Cost management insights from your MyExpatriate Market Pay report

In recent years, the global mobility industry has faced considerable challenges, not least from the success of anti-globalist politicians and the on-off trade war between China and the United States. Few, however, would have predicted the onset of the Covid-19 pandemic, which has thrown the global economy into unprecedented turmoil. The resulting scale-backs in production, consumption and international travel have only further highlighted the importance of good cost management for global mobility managers. Results from our Global Mobility and Covid-19 survey suggest that, as a direct result of the pandemic, almost 50% of companies are expecting to be reducing the costs of their international mobility programmes, or have already been instructed to do so. As the fallout continues, this figure is only likely to increase. 

This article will consider how the insights provided in ECA’s MyExpatriate Market Pay Reports can inform and support cost management decisions, using real-world examples. 

Assessing your market salary position

Salaries are perhaps the most visible part of expatriate packages. An understanding of the salary market is key to attracting and retaining talent while remaining cost-effective, and our reports provide an at-a-glance overview of the market with the MySalary graph, an example of which can be seen in the case study below. 

Every job role submitted for a country is analysed and plotted on the graph, with your own job holders highlighted in red, creating a clear picture of exactly where your company sits relative to the rest of the expatriate salary market in each country. Every job submitted is assigned ECA points to reflect relative seniority (you can see more on our job evaluation approach here), and a net ‘take home’ salary figure is calculated by applying any necessary tax treatment and deducting any expatriate contributions to accommodation and/or pension costs. The graph can be filtered by salary system and by industry, allowing you to focus the benchmark on your specific needs. Making accurate projections is essential in avoiding unforeseen and spiralling costs, and an understanding of the salary market is key to this. 

The MySalary graph’s ability to simply and effectively illustrate where employees sit in a country’s pay market means it is often the first place to start with any benchmarking exercises. The case study below illustrates how a recent participant used the MySalary graph to make considerable and practical savings in their mobility programme. 

Case study

The client’s global mobility (GM) team had been instructed to look for ways to reduce the costs of their international assignments and were eager to see whether it was feasible to simultaneously reduce salaries while also maintaining competitiveness in their packages. They needed robust, defensible data to support their decision making, so turned to their MyEMP reports.

The graph showed that the client was currently paying salaries in the upper quartile of the market, and felt reductions could be made without missing out on talent. Once they had established this, the next step was to understand how they could reduce salaries in line with the market practice in that country. Using the information available on allowances in the report, the GM team was able to see that their mobility allowance amounts were overly generous. 

As a result, they were considering a 5% reduction in allowance and also changed how it was calculated. Despite these changes salaries remained above the assignee average. 

The company then went further and reviewed the impact of these changes in all its assignment locations using ECA’s MyExpatriate Market Pay reports to understand how the changes would affect their expatriate salaries globally. Using the results, the client was able to assess what level of cost reduction they would see under the new allowance policy and where the allowance changes could be practically implemented to reduce costs. 

Know your total package value

According to ECA’s most recent Managing Mobility report, 51% of respondents cited insufficient compensation as something that had hindered hiring for assignments, and while cash salary is the most visible part of the expatriate package, this statistic demonstrates how important it is to have a strong understanding of total compensation value, both for the practicalities of encouraging mobility, as well as for effectively budgeting assignments. The Total Package Listings feature of the reports gives insight into the complete value of assignment remuneration, including salary plus bonus and benefits, and can help you make informed decisions around your compensation approach. 

Case study

The value of the listings feature was highlighted to a participant last year after an assignee had voiced concerns that they were not being paid competitively in comparison with their industry counterparts. The client had taken part in the 2019 survey and was keen to investigate using their reports, and the first step was to look at their MySalary graph. While initially it seemed the expatriate had a point - they were earning in the lower quartile of the market - by using the Total Package Listings of the country in question, the client was able to gain a more complete picture of the total reward package. Below is a table created with information found in the listings around total package costs. 

USD	Participant Assignee	Average Assignee
ECA points	98	98
Net take home pay	80000	100517
Accommodation allowance	40000	20000
Utilities	3000	3000
Transport	5000	2000
Education	20000	0
Bonus	15000	10000
Total package value:	163000	135517

It became clear that the total package value of the assignee was actually more generous than the average package in the same country; and while providing a strong argument to counter the assignee pushback, more importantly, from a cost-saving perspective, the exercise demonstrated that the participant’s accommodation and bonus offerings were overly generous against the market. Consequently, both were scaled back to more market rate levels, reducing costs considerably, while also ensuring packages remained competitive to potential talent.  

Audit your salary methodology 

As well as providing information on specific salary and benefits issues, the reports can also inform broader policy cost management measures. The insight given into salary systems, for example, is detailed and has been used by participants under cost pressures to assess the viability of their salary methodology. Particularly, participants have used the reports to assess the practicalities of transitioning from a home-based approach to a host-based one, which is perceived as a cost saving option. However, this perception can sometimes be wrong, and ECA’s local salary graphs provide a guide as to whether local salaries are actually lower than average assignee salaries, and help inform whether transitioning to a host-based approach is both practical and cost-effective.   

Case study

In a recent example, a company with expatriate staff in Singapore and China that used a home-based build-up approach for all assignees, was under pressure to reduce costs and keen to assess the viability of transitioning to a host-based approach to do this. The local salary graphs for each country were available to them through their participation in the survey.

The dashed red line on the graph above represents the average local salary against the expat average and upper and lower quartiles represented as solid lines.

In Singapore, the company could see that, at junior levels, moving onto a host-based approach may be feasible. Local salaries there sit on or around the expat lower quartile at lower levels of seniority, meaning some savings may be made without the risk of offering uncompetitive salaries. However, as local salaries quickly surpass expatriate levels, any shift at more senior levels would increase salary costs and so would not offer a viable cost saving option.  

In China, however, local salaries sit below the average expatriate level across all seniorities. While there are considerable savings to be made by moving to local salaries, offering a salary far below an average assignment salary would be a hard sell to potential assignees. To offset this, the client was keen to investigate the ‘local-plus’ approach. Derived using local salaries, local-plus includes some (or all) of the allowances and benefits typical of a home-based system, making the overall package more attractive to potential assignees, while maintaining the cost-effectiveness of a host-based salary. Successfully implementing a local-plus approach requires an understanding of what a typical benefits package in a given country looks like, and in this example, the client used the detailed information on benefits practice in their MyEMP report to see that, in China, 83% of participants provide the full cost of accommodation, either as a benefit in kind or as an allowance, while 98% of respondents provide medical insurance to their expatriates. Subsequently, accommodation costs and medical insurance would likely be part of any local-plus package. 

Country-specific insight

More broadly, knowledge of a country’s typical benefits package remains essential when budgeting international assignments, whether an organisation is considering local-plus or not. While the MyEMP does provide information on which benefits are more commonly offered than others (medical insurance, for example, was offered by the vast majority of participants in all countries published), the country-specific nature of the reports means that participants gain a comprehensive understanding of the variable nature of benefits provision in different locations around the world. 

For instance, in Egypt, where personal security on public transport and at night is an issue, around 70% of respondents provide either a car allowance or a car benefit. In contrast, in the United Kingdom, where public transport infrastructure is good and personal security is not a significant issue, the proportion of respondents providing a car-related benefit to some of their assignees falls to around 40%. Other benefits that vary considerably from country to country include home leave, rest and recuperation trips, and club memberships. The reports contain a wealth of further information on these, as well as on bonuses, pensions, salary delivery and other benefits. Often, the benefits package required for an international assignment can be more expensive than the salary itself, so knowing what a typical package looks like and what is needed to maintain the attractiveness of an assignment allows for more accurate budgeting and cost projecting, leading to greater cost control.

Additional advantages

While the above illustrates some key examples of the cost management insights the reports can provide, there is a great deal of further information which can be just as valuable. The beginning of each report includes an economic overview summarising the economic situation, the general trend in the cost of living, and the labour market in the report country. There is also a breakdown of official figures and forecasts for GDP, inflation and unemployment, and a brief summary of pay growth. The reports provide insights into how and where salary is delivered, which currencies are most commonly used to pay expatriates in a given country, whether split pay is the norm and, if so, what determines the salary split. 

With the fallout from the pandemic far from over, using robust, dependable data and expert analysis to drive informed decision making is more important than ever, and at a time when most companies are likely to be seeing their GM function’s budget decrease, the effective cost-management of compensation is central to maintaining successful international mobility programmes. Whether on salary, benefits or policy, ECA benchmarking data and MyEMP reports provide invaluable information and insight that support global mobility teams making difficult and crucial decisions in the current complex global environment. 

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