Europe breeds new type of expat
The times are a-changing for the 'intra-Europe' expatriate and the arrival of the euro will probably give the changes a further nudge. The intra-European is an ungainly label for those who move from one European country to another at the behest of their employer. They probably account for the largest proportion of the expatriate workforce of Europe-based companies - around a third, according to a survey by PricewaterhouseCooper's international assignments practice.
What we are finding is that companies are treating moves within Europe more as relocations than expatriate assignments," says Susanna Postlethwaite of PWC's expatriates compensation and benefits consultancy team in London. "This means that increasingly people are being paid at the local national salary rates of the host country rather than being given the full expatriate package." This is a reflection of the closer integration of Europe's economies and breakdown of the barriers to labour mobility, something the euro is likely to boost.
In its 1997/98 survey of the international assignment practices of nearly 200 European employers, the consultant asked whether they considered cross European border assignments as relocations rather than expatriations. "In the survey, while most companies still treated these assignments as expatriations, fewer were doing so in 1997 than two years earlier," Postlethwaite says. Around a quarter of companies had adopted the relocation approach then, compared with 10% in 1995. This trend is likely to have gathered pace since, but still not have moved to the logical conclusion of the euro, which would lead to the creation of a European pay scale.
"Under this, people doing the same job across the EU would be paid the same," says Postlethwaite. Much has to happen before this can become reality, including a convergence of taxes and prices. The single currency will bring greater transparency of labour costs but that will not bring about convergence. Managers across Europe have long been able to do the necessary calculations to make comparisons, she points out. Also language and cultural factors may im-pede the evening out of pay levels by restricting mobility.
With the relocation approach em-ployees are offered the local salary, so a German moving to France for his employers would get the same salary as his local counterpart, instead of being given the usual expatriate re-muneration package, which is based on home country pay adjusted for cost of living and tax differences, she says.
The euro could strengthen this trend, whatever happens longer term to greater convergence of pay across the euro-zone. In its next survey of European practice in the field of international assignments later this year, PWC will ask specific questions about how Emu will impact expatriate policies and whether there will be a trend to European pay scales.
But another force is affecting assignments - employees' increasing resistance to working outside their home country. PWC found nearly half the companies surveyed had problems in persuading staff to make international moves, with the issues becoming more intractable in the past five years.
Domestic and family concerns, rather than problems with pensions transferability, were stated by nearly 80% of employees as the main reason for avoiding international transfers. The problem of dual careers, where an employee's partner refuses to relocate because of their career, was cited by nearly 60% of employees.
"And there are a lot more dual-career couples now, and fewer of these are financially able or willing to give up the partner's income," says Postlethwaite.
Employers are trying to find ways around this. "Very few companies are compensating for partners' lost in-comes, as this would be very expensive. But they are setting up job search networks for the partners and help with all aspects of finding a job for them." It is likely that, within Europe, it is easier to find suitable jobs for partners than in other areas, she adds.
Another response has been a growth in commuter assignments, where employees commute from their home country to work in another, say on a weekly basis, while the family stays at home. 'Virtual assignments' are another phenomenon born of em-ployees' resistance to moving. Here the employee does not relocate, but takes on responsibilities for operations in another country, often in-volving business trips and constant contact with the country.
The shifts in the pattern of international assignments will have implications for the provision of pensions benefits. Clearly, where employees are staying in their home country and running their non-domestic activities as a 'Euro-commute' or as a 'virtual assignment', there should be no change in their pensions arrangements - although whether part of the cost will be offset by the host country depends on corporate philosophy.
The survey showed that most 'temporary expatriates' - assignments of one to five years - remain in their home country schemes. The 'career/international cadre expatriates' who go from one international assignment to another have a wider variety of ar-rangements, with a predominance still of 'home country' arrangements.
Over three quarters of permanent transferees - those who go to another country for the forseeable future - join the host country scheme.
But for the new phenomenon of treating 'intra European' transfers as a relocation, as one quarter of employers are now doing, the question of pensions treatment may still depend on their long-term expectations for such employees. The survey found that some of the assignment benefits of expatriation are still provided, in some cases for as long as the employment in the host country continues, in others these are phased out after a period, such as five years. The question of cross-border European pensions may not be the issue exercising employees deciding whether to make the move, but the variety of complicated scenarios that employers have to adopt when trying to meet the pension needs of their employees is a clear indicator that a simpler system is essential. IPE If you would like to participate in the next PWC survey of this area, please contact Susanna Postlethwaite on +44 171 939 1730"