Magazine article Workforce Management

Fed Up with High Costs, Companies Thin the Ranks of "Career Expats"

Magazine article Workforce Management

Fed Up with High Costs, Companies Thin the Ranks of "Career Expats"

Article excerpt

Firms relocate fewer workers overseas, relying instead on short-term stints and less costly local hires

OVER THE LAST SEVERAL YEARS, as Agilent Technologies cut 16,000 jobs during a major restructuring, it was obvious that its multimillion-dollar expatriate program needed serious trimming. But the company faced a problem: It didn't know what it was spending on its employees in foreign countries. The company, the world's largest maker of scientific-testing equipment-from fiber optics to semiconductor products-did know that in general, the cost of an expatriate is three times the expat's annual salary for every year of the assignment-easily putting the price tag for some three-year assignments at $1 million. But with spending spread across 21 different countries, such as Germany, Singapore and China, and across business areas, from compensation to taxation, it was nearly impossible to nail down the total cost of relocation. "If you don't know how much you're spending, how do you get started on how to save?" says Lin Contino, global relocation manager at Agilent, which is located in Palo Alto, California, and now has 28,000 employees. "We couldn't get a grip on it. We had 422 different suppliers globally that provided relocation services. I could tell the cost for the United States, but I couldn't tell for other countries. I couldn't pull it all together."

To get a better handle on spending and to standardize policies for expatriates, Agilent outsourced its expatriate program in 2001 to Cendant Mobility, a relocation services firm in Danbury, Connecticut. Agilent determined that in 2000, its international transfer program, with about 1,000 expats, had cost approximately $72 million. Over the next three years, the company sent fewer workers overseas. It now has 300 expats; it is filling positions locally instead of deploying U.S. employees abroad and has scaled back on benefits packages for expats. The company has slashed relocation costs by 70 percent, to $23 million.

A sluggish economy and a weak U.S. dollar have led more and more organizations to tackle the exorbitant cost of their expatriate programs. But it's not easy. Many corporations are hard-pressed to put a number on the total cost of their international programs or even on how many employees they have overseas at any one time. It's not uncommon for organizations to have "career expats," employees who have stayed abroad for more than 10 years, continuing to collect generous bousing allowances, cost-of-living adjustments and reimbursement, for their children's education. To rein in spending, employers are using a variety of strategies. They're sending fewer workers overseas, replacing traditional three-year stints with short-term assignments, localizing expats, offering less generous perks and hiring third-country nationals or local talent instead of sending a U.S. employee overseas.

"A lot of companies are trying to come to grips with the fact that they don't know what the [total] costs are for international relocation," says Rick Schwartz, CEO of GMAC Global Relocation Services, in Oak Brook, Illinois. "It's kind of scary. I've heard it so many times, from large, prestigious, well-run organizations. But the need to do business around the world is increasing significantly. The question facing many organizations is: How can I move more, but in a cost-effective way?"

Employers today also face the painful fact that it's more expensive to send workers abroad. The U.S. dollar has weakened against European and Asian currencies, making it even more costly to send workers to cities where the cost of living has increased. Tokyo, for example, ranks as the most expensive city for expatriates, followed by London, Moscow and Osaka, Japan, according to a 2004 survey by Mercer Human Resource Consulting. In Tokyo, an expat can expect to spend $4,501 per month on a luxury two-bedroom apartment rental, $4.73 on a cup of coffee and $5.48 on a fast-food hamburger dinner. …

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