APAC Localization
Survey Results
A P A C
L O C A L I Z A T I O N
S U R V E Y
R E S U L T S
Localization of international assignees is on the rise; in fact, according to a
recent Worldwide ERC® study, 65% of companies expect localization activity to
increase in the next five years. To identify the prevailing conditions under
which companies transition their assignees to local status, Weichert Relocation
Resources Inc. (WRRI), in partnership with the Hong Kong Institute of
Human Resource Management (IHRM), and Worldwide ERC®, conducted
a landmark study of localization practices in the APAC region.
Defining Localization
While the definition of “local status” can vary widely between companies, for
purposes of our study, we defined “localization” as the process by which an
employee on assignment in a host country location is transitioned (partially
or totally) to that location’s employment terms and conditions, including
compensation and benefits.
Methodology
Our survey was conducted online from September 25, 2008 to October 15,
2008 and we received 91 responses from employers with international activity
in the APAC region, 63 (69%) of which had localized employees in that part
of the world. There was a very robust response from companies in the USA
but also a number of participants from Australia, Belgium, New Zealand,
Singapore and, of course, Hong Kong and China. Respondents were
predominantly from the technology, communications, transportation,
engineering and manufacturing industries.
The following highlights some of the initial findings from this research.
Key Findings
How many localized employees do companies have in this region?
Among surveyed companies with localized employees in the APAC region,
most have a very limited number of such employees, with the highest
percentage (71%) reporting between 1 and 10 assignees localized in APAC.
Why do companies localize employees?
The most common reason to localize employees, cited by 52% of respondents,
is to cut or contain costs. Another 30% indicated they localize employees to
achieve business necessity, while 13% indicate they localize employees to
accommodate employees’ desire or choice. Only 5% indicated that localization
is used to establish greater equity among workers in the same location.
Do companies have formal localization policies?
Eighty-one percent of respondents have either a formal policy or follow a set of
guidelines—46% have one or more formal policy/tiers and 35% follow a set
of guidelines. The remaining companies handle localization on a case-by-case
basis. Among the criteria companies use to distinguish policy tiers, the most
significant criteria is the original status or intent of the assignment, followed by
employee level and the home/host locations.
Do companies totally transition employees to local terms and
conditions immediately?
Localization does not necessarily mean complete transition to local terms and
conditions immediately. In fact, it seldom does; only one company in our survey
transitions employees 100% at the time of localization and a few companies
choose to provide selected assignment benefits indefinitely. However, the
purpose of localization is to migrate assignees to local terms and conditions
and most companies approach this through a phase-out of expatriate and other
home-country benefits. Some use a lump sum approach to eliminate some
benefits. Even then, however, most companies that take a lump sum approach
still phase-out home country benefits and even some assignment benefits.
Which benefits are most likely to be retained?
The following chart depicts the expatriate benefits that continue to be provided,
at least for a certain period of time, upon localization.
It is interesting, however, to note that nearly 10% of these respondents
reported having more than 50 localized employees in the region.
Where do companies localize employees in APAC?
The APAC countries with the most localized assignees include Mainland China,
Singapore, Australia, and Hong Kong, as illustrated in the chart below:
Benefits Provided Upon Localization
Localization by Country
Mainland China
68%
Singapore
67%
Australia
30%
Malaysia
25%
Taiwan
24%
New Zealand
13%
Thailand
13%
South Korea
11%
Indonesia
11%
73%
53%
49%
Cost of Living Allowance
35%
India
Housing Allowance
Transportation Assistance
41%
Japan
78%
Home Country Home Sale Benefits
48%
Hong Kong
Final HHG Shipment
46%
Home Country HHG Storage
44%
Home Country Rental Assistance
44%
Dependant Education
41%
Home Country Visits
31%
Host Country Home Purchase
29%
Language Training
25%
Foreign Service Premium
20%
Host Country HHG Storage
18%
Philippines
8%
Cultural Training
17%
Vietnam
6%
Host Country Social Club Membership
17%
North Korea
2%
Hardship Allowance
Pakistan
2%
Spouse Employment
Percent of
Organizations
0
10
20
30
40
50
60
70
80
15%
11%
R&R Trips
Percent of Organizations
2
5%
0
10
20
30
40
50
60
70
80
90
A P A C
L O C A L I Z A T I O N
S U R V E Y
R E S U L T S
It is not surprising that a final household goods shipment to the destination
location would be provided. More significant is the fact that 73% of
respondents retain the host housing allowance, at least for some period
of time. We can see the cause of this, as there are some costly destination
cities in Asia (consider survey responses on the top four localization
destinations in Asia: Mainland China, Hong Kong, Australia and Singapore).
Fifty-three percent of respondents will provide some form of home-country
home sale assistance when the employee is localized. Many companies
employ the same type of home sale assistance typically used in the home
country when this benefit is provided to a localized employee.
Home Country Home Sale Assistance
Direct reimbursement of selling expenses
Third party home sale assistance/guaranteed offer
Both/either depending on departure location norms
Other
Services and/or benefits that are related to the initial transition to the host
country (language and cultural training and spouse counseling) are not usually
made available when the assignee is localized. And, very few companies (5%)
continue to provide R&R trips—a provision that would make local vacation
policies inequitable.
How are income tax, health & welfare, and social tax issues handled
during localization?
Tax equalization, tax consultation and tax preparation generally continue
for one or two years following localization. And in most cases (61%), the
employee is enrolled immediately in the local social tax system or this is
handled on a case-by-case basis (25%). Vacation, Sick Time and Pension
Schemes also tend to transition in year one. Medical benefits are
different—employees usually are moved immediately to either a local
or global medical plan upon transition.
What process do most companies use to localize employees?
When localizing employees, the large majority of companies (83%) gradually
phase out one or more assignment benefits over time. The phase-out
procedure varies considerably both in time frame and benefit type.
Among those provisions that are continued for a period of time, the most
popular transition schedule is to “reduce the benefit over three years.” Of
those providing selected benefits, as many as 32% reduce the Cost of Living
Allowance over three years, 26% reduce Housing Allowances over three years,
and 24% reduce the Transportation Allowance over three years.
When are the following benefits transitioned to the destination country?
Participant Profile
Cost of Living Allowance
Continues at full amount transition year only
Continues at full amount for more than 1 year
Continues at full amount indefinitely
Eliminated with a lump sum
Reduced over 2 years
Reduced over 3 years
Reduced over 4 years
7%
4%
7%
11%
21%
32%
4%
Other (includes, a one time transition payment, agreeing
to provide the benefit “indefinitely” but at a reduced amount).
14%
9%
9%
5%
9%
19%
26%
2%
Other (includes, a one time transition payment, agreeing
to provide the benefit “indefinitely” but at a reduced amount).
21%
14%
7%
17%
7%
14%
24%
Reduced over 4 years
Other (includes, a one time transition payment, agreeing
to provide the benefit “indefinitely” but at a reduced amount).
—
Percentage that Transition Year One
Vacation time
Sick Time
Pension Schemes
73%
73%
62%
Conclusions
Our research reveals that many companies are localizing in the APAC region
and using formalized policies to do so. While localization typically entails
gradually reducing expatriate benefits over time, they are rarely eliminated
entirely or immediately. When benefits are phased out, they tend to be
reduced over a three year period. The top three challenges associated
with localization are: pension portability, issues related to income taxes
and consistency of policy application.
On behalf of WRRI, Worldwide ERC® and the Hong Kong Institute of Human
Resources Management, we’d like to thank those companies that participated
in this study. A partial list of respondents appears on the following page.
Transportation Assistance
Continues at full amount transition year only
Continues at full amount for more than 1 year
Continues at full amount indefinitely
Eliminated with a lump sum
Reduced over 2 years
Reduced over 3 years
Policy Component
What are the major challenges of localization?
The variety of challenges associated with localization range from quality of
life issues to adequate medical care to tax and pension programs. But most
significant among the challenges are finding a suitable and comparable
pension program which was cited most often as one of the top three
challenges facing companies when transitioning employees to local status.
Rounding out the top three challenges were “consistency of policy
application” and “issues relating to income taxes.”
Housing Allowance*
Continues at full amount transition year only
Continues at full amount for more than 1 year
Continues at full amount indefinitely
Eliminated with a lump sum
Reduced over 2 years
Reduced over 3 years
Reduced over 4 years
29%
16%
32%
23%
17%
*Percentages do not add to 100% due to rounding.
3
A P A C
L O C A L I Z A T I O N
S U R V E Y
R E S U L T S
A Sampling of Participating Companies
ABS
Advanced Micro Devices
Aetna
Agilent Technologies
Air Products and Chemicals, Inc.
Alcatel-Lucent Asia Pacific
Alcon Laboratories
Aleris Switzerland GmbH
American Express
Amylin Pharmaceuticals Inc.
Anadarko Petroleum Corp.
ANN TAYLOR
AON Reed Stenhouse Inc.
APL Ltd.
Apple Inc.
ARINC Incorporated
Armstrong World Industries, Inc.
Avaya
Aviva Canada Inc.
Bayer Business and Technology Services
Bechtel
Biogen Idec
Black & Decker
Boeing
BP
CA (Hong Kong) Limited
Cameron
Canadian Natural Resources Limited
Cardinal Health
Cerner Corp.
Cisco Systems
Citizens Financial Group
CoBank, ACB
Corning Incorporated
Covance, Inc.
Covidien
CR Bard
Cytec Industries Inc.
Dassault Systemes Inc.
Dell International Services
Dow Chemical
Dow Jones
DuPont
DuPont China Holding Co., Ltd.
Electronic Arts
Ernst & Young
Exel
Exxon Mobil Corporation
Flextronics International USA Inc.
FM Global
Fonterra Co-Operative Group Ltd.
Foot Locker, Inc.
GE
Harris Corporation
Haworth, Inc.
Hercules Incorporated
HJ Heinz Company
Hollister Incorporated
Honeywell International Sarl
Hospira
International Flavors & Fragrances
International Paper
Invesco Ltd.
JDSU
JohnsonDiversey, Inc.
Jones Day
KCI
Kimberly Clark
Koch Industries
L.L.Bean, Inc.
Lenovo
Levi Strauss & Co./Accenture HR
Lord Corporation
Manulife Financial
MedImmune
Monster Worldwide
MWH Global Inc.
NetApp
OM Group Inc.
Philips
Philips Electronics Hong Kong Limited
RBC
Reader’s Digest
Roche
Scotiabank Group
Sensata Technologies
Shanghai Centre
Shinhua Company
State Street
Stryker
Sun Life Financial
The Home Depot
The Manitowoc Company
ThyssenKrupp Materials Handling
Towers Perrin
TransAlta
Tupperware Brands Corporation
Unisys
US Postal Service
Waggener Edstrom Worldwide
Watson Wyatt Worldwide
Whirlpool
WPP
Wyeth
Xerox
About WRRI
Weichert Relocation Resources Inc. (WRRI) delivers turnkey global relocation and assignment
management solutions that help clients expand their business reach, increase productivity, and
more cost-effectively manage their mobile workforce. WRRI is recognized as the growth-oriented
industry leader, providing a unique combination of stability, financial expertise and seasoned
leadership that has made the company a trusted, proactive partner to some of the world’s most
respected corporations. A progressive, independent company, WRRI is committed to delivering
Raving Fan® service; investing in new capabilities, technologies and talent; and bringing unmatched
innovations to market, such as the industry’s only complete, end-to-end global workforce mobility
solution. For more information, visit wrri.com.
About Worldwide ERC®
Worldwide ERC® is the premier global professional membership association for workforce
mobility. With a tradition of excellence in research, training and education, and peer-networking
that dates back to 1964, Worldwide ERC® is headquartered in the Washington, DC metropolitan
area, with offices in Brussels and Shanghai. Our membership includes 13,000 professionals
representing 71 countries, who are involved in managing or servicing a mobile workforce.
Learn more about Worldwide ERC® at www.worldwideerc.org.
About HKIHRM
As the most representative professional human resource institute in Hong Kong, the Hong Kong
Institute of Human Resource Management (HKIHRM), a non-profit making organization, has
over 4,100 individual and corporate members. Founded in February 1977, the Institute aims at
developing and enhancing professional standards in HR management, covering quality, ethics
and practices, and increasing the influence of HR professionals, for the benefit of individuals and
organizations in Hong Kong. As a member of the World Federation of Personnel Management
Associations, the Institute organizes a wide range of professional activities such as multi-level
training programs and conferences, and provides services such as conducting surveys and
publishing a professional journal. For more information, please visit http://www.hkihrm.org.
©
2008 Weichert Relocation Resources Inc., Worldwide ERC® and HKIHRM
®
2008 APAC Localization Survey Results
Weichert Relocation Resources Inc. ~ Hong Kong Institute of Resource Management ~ Worldwide ERC®
Conducted September 25 through October 17, 2008
GENERAL
Do you have international relocation activity in APAC?
Yes
91
86%
No
15
14%
Total
106
100%
THE NEXT TWO QUESTIONS REFLECT RESPONDENTS THAT DO NOT HAVE APAC ACTIVITY
Please select the industry category that most closely reflects your industry sector.
Energy (Petroleum/Chemical/Utilities)
2
13%
Financial Services (Banking/Insurance)
4
27%
Pharmaceutical/Bioscience/Health
3
20%
Retail
2
13%
Transportation/Engineering/Manufacturing
1
7%
Other
3
20%
Total
15
100%
How many international assignees does your organization have, overall?
Fewer than 10
7
50%
10 to 50
3
21%
101 to 200
1
7%
501 to 1,000
1
7%
More than 1,000
2
14%
Total
14
100%
ALL SUBSEQUENT QUESTIONS REFLECT RESPONDENTS THAT DO HAVE APAC ACTIVITY
Please select the industry category that most closely reflects your industry sector.
Consumer Products/Food & Beverage
1
Energy (Petroleum/Chemical/Utilities)
6
1%
7%
Financial Services (Banking/Insurance)
9
10%
Pharmaceutical/Bioscience/Health
12
13%
Retail
4
4%
Technology/Communications
19
21%
Transportation/Engineering/Manufacturing
19
21%
Other
21
23%
Total
91
100%
How many international assignees does your organization have, overall?
Fewer than 10
17
19%
10 to 50
26
29%
51 to 100
17
19%
101 to 200
11
12%
201 to 500
8
9%
501 to 1,000
5
5%
More than 1,000
7
8%
Total
91
100%
LOCALIZATION
For purposes of this survey, we define "localization" as the process by which an employee on assignment in a
host country location is transitioned (partially or totally) to host location employment terms and conditions,
including compensation and benefits.
Number of employees on assignment in the APAC region (annually):
Fewer than 10
37
41%
10 to 50
32
35%
51 to 100
9
10%
101 to 200
4
4%
201 to 500
6
7%
501 to 1,000
3
3%
Total
91
100%
How many localized employees are in this region?
1 to 4
24
38%
5 to 10
21
33%
11 to 15
4
6%
16 to 20
1
2%
21 to 25
4
6%
25 to 50
3
5%
51 to 100
2
3%
More than 100
4
6%
Total
63
100%
In which countries in the APAC region do you localize assignees?
Australia
30
48%
China (Mainland China)
43
68%
Hong Kong, Macau
26
41%
India
19
30%
Indonesia
7
11%
Japan
22
35%
Malaysia
16
25%
New Zealand
8
13%
North Korea
1
2%
Pakistan
1
2%
Philippines
5
8%
Singapore
42
67%
South Korea
7
11%
Taiwan (Republic of China)
15
24%
Thailand
8
13%
Vietnam
4
6%
Which best describes your most common reason for localizing employees.
To control/contain costs
33
52%
To achieve business necessity
19
30%
To establish greater employee equity
3
5%
To accommodate employee desire/choice
8
13%
Total
63
100%
Yes, one formal policy
19
30%
Yes, multiple policies/tiers
10
16%
No, but follow a set of guidelines
22
35%
No, handled on a case-by-case basis
12
19%
Total
63
100%
Do you have a localization policy?
If case-by-case, please define criteria:
11 Responses
Assignee needs to be replaced by a local and employee chooses to stay.
Cost, business need and timing
Depends upon length of time in location.
If employee initiated then local package, if company requested then local plus package to meet needs of employee (is, schooling may be
provided for children)
Limits for Social Security Systems, permanent/project functions
Must have BU approval/buy in; must be less costly than assignment status. Does not allow for phased in / out expense absorption;
localization is all at once. Base pay may be adjusted to accommodate loss of assignment benefits.
Position, Length of assignment, cost of expat pkg, culture of location
Review economic environment, presence of other local employees, and business need
These were the first localizations, the experience is used to draft the formal policy.
Time in location, Grade, Level and personal situation are taken into account.
If you have multiple/tiered policies, please indicate the criteria you use to distinguish
among policies/tiers. (Note: Total exceeds 100% due to multiple answers.)
Employee Level
9
39%
High Cost/Low Cost Locations
4
17%
Original Assignment Status/Intent of the Assignment
13
57%
Home/Host Locations
8
35%
Family Size
3
13%
Accompanied Status
1
4%
All of Above
4
17%
Other:
Business needs
1
4%
PLEASE NOTE: For the next set of questions, respondents were asked to indicate the types of assistance that
assignees might retain when localized in the APAC region. ("Spouse" may also refer to "Partner" where
applicable/legal.)
Spouse Employment Assistance
Yes
7
11%
No
54
89%
Total
61
100%
Language Training
Yes
15
25%
No
46
75%
Total
61
100%
If Yes, who is eligible for Language Training?
Employee
2
13%
Employee & Spouse
3
20%
Employee, Spouse & Dependents
10
67%
Total
15
100%
Cultural Training
Yes
10
17%
No
50
83%
Total
60
100%
If Yes, who is eligible for Cultural Training?
Employee
1
9%
Employee & Spouse
3
27%
Employee, Spouse & Dependents
7
64%
Total
11
100%
Home Visits
Yes
19
31%
No
42
69%
Total
61
100%
If Yes, who is eligible for Home Visits?
Employee
1
5%
Employee, Spouse & Dependents
18
95%
Total
19
100%
One trip per year
14
74%
Two trips per year
3
16%
Other, please specify
2
11%
Total
19
100%
If Yes, how often?
Other:
One trip after first year of localization
One trip for the first year only
Rest & Relaxation Trips (R&R)
Yes
3
5%
No
58
95%
Total
61
100%
Employee, Spouse & Dependents
3
100%
Total
3
100%
One trip per year
2
67%
Two trips per year
1
33%
Total
3
100%
If Yes, who is eligible for R&R Trips?
If Yes, how many?
Dependent Education Assistance
Yes
26
41%
No
37
59%
Total
63
100%
If Yes, indicate which of the following are eligible for reimbursement
(Select all that apply.):
Pre-school/nursery school?
13
50%
Kindergarten-Grade 12
26
100%
College/University?
2
8%
PLEASE NOTE: For the next set of questions, respondents were asked to indicate the types of assistance that
assignees localized in the APAC region might be provided that is over and above that given to local nationals.
Rental Assistance/Property Management in the Home Location
Yes
26
44%
No
33
56%
Total
59
100%
If Yes, for how long?
1 year
14
54%
2 years
6
23%
3 years
1
4%
5 years
1
4%
Indefinitely
4
15%
Total
26
100%
Storage of Household Goods at Home Location
Yes
26
44%
No
33
56%
Total
59
100%
If Yes, for how long?
1 year
12
46%
2 years
5
19%
3 years
1
4%
5 years
2
8%
Indefinitely
6
23%
Total
26
100%
Storage of Household Goods at Host Location
Yes
10
18%
No
47
82%
Total
57
100%
If Yes, for how long?
1 year
6
60%
2 years
2
20%
Indefinitely
2
20%
Total
10
100%
Home Purchase Assistance in the Host Location
Yes
17
29%
No
41
71%
Total
58
100%
Cost-of-Living Allowance
Yes
27
46%
No
32
54%
Total
59
100%
If Yes, which best describes the schedule?
Continues at full amount for transition year only
2
7%
Continues at full amount for more than one year
1
4%
Continues at full amount indefinitely
2
7%
Eliminated with a lump sum
3
11%
Reduced over 2 yrs.
6
21%
Reduced over 3 yrs.
9
32%
Reduced over 4 yrs.
1
4%
Other, please specify
4
14%
Total
28
100%
Other:
At business unit discretion
For duration of assignment--balance sheet only
Included in transition pmnt calc & paid over 2 yrs
Reduced over 1 year
Housing Allowance
Yes
43
73%
No
16
27%
Total
59
100%
Continues at full amount for transition year only
4
9%
Continues at full amount for more than one year
4
9%
Continues at full amount indefinitely
2
5%
Eliminated with a lump sum
4
9%
Reduced over 2 yrs.
8
19%
Reduced over 3 yrs.
11
26%
Reduced over 4 yrs.
1
2%
Other, please specify
9
21%
Total
43
100%
If Yes, which best describes the schedule?
Other:
At business unit discretion
Continues indefinitely with reduced amount
Included in transition pmnt calc & paid over 2 yrs
Individually negotiated
May get an ongoing housing allowance indefinitely
Reduced over 1 year
Reimburse the actual housing cost
We haven't had this yet, but will be a HK issue
Transportation Assistance (Car, Driver, Allowance)
Yes
30
49%
No
31
51%
Total
61
100%
Continues at full amount for transition year only
4
14%
Continues at full amount for more than one year
2
7%
Continues at full amount indefinitely
5
17%
Eliminated with a lump sum
2
7%
Reduced over 2 yrs.
4
14%
Reduced over 3 yrs.
7
24%
Other, please specify
5
17%
Total
29
100%
If Yes, which best describes the schedule?
Other:
In accordance with local policy (4)
Reduced over 1 year
Foreign Service/Mobility Premium
Yes
12
20%
No
48
80%
Total
60
100%
Continues at full amount for transition year only
2
17%
Continues at full amount indefinitely
2
17%
Eliminated with a lump sum
2
17%
Reduced over 2 yrs.
1
8%
Reduced over 3 yrs.
3
25%
If Yes, which best describes the schedule?
Other, please specify
2
17%
Total
12
100%
Other:
Included in transition pmnt calc & paid over 2 yrs
Only applied to those MP as part of assignment pkg
Hardship Allowance
Yes
9
15%
No
51
85%
Total
60
100%
Continues at full amount for transition year only
1
11%
Continues at full amount indefinitely
2
22%
Reduced over 2 yrs.
1
11%
Reduced over 3 yrs.
2
22%
Other, please specify
3
33%
Total
9
100%
If Yes, which best describes the schedule?
Other:
Included in transition pmnt calc & paid over 2 yrs
On an individual case
Reduced over 1 year
Do you cover the cost of any social clubs in the host location?
Yes
10
17%
No
49
83%
Total
59
100%
Continues at full amount for transition year only
1
10%
Continues at full amount for more than one year
1
10%
Continues at full amount indefinitely
2
20%
Other, please specify
6
60%
Total
Other:
All the time; no plan to reduce it.
10
100%
If Yes, which best describes the schedule?
Local package pays for club as well
May continue if business related at level
Offered to employee based on level
Only if a local role entitlement
Would be reduced/increased to equal home plan
Do you provide home-country home sale benefits when you localize the employee?
Yes
31
No (if No, please skip the next question)
27
53%
47%
Total
58
100%
Direct reimbursement of selling expenses
9
29%
Third party homesale assistance/guaranteed offer
5
16%
Both/either depending on departure location norms
10
32%
Other, please specify
7
23%
Total
Other:
As per home country domestic policy
31
100%
If Yes, please specify type.
Depends on home country relocation policy
Depends on home/host policies
Expenses & Guarantee Price / Loss on Sale protecti
Reimbursed to caps
Some assistance with selling expenses but selective
Third party assists with home sale/BVO Program
Do you provide one last household goods shipment prior to localization?
Yes
45
78%
No
13
22%
Total
58
100%
Income Taxes, Benefits & Social Taxes
Respondents were asked to answer the questions on this page once again reflecting just employees who have
been on assignment in a host country location and are subsequently localized; that is, transitioned (partially or
totally) to host location employment terms and conditions, including compensation and benefits.
Do you prepare a cost projection before localizing an employee?
Yes
43
70%
No
13
21%
Update the original expatriate cost projection
4
7%
Other, please specify
1
2%
Total
61
100%
Other:
Sometimes
Which best describes your tax assistance program(s) as they relate to localization?
Top number is the count of respondents selecting the
option. Bottom % is percent of the total respondents
selecting the option.
Tax Equalization
Tax Consultation
Tax Preparation
One Year
Two Years
Three Years
Four Years
Five Years
> Five Years
Other
Not
Provided
18
6
4
3
0
0
10
12
34%
11%
8%
6%
0%
0%
19%
23%
20
14
6
2
1
0
7
5
36%
25%
11%
4%
2%
0%
13%
9%
17
17
5
3
2
1
9
5
29%
29%
8%
5%
3%
2%
15%
8%
If you responded Other, please explain.
13 Responses
(1) No tax equalization for employee localization but transition tax subsidy in some emerging markets where income tax rate is high (such as China and
Vietnam).
(2) No tax preparation is provided except for China.
Based on # years of phased localization
Based on the level of employees
Depends on length of assignment; tax assistance provided for duration
Depends upon level of employee, complexity of compensation package, equity etc. Typically 2 yrs. of assistance but could be more or less.
Full Localizations - tax equalized in year of localization plus one additional year.
Modified Localizations - stay on home pay and benefits. Tax Equalized indefinitely.
In tax years impacted by the relocation benefits.
Tax equalization and prep is for duration of assignment. Tax Consult is for year of transfer and year of repatriation
Tax equalized until localization. Tax consult provided and preperation through end of assignment related tax liability.
Tax prep as long as localization continues.
TEQ through the end of the assignment date
Until there is no further income attributable to the expatriate assignment or localization transition payments.
We tax equalize by building an estimated amount into the salary however only for those home countries that require double taxation.
How are Social Taxes generally handled? Employee is:
Enrolled in local program immediately
37
61%
Enrolled in local program after a period of time
3
5%
Retained on Home Country program indefinitely, if possible
Handled on a case-by-case basis
4
7%
15
25%
Other, please specify
2
3%
Total
61
100%
Other:
Enrolled in local program if not prohibited by law
Full-enrolled immediately; Modified home ctry plan
When are the following benefits transitioned to the destination country?
Top number is the count of respondents selecting the
option. Bottom % is percent of the total respondents
selecting the option.
Vacation/Holidays
Sick Time
Pension Schemes
Year One
Two Years
Three Years
2
0
0
1
6
6
3%
0%
0%
2%
10%
10%
44
1
2
0
0
1
6
6
73%
2%
3%
0%
0%
2%
10%
10%
37
1
3
0
0
2
8
9
62%
2%
5%
0%
0%
3%
13%
15%
7
11%
67%
Other, please describe
13
21%
Total
61
100%
Local plus plan
Mostly regional schemes, only a few global
Move to local plan, unless an exception is made
Moved to local + company pays for additional/topup
On local plan if possible by local law
Phased transition to local medical plan
Supplemental coverage provided to equal home plans
Not
Provided
1
41
Full-moved to local plan; modifed stay home plan
Other
2%
Employee immediately moved to a global medical plan
Employee to local medical plan after 2 years
> Five Years
44
Employee immediately moved to a local medical plan
Employee is already on global plan and stays on it
Five Years
73%
How are medical benefits generally handled?
Other:
Case by case depending on host location
Four Years
Overall, what benefit(s) is the biggest challenge to administer when localizing employees, and why?
46 Responses
Education
Children Education
Education assistance - the Company still needs to pay for this benefit as most of the localised employees still need their children to go to International
Schools; housing allowance - as this is always perceived as part of their expatriate package
Schooling for children
Compensation
Base pay equity adjustments, these are phased out over several years and hard to track.
Direct Salary, usually because of the differences between home and host wealth accumulation environments.
Equitable compensation with Host Payroll and transition
concerns of home and education
Pension
Asia: Social Security System lacks for foreigners
Group Pension Transfer Plans
Pension
Pension - eligibility, vesting, levels of benefit, age of assignee ... all creates complications
Pension & Benefits due to comparability of value for services offered
Pension entitlement in home country - often many years of built up entitlement.
Pension issues
Pension of course. Question is ... do you try to make them whole to "home?"
Pension plan changes. Often times they are moving to a plan they perceive to be less lucrative.
Pension scheme. People are open to localization if the assignment continues over certain period. But no intention to retire in host country, so not acceptin
local pension scheme, or not able to participate in local schemes
Pension transitions can be challenging, when comparing both the company plans and the local country social plans.
Pension, housing in some locations, medical insurance in some locations
Pension, comp, housing allowance, taxes (if US)
Pension, especially if the individual has had mutliple local jobs at various countries or legal entities.
Pension, however biggest challenge when localizing within US
Pension. Exempt from 401k participation and not likely eligible for host country plan.
Pension. It is difficult for the company to continue contributing the employees' home country government pension program, and the organization solution of
an exclusive pension program may not be benefitial as expected. Localized employees are normally disssatisfied with the localized exclusive pension
program.
Pension/tax impacts particularly on longer termed assignees.
Pensions, because they are so different in AP versus Europe or US
We often find that host country pension scheme does
not fit the needs of foreign nationals.
Pensions
Taxes
China Tax. Because the China tax rate is higher than
other APAC countries, it's impacts the net pay to those
localized assignees.
Tax equalization
Taxation
Other
Prevalance to attempt to broker / negotiate one-off deals / structures.
Qualified U.S. benefit plans
Reducing COL and housing
Reluctance to give up foreign service premium
Benefits
Consistency with application of guidelines & the instinct for management to include the value of assignment benefits into the local salary.
Cost estimates and internal decisions around which benefits apply.
Divisions who want to localize with the intent to repatriate within 3-5 years ... this approach is considered for cost reasons
Housing and compensation
Medical; employees demand no differences from home country provisions
Long term incentive
Family acceptance
Stop of housing allowance and children education - social status & high cost on location
Taking away expat benefits, getting them used to paying local taxes
Transition from the housing, transportation and other assistance to a local employment relationship and minimal company assistance
Transition of benefits - lack of communication
What are the three greatest challenges when localizing employees to the APAC region?
Note: Total exceeds 100% due to multiple responses.
Consistency of policy application
27
45%
Competition for talent
18
30%
Issues relating to income taxes
30
50%
Issues relating to social taxes
15
25%
Pension portability
38
63%
Language/cultural adaptation issues
4
7%
Family adaptation issues
14
23%
Finding adequate medical care
10
17%
Finding adequate schools
11
18%
Environmental concerns
Inadequate public infrastructure (e.g., roads, transportation, public utilities,
hospitals, etc.)
Quality of life issues (e.g., availability of entertainment, restaurants, social
activities, etc.)
1
2%
1
2%
3
5%
Other:
Expat housing vs local housing
5
8%
Fluctuations in base salary
Housing Costs
Local income level is not very attractive
None within this region
If a localized employee is reassigned to another country in the future, what becomes the
Home Country for relocation purposes?
Departure Country
37
Destination Country
2
61%
3%
Employee's Country of Origin (Citizenship)
14
23%
Other, please specify
8
13%
Total
61
100%
Other:
Depends if they are going temporary or permanent
Depends on location and eligibility
Depends on Situation
Depends on the purpose and goal of move.
Depends, case by case, based on pension etc
Has not occurred.
So far, we have no such case.
Varies, but usually destination country
Please provide any additional information you'd like to share regarding your approach to localizaitons.
7 Responses
Calculation has been utilized for a number of years with success.
Conceptually localization is accepted. If start to eliminate certain benefits, retention issue is big, so housing & children's education
assistance is required as per experience.
Current piloting program for China
Generally, the home country salary is simply converted to the host country currency and no salary reduction occurs.
Many are handled outside of policy with exceptions.
Would like to see in a few year if a real cost saving has been reached
A Sampling of Participating Companies
ABS
Advanced Micro Devices
Aetna
Agilent Technologies
Air Products and Chemicals, Inc.
Alcatel-Lucent Asia Pacific
Alcon Laboratories
Aleris Switzerland GmbH
American Express
Amylin Pharmaceuticals Inc.
Anadarko Petroleum Corp
ANN TAYLOR
AON Reed Stenhouse Inc.
APL Ltd
Apple Inc.
ARINC Incorporated
Armstrong World Industries, Inc.
Avaya
Aviva Canada Inc.
Bayer Business and Technology Services
Bechtel
Biogen Idec
Black & Decker
Boeing
BP
CA (Hong Kong) Limited
Cameron
Canadian Natural Resources Limited
Cardinal Health
Cerner Corp
Cisco Systems
Citizens Financial Group
CoBank, ACB
Corning Incorporated
Covance, Inc.
Covidien
CR Bard
Cytec Industries Inc.
Dassault Systemes Inc.
Dell International Services
Dow Chemical
Dow Jones
DuPont
DuPont China Holding Co., Ltd.
Electronic Arts
Ernst & Young
Exel
Exxon Mobil Corporation
Flextronics International USA Inc.
FM Global
Fonterra Co-Operative Group Ltd
Foot Locker, Inc.
GE
Harris Corporation
Haworth, Inc.
Hercules Incorporated
HJ Heinz Company
Hollister Incorporated
Honeywell International Sarl
Hospira
International Flavors & Fragrances
International Paper
Invesco Ltd.
JDSU
JohnsonDiversey, Inc.
Jones Day
KCI
Kimberly Clark
Koch Industries
L.L.Bean, Inc.
Lenovo
Levi Strauss & Co./Accenture HR
Lord Corporation
Manulife Financial
MedImmune
Monster Worldwide
MWH Global Inc
NetApp
OM Group Inc.
Philips
Philips Electronics Hong Kong Limited
RBC
Reader’s Digest
Roche
Scotiabank Group
Sensata Technologies
Shanghai Centre
Shinhua Company
State Street
Stryker
Sun Life Financial
The Home Depot
The Manitowoc Company
ThyssenKrupp Materials Handling
Towers Perrin
TransAlta
Tupperware Brands Corporation
Unisys
US Postal Service
Waggener Edstrom Worldwide
Watson Wyatt Worldwide
Whirlpool
WPP
Wyeth
Xerox