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Global Mobility Strategy: Developing an ROI Focused Approach

An ROI-focused approach for setting global mobility strategy is one way to compare costs of international assignments with the potential business benefits.  As discussed in previous articles, there are inherent challenges in finding the right ROI metric for assignments, but it is possible to break the costs and benefits into distinct categories to develop a useful metric.

Once that has been achieved, then it becomes easier to see where the expected return on investment can be leveraged, by either reducing costs or maximizing the potential benefits of an assignment.  Notably, both of these objectives can be met by use of a GEO local employer of record in the host country, and we will examine the ‘GEO effect’ on ROI in this article.

Effectively Monitoring Costs and Benefits by Category

Any ROI metric that is useful in a global mobility strategy will need to gather data and monitor both the costs and benefits of an international assignment.

Assignment Costs

The areas of cost for an assignment fall into four categories:

1.     Pre-Departure Costs:  Cultural and language training, shipping, transportation. relocation

These costs are more or less fixed, and will not vary greatly between assignments.

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2.     Assignment Costs:  Salary, benefits, taxation, housing, family support

The largest cost for assignments are those that accommodate the needs of the assignee, including all forms of compensation, dual career assistance and family needs.

3.     Destination Costs:  Immigration, compliance, payroll, incorporation, infrastructure

These costs are necessary for most assignments since each country has its own rules for foreign businesses that must be adhered to.

4.     Repatriation Costs: Transportation, relocation, integration

Easily overlooked, repatriation of the assignee needs to be considered, especially in the case of a failed assignment where a replacement will be needed.

Assignment Benefits

These costs will need to be compared to the monetary benefits of an assignment, as well as intangible and non-financial costs.

1.     Achieving Assignment Purpose

An assignment may have a specific objective that is easily tracked and measured, such as number of new sales, customer contact, project completion or training.

2.     Increase in Overall Business Presence in the Host Country

This is a more difficult benefit to measure, and may only be of value in developing a long term ROI metric.

3.     Concrete Business Objectives: sales volume, market share, customer satisfaction

While these objectives may be more broad, there may be ways to track the effect of an assignment on monetary business growth in the country.

How to Manage Costs for International Assignments

The categories listed above can each be managed, especially the cost of an assignment, to bring maximum ROI from an assignment.  The global mobility strategy of most organizations is probably to focus on the compensation and benefits package for assignments if they need to reduce cost, due to its high percentage of the overall assignment expense.

There are localization approaches for compensation being used that are targeted to the local economy of the host country to avoid unnecessary enrichment of assignees, and allow them to participate in managing assignment costs.

“One of the most common approaches to localization is to convert the expat to local terms and conditions, and provide a phase-down of expat allowances and benefits.  For example, the expat would receive a salary according to the host country salary scale and participate in the host country benefits.”  

This type of solution for reducing costs may only be practical in developed countries, where the local economy is roughly equal to the expat’s home country.

Global Mobility Strategy: Targeting Destination Costs

The destination costs may offer greater opportunities for efficiency and savings given that there may be long term expenses in the host country.  Destination costs fall into two subcategories: 1) assignee specific costs and 2) company costs in the host country.

Assignee Destination Costs

The assignee costs will include fees for visas and work permits, specific tax arrangements and any unusual payroll approaches.

Company Destination Costs

Company costs can be both fixed and ongoing, including costs of incorporating a local entity, business registrations, capital requirements, legal fees and maintaining office space.  There can also be costs associated with failure to comply with local rules, such as penalties, back taxes and even being barred from further business activity.

GEO Employer of Record: Impact on Destination Costs and Assignment Success

Many companies elect to set up a local subsidiary or branch office in a foreign market, and then run a compliant payroll on their own while navigating the complexity of local laws.  While this is a valid approach for businesses with a commitment to a country, the time and expense involved are significant.

There is an alternative method for smaller enterprises or exploratory assignments into a new market: a GEO employer of record.  Use of a GEO solution may offer one of the best methods to impact ROI for assignments since this alternative will have a direct effect on destination costs for both the assignee and the company.

“Outsourcing expatriate administration will allow HR staff to focus more on expatriate strategy, which will increase benefits and decrease costs, and increase expatriate ROI.” 

Providing a Legal Entity for Employment

As local employer of record, the GEO provides the legal entity needed to run a fully compliant payroll for any number of employees in the host country.  The savings for the company derive from eliminating the need to set up a local corporation and meet all the filing and registration requirements.

This one step virtually eliminates the compliance risk of doing business in a foreign country since the GEO utilizes local partners and experts to assure the client that they are in full compliance.  This one element can have a lasting effect on long term ROI in locations where a company has a minimal but ongoing level of activity.

Handling All Assignee Employment Requirements

The GEO also handles all of the elements that relate directly to assignee destination costs including obtaining visas and work permits, structuring and running payroll and complying with tax withholding and employee benefits laws.  This is particularly useful if a company is considering running a ‘remote payroll’ from the home country, a tactic that may be prohibited in some foreign countries.

Minimizing the ‘Hidden Costs’ of an Assignment

There are potential hidden costs for international assignments that can dramatically affect the ROI metric, and the GEO solution will minimize the potential for these expenses.

For example, if a company is using independent contractors, the GEO can employ those workers as well, preventing any possibility of misclassification under host country laws.

Also, companies that send employees on frequent short assignments using business visas can instead employ the assignee legally, avoiding any potential for problems with immigration departments that may scrutinize the employee’s presence in the country.

Facilitating Assignee Repatriation or Replacement

The GEO service is useful to control repatriation costs as well, especially in the case of early repatriation.  The GEO can facilitate the departure of the assignee and also provide the means for quick deployment of a replacement.

The GEO Effect:  Influencing ROI Through Cost Savings and Assignment Support

By relying on a GEO solution in foreign markets, a company can more easily predict the destination costs in any country of business activity, allowing the GEO to manage every area that affects those costs.  In addition, this employment alternative can influence the other side of the ROI assignment metric by enhancing the desired business benefits, such as achieving the assignment purpose and eliminating delays or barriers to employee activity.

Get in touch to find out more about how an Employer of Record solution can help your company

The information in this article is subject to changes in local legislation.

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