographies. Striking the balance between incentivising experienced and valuable resources to take postings in locations where the standard of living poses additional difficulties, providing the right level of support from a risk management and duty of care perspective, managing cost, and delivering meaningful career and leadership development opportunities for employees is not easy. Thinking creatively about the assignment structure (i.e. does the assignment need to be on a long-term, accompanied basis?), the cash allowance and benefit mix, and personal and career development opportunities of assignments to these locations can enable a positive assignment experience for the business and employee alike.