Firms in India start to see cost disadvantages of hiring expats

Firms in India start to see cost disadvantages of hiring expats
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First Published: Thu, Aug 28 2008. 12 29 AM IST

Updated: Thu, Aug 28 2008. 12 29 AM IST
New Delhi: A slowing economy and rising inflation seem to be forcing companies in India to look at hiring locally wherever possible than get expensive expatriate talent, according to a study by Mercer, a human resources (HR) consultant.
The study, which surveyed 40 firms including Indian private companies, public sector units, wholly owned foreign enterprises and a few joint ventures with international firms, found that 18 of them thought cost containment was a major challenge in expat hirings. “Organizations are cognisant that international assignments—and, in particular, those which include family relocation—call for significant investments,” wrote Gangapriya Chakraverti, business leader, information product solutions, Mercer India in a statement.
“Companies are also looking for ways to reduce costs where possible by hiring local staff instead of making an expatriate assignment, by reducing or eliminating benefits and allowances associated with international transfer, or by looking for alternative ways to address pressing business needs,” he said. “Thus, companies have been increasingly relying on short-term assignments as an alternative to long-term assignments...”
The survey also says that spouse dissatisfaction was one of the major factors for failure of international assignments. Some 12 firms surveyed cited family expectations and spouse dissatisfaction as a major challenge in case of managing international assignees. Yet, only eight of them surveyed had policies addressing these issues. “...Softer issues, such as spouse support measures and repatriation planning still take second place to other operational aspects of international assignment management,” says Rupam Mishra, head of global mobility practice at Mercer India, a part of US-based Marsh and McLennan Companies Inc.
The other most common challenges faced by employers related to salaries, issues with different tax structures and of overall cost control. Around 35 of the companies surveyed reported that benefits, including retirement, death, disability and medical coverage, were an area of concern frequently addressed in each international assignment. This is closely followed by allowances and premiums. “This is especially true of companies of Indian origin who find themselves challenged by significant costs borne to offset international compensation inequity,” says Mishra. Some of the elements included in the expatriate package are housing benefits, cost of living allowance, settling in allowance, home leave allowances and education benefits. Some companies also include repatriation allowances, spouse support and additional salary adjustments.
While international assignment policies typically have localization terms and conditions, companies often deal with localization on a case-by-case basis. “In some cases, companies might have an international assignee on a local contract rather than on expatriate terms to save costs,” says Mishra.
“In addition to containing costs, availability of local talent and return of Indian professionals are the reasons why companies are preferring to hire locally,” says P. Dwarakanath, director, group human capital at Max India Ltd.
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First Published: Thu, Aug 28 2008. 12 29 AM IST