Saturday, August 2, 2008

Issues that affect Expatriates

Handling "Expatriates"...Issues and Challenges...ARE WE READY?

India plays an increasingly critical role on the world economic stage. Western companies have been hiring Indian professionals in large numbers for work in their own country or abroad; many people from other parts of the world now work regularly with Indian counterparts. At the same time, a growing cadre of expatriate managers and project leaders is being assigned to India in order to assist in building up operations there.

Understanding the term and its Origin

An expatriate (in abbreviated form expat) is someone temporarily or permanently residing in a country and culture other than that of their upbringing and/or legal residence. The word comes from the Latin ex (out of) and patria (country), and is sometimes misspelled as ex-patriot or short x-pat, due to its pronunciation.

The term is often used in the context of Westerners living in non-Western countries, although there are many instances of Westerners living in other Western countries, such as Australians living in the United Kingdom, or Britons living in Spain.

The difference between an expatriate and an immigrant is that immigrants (for the most part) commit themselves to becoming a part of their country of residence, whereas expatriates are usually only temporarily placed in the host country and most of the time plan on returning to their home country, so they never adopt the culture in the host country. While Europeans or North Americans living in the Middle East and Asia may marry local people and have children, most see no advantage in adopting citizenship of their host countries, usually because they consider their stay only temporary. In countries like Saudi Arabia, expatriates are required to live in segregated compounds, meaning that integration into their host country's society is not an option.

Challenges...and Concerns

When you hire an expatriate the challenges are multi-fold. 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 can we facilitate mobility and ensure equitable treatment among similarly situated employees?
Currency and mode of payment for these people.
How to charge income-tax?
How to protect their interests in case of exploitations?

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.

More then that, when you hire someone, you are not only hiring his knowledge and expertise but also his culture, social beliefs and values.

Just an example : In my previous two companies we had two and five expatriates respectively. They never use to mingle with others and generally tries to be on their own. Some were also of the opinion as if this is a "punishment" for them.

Learning from Others...Global Trend...with Reference to Western Countries It is all about Global Experience

As per one of the survey done in 2005 it is found that the number of expatriates is increasing. This is despite the move towards using local hires, particularly in key markets such as Asia. The growth of expatriate numbers can be explained by the need for global leadership development within multinationals, which encourages key talent to gain international experience. In addition, there is an increase in the use of globally nomadic employees (i.e. employees with no home country)

Expatriate benefit trends

Companies tend to keep expatriates in the home country retirement plan throughout the assignment. However, global nomad employees who move from country to country on varying assignments will more commonly be in an international retirement plans. The majority of multinationals now provide attractive international medical plans for their expatriates. US employers expect employees to pay towards the cost, whereas other multinationals will typically pay the full cost. Overall, US employers tend to provide lower levels of benefits than European (and other) employers, however US employers provide a wider range. Most companies, (US, European and other), do not provide special treatment for loss of benefits when they localize an employee from one country to another.

Benefits Policy for Expatriates

In another survey, 1 in 10 companies surveyed reported that their expatriates have explicitly expressed dissatisfaction with their benefits. Not surprisingly then, almost all companies agreed that addressing benefit arrangements for expatriates is a medium to top priority. Arriving at a globally consistent approach for expatriate benefits has proved challenging, and almost ¼ of companies still do not have a specific benefit policy for their expatriates. A further 30% do not have formal expatriate governance procedures in place and 60% have no process to measure the success of an assignment. 10% of respondents admitted that they have never reviewed their policies on benefits for expatriate employees.

"One-size fits all" approach is no longer realistic

Companies who have relied on expatriate policies in the past are finding that a "one-size fits all" approach is no longer realistic. The demographic and nature of international assignments has changed, and companies have to adapt policy to reflect this new diversity among expats. For companies who have expatriate benefit programs, there is increased pressure to differentiate by region ( e.g. Asia Pacific, Europe, etc) or by category of employee (junior, senior exec, business need for transfer etc)


Handling expatriates is still a challenge both at strategical and cultural front. "Cross Cultural" adaption is the key and there should be some legal protection for expatriates both from host as well as parent company.

These are my views and thoughts, you can have different opinion. However, it would be nice to receive your feedback and comments.

Composed by: Sanjeev Sharma
(Chandigarh - India)
(Mobile: +91-9876328841)