The escalating cost of expatriate assignments worldwide is posing significant challenges to international businesses. According to new research, the high average cost of $79,000 per expat worker is causing many assignments to terminate earlier than expected.
An international relocation study conducted by ECA International reveals that the staggering expense has resulted in roughly 7.8% of overseas assignments being ended prematurely in the past year. This accounts for a significant increase in comparison to previous years, with managing cost being deemed the prime factor behind these early terminations.
Andrew Shaw, Managing Director at ECA International, disclosed that the uncertain economic landscape and pandemic-induced restrictions on travel have caused many companies to reassess their operations. “Organizations are scrutinizing the cost-effectiveness of their expatriate packages closely,” Shaw said. “They are trying to strike a delicate balance between sufficiently incentivizing the employee to accept and remain in the foreign assignment while keeping outgoing expenses to a minimum.”
The ECA’s report highlights several components that contribute to the high cost of maintaining expatriates. Notable among these are allowance compensation, housing & utilities, education expenses, and individual and family health care. The increased cost of living and currency fluctuations also factor into the equation and further inflate the financial burden on the company.
Pertinently, the study also identifies Asia as the most expensive destination for expatriate employees. Due to the high cost of housing, schooling, and government-imposed taxes on foreign workers, Hong Kong, Tokyo, and Singapore feature among the top-ranking expensive cities for expat assignments.
Though it might seem an economical choice to terminate expat placements early, it’s a decision laden with potential downsides. Missed market opportunities, damage to reputation, and harm to team morale are just some of the possible consequences that could affect a company negatively in the long run.
Richard Payne, a British expat working in Dubai comments, “The abrupt termination of overseas placements sends a message of instability, not just to us expats, but also to the local workforce and potential business partners.”
Moving forward, businesses are having to rethink their strategies and are adopting more flexible approaches to curb costs without compromising on global engagement. With remote working proving itself to be a viable option, companies may opt for virtual assignments, a move that will also cater to the demands of the younger tech-savvy workforce.
Meanwhile, organizations are also looking at hiring locally or regionally instead of expensive international assignments. This provides a dual benefit of cost reduction and increased diversity, leading to more innovation at workplaces.
Though the increase in early expat assignment terminations sparked by high costs may have disrupted traditional business models, it has started a necessary conversation about the ways international business is conducted. Companies are now reevaluating their strategies, with a palpable shift towards more efficient, flexible, and inclusive operating models as the new way forward.
Original Source: https://hrreview.co.uk/hr-news/mobility-news/expat-jobs-fail-early-as-costs-hit-79000-per-worker/387054
