More and more people are being sent by their employers to work in other countries; some estimates show that there are up to 50 million expatriates within multinational employers, which represents a 25% increase in the last decade.
The old way of keeping an expatriate on home country terms, with all additional expenses paid, no longer makes sense for such a broad and diverse group. Instead, it is increasingly common for multinationals to adopt a 'local plus' approach, except perhaps for very short assignments. The employee is offered terms and conditions consistent with local practice, and this is used as a starting point. Then, additional elements may be added as needed, particularly housing and schooling.
In terms of benefits, there are a variety of treatments that can be offered to employees.
Medical cover for employees and their families, just in case they need the ability to obtain medical treatment locally, that is in the host country, so participation in the local plan is advisable. However, many employees will appreciate the security of knowing that they can obtain treatment in a familiar environment in their home country. For example, it is often very difficult to convince expatriates from France to go and work in the UK if they have to rely on the UK health service alone.
Pensions are another consideration because it is more unusual for an employee to retire outside their home country than to work outside it, and most expatriates do not settle in the country to which they are expatriated. Accordingly, continued membership of the home country pension plan is usually the most sensible option where it is (a) possible and (b) tax-effective. The problem is, of course, that both of these are rarely the case. Joining a pension plan in the host country can lead to difficulties in transferring entitlements at the end of the assignment. Many larger multinationals operate international pension plans in jurisdictions such as the Channel Islands which may not be as tax-efficient, with contributions paid out of after-tax income, but are simple to administer and understand.
More insurers are offering global death and disability policies to cover internationally mobile employees, because the simplicity of administration and communication can outweigh any additional costs arising from cross-border insurance, for example, policies not being admitted locally. Global arrangements may also be made for employee assistance programmes (EAPs) and business travel accident insurance.
Finally, it is worth noting the recent increase in global commuters, particularly in the case of dual-career families. With children established in a particular education system, it can be simpler for the employee to commute weekly to the host country, often for four days a week, and return to their family at weekends. In such cases, attention should be paid to medical benefits because the family and employee will be in different countries.
Tim Reay is treasurer at the International Employee Benefits Association (IEBA)
