International assignment policy design: taking a more local approach

There has been increased emphasis recently on taking a host country or local approach to designing international assignment policies. Dr Sue Shortland explains the options and when to use them.

Sue Shortland

9 December 2024

This article is taken from the Winter 2024/25 issue of

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“The choice of policy used must be considered very carefully. It is a false economy to use transfer policies that are too light in terms of support.”

Traditional international assignments are long-term in nature and policy content is predicated on the return of the assignee and any accompanying family to the home country. Home-based, balance sheet-style approaches to international assignment rewards are designed to keep employees ‘whole’, meaning they should be no better or worse off financially as a result of their mobility.However, with all the various compensatory allowances included in the home-based package, employees are usually financially better off. Home-based assignment packages typically cost organisations around three times that of employing a local on host country terms. So, what are the alternatives if employers want to try to reduce assignment costs?

Host-plus arrangements

Host-based pay has long been an alternative to the home-based balance sheet. Typically, this style of compensation is based on the local market salary and so using it brings equity with local peers, rather than home-based colleagues.This approach works effectively as a means of attracting and retaining mobile talent in countries with high pay. However, this can have the disadvantage that employees are not keen to repatriate if their net pay on assignment is significantly higher than it would be when they return home. This can damage employers’ ability to keep employees globally mobile and to facilitate the transfer of skills and knowledge. The host-based approach is also unlikely to be effective as way of attracting and retaining talent in low-pay countries.Host-based pay is not usually delivered in its pure form; that is, exactly as it would be received by local people. Usually, allowances are given to recognise that assignees have home-country housing responsibilities and that accompanying children require education in a system that is compatible with their home country. As such, host-based pay is usually termed ‘host plus’, with the ‘plus’ elements also including in some (although not all) cases assistance with temporary accommodation, removals, home search, home leave and preparatory training.Host-based packages are designed to recognise the temporary nature of the transfer and that assignees will repatriate to their home country. As such, they also take into account tax, pensions and social security issues. Tax briefings and preparatory support are usually given and employees pay local taxes. Where possible, social security and retirement benefits remain in the home country.Medical plans are also usually included in the policy. This is typically either a local plan or an international plan, but the home country plan might be applied.It is important to remember that depending on the host country, the cost of using host-based compensation packages may not necessarily save the organisation money. However, they do have the advantage that they reduce the visible ‘expatriate status’ associated with traditional home-based balance sheet packages.

Other host country-based policies

In recent years, there has been a growth in the use of so-called ‘one-way’, ‘one-way plus’ and ‘local plus’ transfers. In the past, these were often grouped together and considered as permanent transfers. Today, the terms are far more clearly differentiated.A permanent transfer was not considered to be an assignment. Rather, it referred to filling a position permanently in another country with a non-local person. No return to the home country was expected to take place.Permanent transfers attracted a compensation package based on local terms and conditions, although employers did support the move itself with the necessary costs of moving addressed in policy. (For example, airfares to get there.) Today, the label ‘permanent transfer’ is used far less often. The term ‘one-way transfer’ has become more commonplace.

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One-way and one-way plus transfers

The term one-way transfer recognises that a move may not be permanent. Rather, it demonstrates that the employer is supporting the move only in one direction and that the move is not anticipated to end with repatriation. Employees on one-way transfers receive local pay, pay local taxes and their social security and retirement benefits are local, too.While repatriation is not anticipated, one-way plus transfers are so-called because the transition period in the host location is supported by employers. In essence, a limited ‘plus’ element is added into the costs for employers to ensure a smooth transition. This might include, for example, temporary living. Again, salary is host country-based, taxes are paid by the employee locally, and social security and retirement benefits are local.It is important to note that in the case of one-way/plus transfers, there is some mix in practice with respect to social security and retirement benefits. Where there are social security totalisation agreements in place, some employers do keep the employee in the home country scheme. Social security is an emotive issue and has long-term consequences. Although a one-way/plus transfer is more likely to mean a transfer into the local retirement plan, again some employers do keep employees home-based for this benefit. International pension plans might also be used.For both these transfer types, tax briefings and tax preparation assistance might be given. Typically this is only for the first year so that the employee can enter the new tax system appropriately.One-way/plus transfers are not only used for moves where no return is envisaged. Such a policy might also be applied to volunteer/employee-initiated moves or as a low-cost option rather than richer policy provision flowing from host-plus or home-based reward systems.

Local plus transfers

A further approach is the use of local plus compensation arrangements. Under these, repatriation is not expected and so salary, taxes, social security and retirement benefits are all locally based, but the package is uplifted with the ‘plus’ elements of assistance such as housing, education and sometimes limited home leave, as well as tax briefings/preparation, to attract individuals to accept the role. The ‘plus’ elements are therefore likely to be greater than for one-way plus moves.

What are the differences?

At first glance, it might seem that the differences between all these arrangements are minimal. The key issues to note are the differences in the treatment of social security and retirement benefits (home-based for host plus, but local for one-way/plus and local plus transfers) and the likelihood of providing ‘plus’ elements to support the transition to the new location or to attract people to the role. Under host plus arrangements, a range of ‘plus’ elements of support is likely to recognise the intention to return home at the end of the assignment.Under one-way plus/local plus policies, the level of support to get to the host country and settle in is likely to be lower than for host plus arrangements. Ongoing support with factors such as housing, home leave and education assistance are also far less likely to be covered. Housing and education assistance are expensive elements in policy and without their provision costs would be expected to be far less.

Which policy to choose?

The choice of policy used must be considered very carefully. Organisations must attract, motivate and retain the very best talent if they are to be competitive. Policy options for transferring employees and their families abroad must be appropriate to meet this objective. It is a false economy to use transfer policies that are too light in terms of support.Employees must be engaged and productive in their roles. Policy content should therefore not only reflect the rationale for the assignment and its temporary or potentially permanent nature, but also ensure that employees and their families can hit the ground running and deliver strategic outcomes for their employing organisations. Regardless of the compensation package option selected, it therefore makes sense to offer some preparatory training, such as cross-cultural training and language support.A further issue to consider is that of equity. For the application of policy to be seen as fair, it is important to ensure that individuals understand why a particular approach is being applied to them and how this compares with that is offered to others in similar situations. Fairness and transparency are crucial to motivation and engagement. Whichever approach is taken, it is critical to communicate effectively. Certainly, the long-term social security and retirement benefit implications must be taken into consideration and explained carefully. Employment contract implications must also be considered and explained.Employers have a wide range of policy options from which to choose. Flexibility is key to success in attracting, motivating and retaining a range of diverse candidates and widening the talent pool. Policy design should therefore embrace the notion of flexibility as far as is feasible.

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