In recent weeks, many countries have begun the process of relaxing the restrictions imposed due to Covid-19. There has been an increase in business activity in many locations and a tentative opening of borders, thereby allowing people to enter countries once again. In the hope that we will not see further waves of the virus requiring countries to reimpose some of these restrictions, what should companies be thinking about when managing employee mobility during this period of tentative recovery?
Can and should your repatriated assignees return?
In an earlier blog I wrote of challenges and risks associated with repatriating employees who were on an assignment. We recently ran a series of webinars in Asia during which we asked participants if they had repatriated staff. The replies showed that approximately 20-30% of respondents, depending on where they were headquartered, had repatriated some staff on account of the pandemic, with most of these expecting staff to return to their locations of work at some point. However, many were pessimistic about how long they expected it would take before their assignee numbers returned to pre-outbreak levels, with most companies expecting it to take 3-12 months before all of their staff would be able to return. More positively, though, fewer than 5% of companies felt that Covid-19 had caused an overall structural decline in employee mobility and that their numbers of mobile employees would never return to pre-pandemic levels.
Nonetheless, even if risks in the host location have abated and business leaders would like their employees to return, consideration needs to be given to whether or not host countries have imposed restrictions to the point that it is currently impossible for employees to return. China, for example, presently prohibits foreigners, including holders of valid work permits, from entering China. Similarly, countries where restrictions are less strict still require people to quarantine or self-isolate for a period of time upon entry; and even when this is not required, it may still be advisable in order to prevent an asymptomatic employee returning to the office and passing the virus on to local colleagues.
Medical and travel insurance policies
Fears of further waves of transmission or a re-emergence of the virus during the winter 2020-21 influenza season remain present in the absence of a coronavirus vaccine. While it is extremely likely that countries and companies will be much better prepared for a re-emergence of the virus, the absence of a vaccine means that companies have a duty of care to ensure that their mobile employees receive support if they become infected whilst working overseas at the request of their employer. This will likely require them to revisit medical insurance policies or request that providers update policies to ensure that coverage associated with Covid-19 (or any other future pandemic) is included. Coverage may include treatment as well as precautionary evacuation. Likewise, corporate travel insurance policies should be reviewed to see whether costs associated with precautionary repatriation are covered.
Given that many companies have had employees on short-term assignments (including business travel or commuter assignments) being stranded in an assignment location during a Covid-19 lockdown, companies should review policies to ensure they cover the costs associated with accommodation, any necessary medical treatment, and other relevant costs for an employee whose return home has been made impossible by circumstances beyond their control.
Home leave – Delay, cash out or something else?
Our most recent Benefits for International Assignments policy survey showed that over 90% of organisations provide some form of assistance associated with long-term assignees returning to their home location periodically throughout their international assignment. However, during the current pandemic many employees have been unable to utilise this benefit and may be unable to do so for the immediate future on account of either health concerns, quarantine restrictions or the inability to travel back to their home location. So what should companies do with respect to the home leave passage? Some companies have encashed it, accepting the fact that the employee has not or may not be able to use it during the time in which the benefit is applicable. Others have simply allowed the employee to roll it over to the next year. Both options have their merits, but any decision should account for the impact these choices may have on the taxable nature of this benefit. As most companies tax equalise long-term assignees, converting home leave to a cash value is likely to make this benefit subject to income taxes in the host location and the company will therefore need to decide if the company or the employee is responsible for meeting the tax due on this cash value. Similarly, many jurisdictions impose a limit on the number of home leave passages that can be provided and exempt from income tax in any given year so deferring any home leave entitlement to the next tax year may make this a taxable benefit next year.
Instead, as countries gradually relax their border restrictions, certain countries have discussed creating ‘bubbles’ or ‘corridors’ within which travel is easier. Examples include one currently in effect between China and Korea Republic, one currently under consideration between Hong Kong, Macau and the province of Guangdong in mainland China, and another between Australia and New Zealand. As the employee may not be able to return home, companies may permit them to use their home leave passage towards travel to a neighbouring location as an opportunity to de-stress instead – this method recalls the principle behind ‘rest and recuperation’ trips in an era where travelling back to one’s home country was not as easy as it has been in recent years.
Our regular policy surveys show that the happiness of accompanying dependants is often crucial in ensuring assignments are a success. In the case of long-term assignments and permanent transfers, the ability of the employee’s partner to be able to work in the host location is an important factor in the success of the relocation. Over 50% of companies in our most recent Managing Mobility Survey reported that issues relating to a partner’s career hindered their efforts to encourage an employee to relocate. The same survey showed an increase in the proportion of partners being able to work during an assignment, which has likely contributed to a fall in assignment failure rates in recent years. As host countries grapple with the economic impact of the Covid-19 pandemic and the consequent increase in unemployment rates, the employment prospects of accompanying partners are likely to be under threat and many will be at risk of being made redundant. Similarly, the disruptive impact of the Covid-19 outbreak on children’s education has been considerable, with different countries taking varying approaches in terms of suspending and restarting classes. Parents may also have concerns about whether or not it is safe for their children to return to school. Furthermore, the emotional impact of the disruption on children’s education caused by the pandemic, particularly those who are in school years where exams have been postponed or cancelled, or who may be planning to start university this year, should not be underestimated. HR teams need to be aware of this as it may lead to an increase in requests for an early termination of the assignment (for example, over 30% of companies in our Managing Mobility Survey reported that assignments had been terminated due to concerns associated with children’s education) and be prepared to provide some form of emotional support to expatriate employees and their families during this time.
A large number of long-term assignees maintain financial commitments in their home locations, particularly housing commitments such as a mortgage on a home property. How home country commitments are addressed as part of a compensation and benefits package by companies will vary. Many adopt a laissez-faire approach, where the assignment compensation incorporates estimated home country commitments, so the employee can meet their home country housing costs from their assignment salary. In such cases, if the employee chooses to lease out their home country accommodation while on assignment, they assume sole responsibility for all costs, including administrative and taxes, that arise from this choice. However, some companies will exclude home country housing costs from the assignment salary for various reasons. In such cases, if the employee retains their home country property, they will need to meet related costs themselves and often choose to lease out accommodation to do so. However, the Covid-19 pandemic and increases in unemployment rates globally have had an impact on many people’s abilities to meet rental payments. While some countries may have facilitated mortgage holidays for borrowers, many assignees renting out their accommodation to meet home mortgage payments could be faced with tenants who are no longer able to afford the rent. Others may not be able to lease out their property at all. Mobility managers need to be aware of how their policies could be applied to assist their assignees in such situations.
Managing commuter and short-term assignments
Two of the most popular methods of encouraging employee mobility in recent years, as alternatives to long-term international assignments, are commuter and short-term assignments. On the eve of the Covid-19 outbreak, we undertook our Global Mobility Now survey. This showed approximately 40% of companies had experienced an increase in short-term assignments, while 25% had seen more commuter assignments, in the last three years. Immigration restrictions put in place in response to Covid-19 have reduced the viability of these assignment types. To many, however, they remain essential: under pressure from business leaders, Hong Kong has now moved to relax business travel between the SAR and Guangdong, while the UK government has been lobbied intensively to exempt technical specialists, who need to ‘fly-in, fly-out’ on a commuter basis, from recently imposed quarantine restrictions. In what is already a fast-moving regulatory world, mobility teams will need to closely monitor relevant procedures, not least to ensure assignees can obtain permissions to travel. For example, the Hong Kong-Guangdong scheme is restricted to a limited number of people per business and requires travellers to undergo testing prior to travel, so moves like these will probably require a lot more planning to ensure success.
As economies begin to emerge from lockdowns and other restrictions that were put in place to combat the spread of Covid-19, companies are initiating their own recoveries, including the tentative resumption of cross-border mobility of employees. The process, however, is likely to be long and require considerable attention to a lot more detail than was necessary even six months ago. As we try to return to some form of normality in what will undoubtedly be a changed world, it is important to bear in mind that there will be new challenges associated with managing expatriate staff, on top of those we have become used to over the years. Whether they are to do with family or financial concerns, or something else entirely, support from HR and Global Mobility teams will be crucial.
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If you would like to discuss any of the above in further detail, or seek our advice regarding how to manage your mobile employees during the pandemic, please do not hesitate to contact us or your ECA point of contact directly.