Globalization forces companies to reexamine international assignment programs

Globalization is forcing companies to reexamine their international assignment programs, as companies increasingly find these programs are too costly and time consuming to administer, according to the results of KPMG's 2007 Global Assignment Policies and Practices Survey, conducted by the International Executive Services practice of Big Four firm KPMG. Short-term assignments (STAs) also are increasing as companies are taking a more global approach to doing business.

Of the 348 human resources executives surveyed, 49 percent believe international assignment programs "take too much time and effort to administer," up slightly from last year's results of 48 percent. A slight increase in respondents, 40 percent, also thought their international assignment programs are "more generous than they need to be," compared to 38 percent in 2006.

"Despite the weakening value of the U.S. dollar, companies have legitimate business reasons to keep investing in international assignments, but it's no surprise that companies also are looking to trim assignment expenses," said Achim Mossmann, managing director of Global Mobility Advisory Services in the International Executive Services practice of KPMG LLP. "International assignments are here to stay, so the most forward looking companies would be wise to develop ways to administer them more cost effectively using technology and conducting extensive pre-planning due diligence."

The number of companies sending international assignees on STAs continues to trend upward, with 80 percent of those surveyed utilizing this option. According to the results of KPMG's Extended Business Traveler-Short Term Assignment Survey (EBT-STA Survey) announced in September 2007, 38 percent of corporate respondents in that survey expected their use of STAs to increase over the next 18 months.

"The increasing number of short term assignments supports the notion that we are in the midst of a paradigm shift in which we see more companies operating globally," said Ben Garfunkel, national partner in charge of KPMG LLP's International Executive Services (IES) practice. "As more companies transition to a global approach and conduct more business in regions all over the world, international assignment programs need to change to fulfill the business needs required to move their workforce globally. This requires flexible yet consistent policies to ensure competitiveness as well as compliance."

While companies have utilized EBTs and STAs for quite some time, there is an increased focus on the compliance risks associated with these assignments. The EBT-STA survey revealed that 88 and 94 percent of respondents were concerned with compliance risks associated with EBT assignments and STAs respectively. Furthermore, the survey revealed that 50 percent of companies have a compliance framework in place to deal with STAs, while 28 percent are in the process of developing one, and 16 percent acknowledge the need to develop one.

As more mid-sized companies send employees abroad, in some cases for the first time, they frequently turn to outsourcing to help manage their international assignment programs. The 2007 GAPP Survey found that, among companies with $500 million or less in revenue, the program functions most frequently outsourced include tax compliance (78 percent), assignment orientation sessions related to tax (72 percent), and immigration/work permit assistance (67 percent). When asked to select the top reason for outsourcing, 78 percent of companies in this revenue range said to gain access to a service provider's global resources and expertise and 21 percent said to improve service quality and efficiency.

"With increased globalization, companies need to better understand how their international assignment programs will be impacted and how these programs can be utilized to meet their changing business needs," said Mossmann. "They may be leaving money on the table if they are slow to adopt techniques that could systematically achieve greater costs efficiencies and fail to see return on investment as a key goal for their assignment programs."

Since its inception nine years ago, more than 400 organizations worldwide have participated in KPMG's Global Assignment Policies and Practices Survey, a dynamic Web survey. The 2007 data is a snapshot, capturing the results as of January 2007 for comparison purposes. This year's survey also included four distinct data cuts, which included headquarters location, organization size, program size, and industry classification. You can read the survey results, (registration required). For more information on the KPMG survey results, or to receive a copy of the survey, please contact Ichiro Kawasaki of KPMG LLP at ikawasaki@kpmg.com.

 

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