Expatriation

The Toughest Test

Globalisation is the pre-eminent mega-trend in business today, a second industrial gold rush, this time, in the Middle and Far East, rather than the West. In an uncertain orld with ever-changing conditions, businesses are under increasing pressure to stay ahead of the game in far-flung places.

Speak to most hard-pushed HR managers and corporate administrators and they will cite the commercial cost and strategic significance of expatriate workforce as their biggest challenge, as well as the security and wellbeing of key personnel on foreign soil.

At a recent conference in China, a keynote speaker from a leading insurance company, a player in the expat insurance market, invited questions from the audience, made up of delegates across a wide range of business sectors. A question began with the two words that all health policy providers must dread: “what if ”. Thisparticular question painted an almost apocalyptic scene with stranded senior personnel caught up in a bird flu epidemic that was being contained by a volatile military rule, in a low coastal region thathad just received an imminent tsunami warning. As the speaker struggled with the answer, it became perfectly clear that no policy, however comprehensive and expensive, can possibly cover all eventualities, when it comes to that most frail and precious of commodities, people.

Of course, you cannot live life expecting this level of horror is always just around the corner, somewhere in the world. It is often the more normal everyday issues, such as bureaucracy, that challenges the majority of expatriates and their organisations. Over the past decade global relocation demonstrated a steady decline, but more recently the trend has been reversed, and there appears to be signs of a rise again. Broadly across all sectors there continues be an overall workforce expansion in expatriate activity. With this in mind, and globalization is likely to be an expanding trend, hard-pushed HR administrators are struggling to keep abreast of the constantly shifting sands, when it comes to protecting their global workforce.

With a probability of failure above 60 per cent, relocating abroad is a risky venture for both employees and employers. But the success rate can improve dramatically with the right training, preparation and package.

It happens in two waves; in the first wave, the largest companies set up offices and plants outside their home countries. During the current second wave, medium-sized companies are expanding outside their home countries and becoming international. The second wave of globalization is sometimes a consequence of the first one. In the automotive business, for example, the fact that car manufacturers want to use the same parts for their cars and trucks regardless of location has driven businesses to establish offices and plants abroad. Because of the high cost, companies try to send as few people overseas as possible. Expatriates therefore carry more responsibility on their shoulders than they would had they stayed at home. Successful international ventures can bring much new business to a company, but those that fail can tarnish its reputation. Because of the high level of responsibilities involved, companies tend to send their best performing and most promising employees. Their success or failure abroad is likely to have a major impact on their careers. Recent research has determined the main causes of failure of international assignments. International assignment failures result far more often from an employee’s inability to adjust to a new environment, than from poor performance or business issues.

Preparing both expatriates and their families for the adjustments they will have to make during the work assignment can therefore increase significantly its probability of success. Both the expat to be relocated and the employer must realize that relocating abroad will have a dramatic impact on the engineer’s professional and personal life. In fact, international relocation will affect virtually all aspects of the expatriate’s life and of that of his or herfamily. To prepare adequately for international assignments, expats and their families need to examine their lifestyle and values. Since companies tend to act rapidly once they have identified the need for an international relocation, preparation time is often limited to three months or less.

Specific issues expatriates and their families need to consider when relocating abroad include the impact of international assignments on both their own and their spouse’s careers.

Being successful in a culturally different environment is often a major challenge, requiring excellent communication skills and much flexibility. Expatriates and their companies should set clearly defined objectives for the assignment. Expatriates also need to take into account differences in values, interpersonal communication and behaviour in their new workplace. Specifically, they need to learn how the following work activities are handled in their country of destination.

When children are involved, finding adequate schools in the city of destination is critical. Due to the limited number of schools overseas that offer suitable educational programs, an expatriate’s children will likely be required to compromise different educational programs or to make use of distance education. Families with children in their final years of high school may want to consider arranging for them to stay in domestic country, to avoid a potentially difficult transition and lower grades at a time when grades count for university entrance. Finding proper day care may also be a challenge. In some countries (like Switzerland), the proportion of women in the workforce is significantly lower than in general. As a result, day care facilities are not as common and more expensive. In other countries (like France), day care facilities are financed and run by the state; although French citizens have easy access to day care, expatriates may not.

Finding accommodation abroad that suits all family members can be a difficult challenge. In some cases, expatriates have very limited choices. For example, when a company sends a significant number of expatriates to the same location for a major project, it may build or operate an “expatriate compound” in which all expatriates are assigned an apartment. The lay of the land may make the type of housing generally preferred by the expatriate, larger detached with gardens, unaffordable. In places like Hong Kong and Singapore, such forms of housing simply do not exist. The delivery of health care services is organized very differently from country to country. In some countries, the state has overall responsibility for health care. However, many countries have intermediate situations, where some services are delivered by the state, and others by private organizations.

In particular, healthcare cover is the paramount concern in any relocation protection package. Medical inflation is blamed for rising premiums, especially where pricing is based on the local cost of healthcare and the political stability of the region to which a client is relocating. It is predominantly regional changes either; political, economic or those relating to civil unrest that are pushing up prices, but this is also a consequence of the seemingly increasing unpredictably of the world, both natural and man made disasters.

It is not surprising that family issues are a dominant cause of early return from an assignment, with spouse/partner dissatisfaction a key component. These sources of assignment failure are frequently related to cultural adjustment problems, but they also indicate spouse/partner dissatisfaction with the lack of employment in dual career household while on an assignment. Consequently, expatriate attrition rates were at least double the rate of single or lone employees.

Put next to this that nearly a quarter resigned during an assignment, a quarter of those within one year of returning from an assignment, and as many again between the first and second year. Other companies, however, indicated that expatriates found relocation compensation packages to be attractive and jumped from one company to another to maintain their expatriate status and related benefits. Managing expatriate compensation programs has always been complex. However, changes in the marketplace will require compensation professionals to consider new and more flexible methods for compensating employees who accept assignments in other countries. In the past, companies had very structured expatriate programs designed around international assignments that lasted from two to five years.

The traditional ideas about expatriate compensation are changing. So changes in expatriate compensation are being driven by a number of factors:

International assignments may be in any part of the world, whereas it used to be more common to assign expatriates to Europe or from Europe to the United States, expatriates may be from any country in the world and there expectations related to compensation will vary widely. Many international assignments are in less developed parts of the world and/or in places where there is endemic discrimination, e.g. discrimination against women is prevalent in certain countries. Expatriates are often forced to consider dual career issues because they have spouses who will have to put a career on hold to move to a new country. In addition, companies are being more flexible in how they structure international assignments including offering short-term assignments of one year or less, and options for employees who do not want to relocate their families such as commuting between their homes and the new work location on weekends. Large multi-national companies also might have a group of employees who move from one international assignment to another.

One problem raised by this more diverse population of expatriates is how to handle differences in pay when, for instance, individuals are transferred from a less developed country to a country such as the United States, where pay rates are among the highest, and vice versa. In addition, in some of the less developed countries expatriates may face security concerns or concerns over schools for their children.

Expatriate compensation programs must be flexible so they can be customized to unique sets of circumstances. In addition, depending on the country, base salary may be only one small portion of the total compensation picture that must be considered when giving an individual an international assignment.

With the necessity for most corporates in the majority of sectors forced to attend to business on foreign shores. The greatest concern for businesses are attractive offers from other employers, and so businesses are continuously upgrading and updating expat packages.

When Disaster Strikes Even after the tsunami, Thailand and the Maldives remained coverable locations, but some companies ceased offering cover in various locations during the second Gulf War. In other regions, rather than seeing cover restricted rising cost was anticipated for purely economic reasons.

China typifies the problem, where healthcare costs have hiked up to those in Japan, long considered a very expensive country for medicine, and this could not have been predicted five to six years ago. The vast difference in regional cost illustrates just how hard it is to make generalisations about international PMI as opposed to more stable and predictable sectors.

Some locations, of course, are more challenging than others, and China and India, the great magnets of today’s expat market, presented great challenge not only for expatriates but administrators too. In fact assignment failure is most frequently reported as a problem in China, Japan, the United States, the United Kingdom, Saudi Arabia, and Iraq.

You could not expect a more culturally different selection of problem areas, although these are areas with a particular high density of expat employees, which will affect any surveys, as locations with large numbers of expatriates, challenges and failures also are likely to be more numerous. The United States, United Kingdom, China, Germany, and Belgium were the most frequently cited “active” destinations, whereas China, India, and Singapore were the primary emerging destinations. China and India were the most challenging locations for expatriates; although China, the United States, and India are perceived as most challenging for administrators.

Emerging Destinations

In a recent survey, When asked to identify the three countries that were emerging as new assignment locations, 23% of respondents ranked China as the most common new destination, followed by India (12%), and Singapore (4%). With only one exception in the history of this survey, China always has been the most commonly cited emerging destination.

Countries with the Greatest Reduction in Activity

When asked which three countries had the most significant reduction in activity compared to last year, 11% of respondents named the United States, followed by the United Kingdom (8%), Germany (7%), and Italy (6%). This was the first time that the United States topped the list. Countries Presenting the Greatest Challenge to Expatriates

When asked which three countries produced the greatest assignment difficulties for expatriates, China was cited by 17% of respondents, followed by India (8%), Japan (5%), and Russia (5%). For the second time in the history of this survey, the United States appeared on this listing. China, India, and Japan always have been among the top six destinations that presented the greatest assignment challenges.

Expats Stats

Eight out of 10 people think that moving abroad was the best decision they ever made.

The findings come following a survey of BUPA International members from around the world on their views on being an expatriate. BUPA International bought IHI in Denmark and AMEDEX in Miami in 2005, opening up new markets all over the world, particularly in Latin America.“Since then our membership has grown by around 10 percent, helped by IHI and AMEDEX’s local knowledge and experience. Both companies have a strong presence in Latin America, a market we have been very keen to develop.“One of the biggest assets we have gained is IHI’s inhouse emergency service, staffed 24-hours by a fully qualified team of doctors, many of whom are trained in traditional, aviation and emergency medicine and speak several languages. Based in Copenhagen, members can phone the team from anywhere in the world and receive on the spot medical advice.

She added: “Looking ahead, China, India and Russia are important markets for us. As the economies in these countries strengthen, Western businesses are basing themselves there, opening up new markets for expat health insurance.

Similarly, a lot of labour is being imported into the Middle East, and new laws, such as those in Saudi Arabia, mean expats must be insured.”The world’s largest and oldest expatriate health insurer, BUPA International sells expatriate and travel insurance to more than eight million people in over 190 countries.

More than a third of the BUPA Group’s business now comes from its international operations in countries including Spain, Ireland, Saudi Arabia, Thailand, Hong Kong, Singapore and Australia.

Risky business

A recent report predicts that the growth of business travel will continue, exposing workforces to a wider spectrum of both man-made and environmental threats. In response, many corporations are now taking measures to mitigate the new risks they face.

According to a recent report by the World Travel and Tourism Council, business travel will grow by 5.9% in 2006. More employees are being posted to developing or post-conflict countries where corruption, violent crime, terrorism or other security threats can be prevalent. Recent Red Cross World DisastersReports show the number of natural disasters to have risen significantly since 1994. At the same time, the threat of a global pandemic has become more real. In short, the world has become a riskier place in which to do business. With security high on the business agenda,many companies are taking a more proactive approach to safeguarding their operations. “It’s no longer enough just to react effectively to events as they happen”, says David Cameron, International SOS’ Vice President Security Services. “Forward-thinking organisations are assessing potential risks and putting plans in place to manage them.” The spectrum of risk includes disease outbreaks, vehicle accidents, storms, earthquakes, fires, crime threats, insurgency, terrorism, war and other sources. “There has been a dramatic growth in the number of security posts in large companies,” continues David Cameron. More and more organisations are appointing chief security officers, while others assign responsibility to human resources personnel. In both cases, specialist help is often needed. “Some outsource the whole risk assessment process to us, along with the development of a complete security management system”, says David. Assessing and managing risk

Since carrying out its first mass security evacuation from Indonesia in 1998, International SOS has been developing services to help clients address the risk spectrum. “Our job is to enable our clients to continue doing business, despite the risks”, explains David Cameron. “That means we don’t just look after individuals. We put plans in place to manage security risks to the business as a whole.” A security risk assessment by International SOS will include an analysis of the organization’s unique profile and the range of threats that might impact it. “A common error in business continuity planning is an under developed assessment of risk”, says David Cameron.“We assist clients to refine the scope of those threats they need to be concerned with and then help them to ensure that their mitigation measures and contingency plans are appropriate.” Robust analysis

International SOS’ security risk assessment process involves five key steps: situation analysis; threat assessment; vulnerability assessment; consequence analysis and recommendations for mitigation measures, including estimates of cost and recommendations for appropriate service providers. “We provide our clients with a robust analysis of the levels of risk to people and operations. This can then be used to direct strategy and resources”, says DavidCameron. Detailed qualitative measures are taken of the likelihood of an event occurring (categories range from ‘almost certain’ through to ‘rare’) and its consequence (with categories ranging from ‘insignificant’ through to ‘catastrophic’).

The combination of these two factors produces a comprehensive assessment of risk which can be expressed on a four-tier risk rating system of low, moderate, high and extreme risk.

Looking after human capital “From a business continuity point of view, human capital is often more important than any other business asset”, says David Cameron. While the direct impacts of death or injury are usually well understood, he points out, the loss of human capital, the effect on morale, and the associated financial burdens are not.

One growing area for International SOS is executive protection and security for at-risk personnel. International SOS carries out a deep analysis of the risks to critical personnel and makes detailed recommendations for how to mitigate them. Other solutions may include crisis management training and simulation activities to help crisis management teams prepare for possible incidents.

“In today’s world, it’s relatively easy for organizations to see the importance of business continuity and crisis management”, says David Cameron. “What’s more of a challenge is to go beyond the glossy binder, and get risk management embedded into the fabric of the organization”.

Globalization and the Expat Exodus 

The global expatriate workforce is a moving mass of the most precious cargo, which expects and deserves all of the protection and safety nets.Top of the list being comprehensive medical insurance that provides cover for a multitude of circumstances without hidden clauses. To be a player in the business world today, companies and corporations of all shapes and sizes, and from a multitude of sectors, are increasingly faced with the reality of dispatching abroad, often their most valued personnel. Tasks in foreign climes are many and varied in the quest to tackle the frontiers and fringes of business. Research and development, setting up satellite operations and recruiting and training localized workforce in increasingly challenging territories, is the modern day equivalent of “our man in Panama”… and increasingly, it is women that are grasping the opportunity to work abroad.

Forget managing an office a stone’s throw from the Champs Elysses, or even a commission to Hong Kong, today, increasingly, personnel are faced with the imposition of a post in semi-rural China, the troubled Middle East, or backwater Eastern European provinces. Working abroad sounds exciting, adventurous and even exotic, until the reality of leaving one’s comfortable and definable surroundings comes on a cold, early morning to catch a flight into the unknown. So expatriation presents some tough decisions for both the business and its elected expat employee. Increasingly, businesses face many dilemmas; spreading its valuable human resource too thin, what gaps are left behind by key personnel accepting long-term foreign commissions? Then there’s the tricky task of convincing a candidate that such a move is mutually beneficial, and that’s where the “package” comes in. This is a more simpler agreement where the candidate is young, with fewer domestic obligations. But often a key strategy abroad will require an experience, older staff member, and this is where the complications and costs start escalating. But whatever re-location package is in the offing, one inescapable truth is, that it is the chief responsibility of any company is the safety and wellbeing of its staff. This absolute obligation is part and parcel of the corporate relocation process, which is often painful and complex, especially where families are uprooted. This is not to deny that the expatriate move is one of life’s big adventures, but moving personnel around like chess pieces on a global chessboard requires care and attention and, in terms of medical insurance, a varied raft of solutions.

A combination of social and economic pressures is quickly transforming the character of the expatriate assignment. In the recent past, the disruption and cost of seconding a manager level staff member forced a trend towards younger expatriates, whom generally display a far greater willingness to accept overseas assignments. Part of this trend is being driven by pressure from below, among trainees who are eager to travel in the early part of their careers. Companies that want to retain their best young recruits are finding such demands difficult to ignore. The way that companies are changing their expatriate policies is also a reflection of changing attitudes to travel, migration and the general sense of what we mean by “abroad”. Any FD of a globalized company will highlight the expense of expat employees, and will be constantly on the hunt for solutions to reduce costs. By all means scrimp on a star in the choice of hotel accommodation, but health and medical insurance cover is one of those compulsory expenses which is only redeemed when “the worse happens”. Fortunately, illness or accidents requiring hospitalization and/or ambulance transportation are rare. But as with all insurance, the possibility, of what if, always exists.

Because of the significant expense involved in expatriation, not to mention the personal strains, means that both employers and their medical insurance providers have to be creative, accommodating and almost bespoke. Electronics giant, Philips, provides a relevant case study of today’s global expat employee challenges. In 2003, according to the Ministry of Commerce (China), electronics, was the hottest area in the manufacturing industry and the trend was likely to continue indefinitely.

This was in line with the recognition that China was the world’s fastest growing economy. A significant slice of this growth was electronics, stimulating a rapid increase in Foreign Development Investment, not only in China but throughout the far east. Philips was faced with the necessity of placing key personnel in foreign assignments. In Philips’ view, most foreign assignments were not career assignments, but job or task assignments for a certain period which, when fulfilled, would see personnel re-instated in their domestic position. According to Philips, expatriation creates a mindset and circumstance that is difficult to fulfill, if not a career based assignment.

Most assignments are not career based, but rather the need for foreign talents to help the country, in this case China, set up for operation. Full expat programs are very expensive and temporary and so the necessity was for short-term expatriation to set up, recruit and build up a localized permanent talent base. Assigning employees to posts outside their home countries raises both strategic and tactical issues for global firms. At the strategic level, global firms need to ask: Are overseas assignments right for our business? How can we contain or reduce the related costs?

Would an expatriate be a better choice than a local hire? If assignments are critical to meeting global business demands, how is mobility facilitated to ensure equitable treatment among similarly situated employees?

At the tactical level, firms must consider how to select the right people for the assignment, manage performance and communication issues, and ensure that expatriates are successfully repatriated or reassigned when their assignments are done.

Some medical insurers will offer expatriate policies where chronic (i.e., long-lasting) conditions are not covered because their domestic policies do not cover such conditions - the state is expected to take over after a while - and that particular clause has been carried over into the expatriate side of the business. The trend would seem to be towards buying the comprehensive-type policies especially among seasoned expatriates who are aware of the problems which can befall those who don’t have the right type of cover.

Primary International Healthcare’s fully comprehensive Platinum Plan, for example, covers all the areas that could result in costs for the expatriate, including dental care, childbirth and pregnancy expenses, out-patient and in-patient care,prescribed medicines, physiotherapy, repatriation and evacuation and local road ambulance services.

Hospital bills are settled direct with the hospital or clinic and a no-claims bonus is available to customers who do not claim on their policy during the course of the year.

The more basic version offered by Primary is the Gold Plan, which excludes dental treatment and pregnancy and childbirth cover as well as personal accident benefits that apply with the Platinum Plan. Primary suggests that for expatriates not to get seriously put out by foreign healthcare systems it pays to get good advice before they move or work abroad.

For MediCare, its Executive International plan is its biggest seller, as like Primary’s Platinum Plan, corporate clients want the reassurance of complete care.

International private medical insurance (PMI) is said to be enjoying something of a golden age. Providers and brokers are reporting strong year-on-year growth as more multinational companies relocate staff globally and increasingly affluent individuals retire younger to warmer climes. Despite an apparent consensus among insurers and intermediaries that the international PMI market is booming, there is no independent data to corroborate such an analysis. With providers and brokers spread across the world, the task of compiling accurate market data is a logistical nightmare and simply too large an undertaking to be financially viable for a research firm. In most circumstances it would be inadvisable, or even foolish, to simply take providers at their word when they say their sales are increasing rapidly. But since the feedback from brokers is also so overwhelmingly positive, the only conclusion must be that business really is booming.

According to CIGNA International, the market is definitely growing by around 30% per year. Although there are issues about global security, people are still going abroad on assignment. Other providers report similarly optimistic performances. Goodhealth, Worldwide and BUPA International have experienced continued growth and Allianz Worldwide has continued growth of around 10% every year for the last decade, as companies continue to invest overseas.

Providers in the corporate provision market are citing market growth of 10% or 30%, and the growth is being driven overwhelmingly by the corporate sector, with group business, accounting for around 80% of all market activity, with the remainder being individual migration. The vast majority of this growth is northern Europeans relocation and expats. Office of National Statistics showed a record 362,000 people left the UK for a new life abroad in 2003 an increase of more 100,000 by comparison, a decade ago. With all expatriates requiring some kind of medical provision, regardless from which country they originate from, or are going to, these numbers may go some way toward validating the strong growth that providers maintain they are seeing.

The sustained growth that many providers claim the sector has enjoyed for the past decade seems to imply that the cost of international PMI, whether it has risen sharply or not, has failed to deter expatriates from purchasing cover. Of course, the simple explanation may be that they have no choice but to insure their health regardless of the cost if there is no state provision to fall back on. In sharp contrast to the UK domestic PMI market, where the vague term ‘medical inflation’ is blamed for rising costs and falling sales, international PMI does not seem to be affected by the phenomenon.

Pricing is based on the local cost of healthcare and the political stability of the region to which a client is relocating. It is predominantly regional changes either; political, economic or those relating to civil unrest that are pushing up prices, but this is also a consequence of the seemingly increasing unpredictably of the world, both natural and man-made disasters.

Thailand and the Maldives remained coverable locations after the tsunami, but some companies ceased offering cover in various locations during the second Gulf War. In other regions, rather than seeing cover restricted rising cost was anticipated for purely economic reasons. Medical treatment costs in China are now on a par with Japan, which has been expensive for some time and this could not have been predicted five to six years ago. The vast difference in regional cost illustrates just how hard it is to make generalisations about international PMI as opposed to more stable and predictable sectors.

Globalization and the growth of tourism, which now includes “dangerous adventure” visits to very remote regions, has created new employment but also new problems. For example, elderly tourists break their hips where there is no competent orthopedic surgeon, a traveler gets bitten by a cobra in rural Cambodia where there is not even an “Ambu” bag to keep him oxygenated, and a tour guide develops high-altitude cerebral edema on a remote Nepalese mountain. What would we do without organizations that are capable of removing such victims rapidly and safely to a place able to provide appropriate medical care. Fortunately, several well-staffed and well-equipped air ambulance companies stand ready almost worldwide to help 24 hours a day.

Medical assistance firms, which sell their own travel insurance and/or act as agents of large insurance companies, are also at hand and have offices in major cities worldwide. They have 24-hour telephone numbers and are prepared to advise a sick or injured traveler where he or she should go to obtain competent medical care. Most of these firms have regional medical advisors in strategic locations who maintain a network of contacts. They can ensure that an ill traveler is receiving appropriate care and will act as quality controllers. They are also able to advise whether medical evacuation to a higher level of care is needed and where the traveler should be evacuated to.

When we think of expatriation, we normally assume a western corporate dispatching staff to far flung places. But there is opposite traffic. Aetna Global Benefits, the international business of Aetna released findings today from a study conducted with 200 benefits managers of mid-to-large-sized corporations which showed expected growth in the number of skilled foreign workers in the United States, also referred to as “U.S.-bound expatriates.” Of the corporations that participated in the study, two in every five benefits managers (41 percent) say they expect this population to increase in the next three years. Cultural assimilation of the foreign worker into everyday American society and getting health plans understood by U.S.-bound expatriates are two issues that face benefits administrators.

Most multinational corporations deal with an often confusing array of benefit programs based on both national and private health care systems. Aetna has found an increasing need for benefits managers to offer plans that provide the benefits of a domestic plan, with domestic connections and capabilities, paired with specialized offerings to meet the multilingual and multicultural needs of the U.S.-bound expatriate population.

Benefits administrators identify high costs and responsibility for ensuring adequate coverage for expatriate employees and their families as the main issues they confront in dealing with the U.S. healthcare system. In addition, administrators believe expatriate employees find the healthcare system complex and confusing, and have difficulty understanding and using the system. The formalities of the U.S. system take some getting used to for U.S.-bound expatriates, as do the wide variety of provider choices and sources of health care needs, was a typical response from those surveyed.

Furthermore, the United States was listed as one of the most challenging among foreign assignment locations, both for expatriates and for administrators in the Global (Relocation Trends 2003/2004 Survey Report, sponsored by GMAC Global Relocation Services, the National Foreign Trade Council and SHRM Global Forum).

It is a case of an expat coming to the United States from a country with a very different healthcare system. In such cases, benefits managers bear the responsibility of educating individuals who are often on a steep learning curve when it comes to accessing U.S. health care. It is important to identify opportunities to improve access to care and ease of use of the health care system, both for the individual and their families, and for the companies that are employing them. 

Generally, professionals are sent to the U.S. as expatriates to fill managerial positions; to give them exposure to foreign business practices; to impart the parent corporation’s culture, and/or to shift them where the demand for work exists. These individuals and their families are in the United States for an average of two years, are often employed in the Technology/IT sectors of the business and are more likely to be from India and from China than from any other countries, according to the study.

Aetna Global Benefits (AGB), the international health and group benefits subsidiary of Aetna, Inc., provides comprehensive benefits coverage for more than 130,000 expatriates, third country nationals, and key local nationals in over 100 countries. AGB believes that the U.S.-bound expatriate market’s needs differ from those of permanent domestic employees, and is committed to working with benefits managers to tailor solutions based on their employee populations, be it in the United States or elsewhere in the world.

As one of the nation’s leading providers of health care, dental, pharmacy, group life, disability and long-term care benefits, Aetna puts information and helpful resources to work for its approximate 14.65 million medical members, 13.03 million dental members, 9.34 million pharmacy members and 13.67 million group insurance members, to help them make better informed decisions about their health care and protect their finances against health-related risks. Aetna provides easy access to cost-effective health care through a nationwide network of more than 700,000 health care professionals, including over 418,000 primary care and specialist doctors and 4,231 hospitals. But is an international job assignment a steppingstone for better career positions - or a minefield of professional and family risks that keep employees close to home?

These days the answer depends as much on an employee’s family situation as their ambition, according to a new survey that explores worldwide employee-relocation trends.

The survey revealed that retaining expatriate talent remains a considerable challenge for companies and attrition rates were at least double the rate of non-expatriate employees. While respondents reported an attrition rate of 10 percent among the general employee population, they indicated that 21 percent of expatriate employees left their companies during their international assignments. Another 23 percent, meanwhile, left within one year of returning from one.

When asked to identify the top reasons for employee refusal of an international assignment, family concerns were cited first, followed by spouse career. Additionally, key factors leading to assignment failure were partner dissatisfaction, family concerns, inability to adapt, and poor job performance.

However, opportunities for international assignments are on the rise. Reversing a steady decline since the 1998 survey, 47 percent of companies questioned for the new survey reported an increase in the size of their current expatriate population last year compared to 31 percent in 2004, an all-time survey low, while 54 percent anticipated additional growth in the coming year. Last year, only 38 percent anticipated further growth. Further corroborating this trend, 68 percent of respondents reported an overall workforce expansion at their companies.

Since it began in 1994, the annual Global Relocation Trends Survey has been the definitive study of companies’ global employee-relocation practices, policies and projections. And as in years past, the latest survey sheds light on some surprising trends among companies large and small that maintain expatriate workforces. For the second year running, the United States retained its status as one of the world’s most challenging countries for international assignments - behind China and India, due primarily to greater delays in the immigration process, visa issues and security concerns.

The world’s expatriate workforce is becoming increasingly female.

Women accounted for 23 percent of international assignees last year, the first time they have constituted more than 20 percent of the total expatriate workforce, and up 5 percent from the 2004 survey.

That workforce also is getting younger. Responding companies reported that 54 percent of expatriates last year were between the ages of 20 and 39, compared to a historical average of 41, since the first survey was done in 1994.

While 70 percent of responding companies said they required a clear statement of the assignment objective, and 52 percent required a cost-benefit analysis in addition to a clearly stated objective, only 37 percent actually compared estimated with actual costs, and just 14% measured the return on investment (ROI) for their expatriate activities.

This latest survey leaves little doubt that a large and growing number of companies are committed to expanding their expatriate workforces as a critical element of their global reach and success. As expatriate workforces continue to expand evolve in their makeup - it will become even more important for companies to bring into sharp focus exactly how their expatriate programs are producing a quantifiable return on investment.”

As it does each year, the new survey paints a comprehensive picture of evolving trends and emerging issues facing companies of all sizes that rely on an international workforce.

There are several explanations for why expatriate employees leave their companies at a much higher rate than the companies’ general employee populations. Among the reasons given for expatriate attrition are; Expatriates are more marketable and receive more attractive offers from other employers as a direct result of their international experience. The survey found that 12 percent of all employees had prior international experience. Expatriates find overseas assignment compensation packages to be more generous than home and jumped from one company to another to maintain/enhance their expatriate status and related benefits.

Expatriates anticipate a lack of attractive positions to return to in the home country and seek out better opportunities outside their company. Expatriates often feel out of place and dissatisfied both during and after an assignment, causing them to search for new employment. Family issues and concerns, and the impact of an assignment on a spouse’s or partner’s career, rippled through the survey.

The survey found record-high levels of spouse/partner employment both before and during a relocation assignment. 60 percent employment before and 21% during; the historical averages are 46 percent and 13 percent, respectively. 19 percent of employees embarked on assignments without their spouses or partners, compared to the historical average of 14 percent. 48 percent of employees went on their assignments without their children in tow last year, compared to 49 percent the year before. The historical average is 41 percent. 67 percent of respondents cited family concerns as the main cause for assignment failure, with spouse or partner dissatisfaction as the top reason. Cultural adjustment problems were frequently mentioned, but assignment failures also were tied to a spouse’s or partner’s dissatisfaction with lack of employment in dual-career households while on assignment.

China, India and Singapore were the primary emerging destinations. In a new measurement, the survey found that 12 percent of current expatriates were newhires, while 88 percent were employed by the company at the time of their assignment.

The percentage of married men (53 percent) was the lowest in the survey’s history; the percentage of women with significant others (4 percent) was the highest. Spouses accompanied 81 percent of married expatriates; the historical average was 86 percent.

Companies seeking alternatives to long term assignments (longer than one year) were at an all-time high (62 percent). The chief reason by far was cost, cited by 93 percent of respondents.

The most popular alternative assignment types being implemented include localizing expatriates (57 percent), hiring local employees (48 percent), short terms assignments (36 percent). Assignment “failure”, employees not completing their assignments, was most frequently cited as a problem in China, Japan, the U.S., the United Kingdom, Saudi Arabia and Iraq. The most common assignment objective was filling a skills gap, followed by launching new endeavors and building management expertise.

Although formal cross-cultural training was mandatory at only 20% of companies - the lowest percentage in the survey’s history - 73 percent of respondents rated it as having great or high value in making the assignment a success. Many critics feared that China’s racing economy could not be sustained, but quite the contrary. It’s economy has boomed, to such an extent that China is viewed as one of the most attractive investment destinations in the world, with more than 80 percent of Fortune 500 companies having already invested in China. R&D centres and Asian-Pacific headquarters are also increasingly being transferred to China. In response to this thriving economic situation, both multinationals and internationalised Chinese firms have endeavoured to expand business on a regional and global scale.

The top 5 factors named by CEOs that have the greatest impact on the organisation’s ability to succeed are related to people. As such, the top priority named by companies for the upcoming year is maintaining a highly engaged and motivated workforce by assembling, motivating and retaining a highly skilled workforce talented staff. China still lacks a well-established talent pool in certain key areas, such as in managerial and executive roles. This has led to ferocious competition for qualified potential candidates both in these and other areas, which in turn has led to rising turnover rates in the last few years. Companies surveyed by Hewitt in China demonstrated that from 2004 to 2005, the turnover rates have risen from 11.3 percent to 14 percent on average. The highest turnover was found among general staff and professionals, as well as senior professionals in Shanghai.

Among non-manufacturing companies, the highest fluctuations in 2005 were in sales and marketing staff. The rest of the top five comprised HR and Finance, followed by R&D. Of these, the high turn over in R&D is probably most alarming, as this could have serious consequences for confidentiality issues and know-how transfer. Among manufacturing companies, marketing, finance, sales, engineering, and quality control were the functions with the highest employee turnover in 2005.

Among non-manufacturing companies, the highest turnover was among sales staff (18.1%), followed by marketing, HR, finance, and R&D (12.4%). This has been largely the same ranking since 2003, although the rate of turnover for sales (which has consistently held first place) has gone down from 20.3 percent in 2003. This is interesting, as most of the other turnover rates in the top-five have gone up since 2003, 2004 standing out as a year with comparably low turnover rates.

The Hewitt 2005 Local Compensation and Benefits Study revealed that, unlike employees in other parts of Asia, employees in China considered pay (ahead of working processes and career opportunities) to be the number one engagement factor. This is the first time that pay has topped the list in China since Hewitt has started doing this study, replacing ‘career opportunities’ as the main driver.

This attitude was mirrored by the study respondents’ compensation practices in 2005, as workers’ salaries increased by 8.4 percent in China. Interestingly, despite the above, the highest pay increases can be found in the management levels, because this is where the biggest shortage of local talent is, despite a relatively low turnover in especially the top management levels. Across the board, non-manufacturing companies paid the highest salaries, small and medium sized companies the lowest.

The wage peg for white-collar workers is not low anymore in China compared to other Asian countries: China is in 5th place after Japan, Hong Kong, Australia, and Korea, predictions putting it above Korea in 2006. Salary increases were prevalent in none manufacturing ‘hot’ jobs such as sales, marketing, and HR. This trend is likely to continue throughout 2006 as Hewitt data suggests further increases of 8 percent in China. Companies wanting to attract key talent must make sure that they are competitive in this respect. As the Chinese government is encouraging Chinese companies to become more competitive regarding pay, Western companies will face increasing competition from staff from this angle.

The expatriate population in China is on the rise due to demand for key managerial talent.

In the Hewitt 2005 Expatriate Compensation and Benefits Study, 50 percent of respondents mentioned they would increase the expatriate population in their companies in the coming twelve months. Furthermore, expatriate wages rose by between 4 percent and 5 percent. The expatriate workforce has also diversified a great deal.

It no longer solely comprises of traditional western expatriates, but of Chinese returnee expatriates, Asian expatriates, and China hired expatriates as well. In foreign invested companies, non-China passport holders still hold most of the top managerial positions, however, within the other senior roles, there is starting to be little differentiation of nationality.

The 2005 data demonstrates that in order for compensation packages to succeed, clear communication on this topic between employer and employee is paramount. In China, as in the rest of the world, today’s workforce is indeed a globalized workforce. At the head of the list of necessities for corporates is the health and well-being of its expat employees. As reflected in every issue of Healthcare International, Medical insurance is at the heart of the healthcare industry. In future issues, we shall be exploring the sector and assisting the industry in the development of worldwide partnerships and potential business development.