Cost Drivers to Make Mobility Affordable

Even before the pandemic, the expense rates were generally viewed as being those costly, expensive, employees within a company and the global mobility sector was witnessing a never-ending struggle with cost-saving. Now, probably more than ever, this conflict is obvious, with changes in mobility programs, cost-cutting measures, and relocation package cuts becoming increasingly visible. This article gives you some of the main cost drivers to make mobility affordable, from 3 international experts in the field. 

Have you witnessed or experienced any labor market shortages in the countries or the regions that you’re covering or that you’re present in?

DANIELA BADINU, Kellogg Company:

I think the labor market shortage is now one of the hottest topics these days, especially following the gradual recovery of economic activities.

I’m more familiar with the US region because I’m leading North America and Latin America. 

What is happening now in the US is really a paradox because the number of Americans that are unemployed equals the number of job offers.

Probably, the pressure now is on the talent acquisition teams. They need to come up with a creative solution for finding this workforce. Even though we find that talent outside the US, the procedure for getting a work permit and the time for getting a work permit in Europe and Latin America is very complicated.

It’s very hard to find a person and bring it into the US. The consulates are partially opened or even closed, and there are traveling restrictions in place. So you cannot travel directly from the Schengen area into the USA. So it is becoming also costly because of all of this.

Have you ever had to offer special relocation packages to your employees to be able to bring them to the right role and the right location? Is it easy to convince employees to move abroad?

DANIELA BADINU:

Sometimes we need to sweeten the offer. The location offers. You want to add some extra benefits if you really want that person. However, I see it as a costly solution and we are here trying to debate how we can decrease costs.

A better solution will be a matter of a better alignment between the global mobility and talent management function.

If you have a well-developed global mobility strategy and a strong candidate pool, this will enable talent deployment, when oversee positions open up. And here the companies need to work, need to do their part. They will need to constantly evaluate their employees and develop skills, so they can be ready for this, taking this role when is required.

Have you ever had clients who were forced to upgrade their relocation benefits for their employees, in order to convince them to move to a location where the load for the local workforce was not suitable, or perhaps it was totally missing?

RAMAN NARULA, FORMULA Group:

We’re a complex country. We have many cities and every city is different, so it depends. How important is that talent for you and how much are you ready to make that particular posting attractive for that particular talent?

I think companies have had to kind of upgrade relocation packages at times, depending on the cost of living, the particular state, or the local rental market, at that point of time to ensure that they get what they want and accept the particular position.

But the pandemic changed all that because of ever-changing rules not only across the globe but also within countries, for example, India.

There are some states which have different rules for entry and I think that made it very difficult for people to come in and do a look and see kind of a chip, for instance. 

Fortunately, India ensured that work permits were not banned for a long time. But if you wanted to come for a look and see the program, that would have been a tough one, you know? 

So I guess that innovative ways had to be thought of by mobility companies or mobility management companies like us to make sure that the assignee or that particular candidate during a call or during a virtual tour still accepts it.

Andreas, you’re covering more than 22 countries on the African continent with your specialized immigration services, present in your portfolio. Are there any other countries that have a quota in place?

ANDREAS KRENSEL, IBN Immigration Solutions:

Obviously, Africa might have a skilled shortage, but we also have a high unemployment rate. So Africa now after the crisis at 44%, that’s a lot. In other African countries, you have similar rates. 

Everybody is expecting that Africa is probably going to export labor very soon. But when it comes to the school of labor, obviously the discussion is a little, slightly different one now. And we could certainly skill shortages.

Now regarding the quotas. There’s only Mozambique, really. They have a strict quota, basically their linkage to the size of the companies. They don’t create a quota per let’s say, professional class. Ghana, basically, also knows a quota, but they connect it to investment.

So if you invest over a certain amount of money, then you get a quota of foreigners, you can get with that, but that’s like a trade incentive. It’s not a typical quota of what you would refer to it and immigration purposes, but otherwise, Africa does no quotas. The simple reason it’s just that we’re really strong in protecting the local labor market.

Can you please share with us some of the obstacles that you had to face in the past couple of years that caused the costs of the assignment to go up?

ANDREAS KRENSEL:

I think of two drivers when it comes to an increase in costs. Driver number one is the added complexity by the legislator – meaning they still requiring another document. Basically, they’re heading one more document or another requirement. 

Then obviously in addition to that, the administrative deficiencies, when it comes to efficiency, et cetera. During COVID, on the African continent, things have definitely not taken shorter rather than the opposite. Because if you’re sitting on a file for 8 weeks instead of 4 weeks, you have to update clients.

Then the number two cost driver is probably coming now from the corporates because of course, a lot of corporates would ask us to use their systems and work on their systems, which requires our employees to sometimes use various systems: to upload the cases, the documents, et cetera. And that’s clearly a cost driver because you need a certain quality of employees who can work on various systems parallel, and also adds complexity for us. It was much more difficult to train on four different systems than instead of one. 

Now how did we overcome it?

Constant training and finding the right people, which obviously have implementations to hiring screening and all these other things.

Sometimes people just don’t want to move internationally. Do you believe that having an incentivizing scheme to convince employees to relocate would be good practice? What should mobility practitioners, in general, take into account when they are developing devising?

DANIELA BADINU:

I’m not going to come with a magic solution, unfortunately. As a global mobility professional, you need to understand the exact reasons that might hold back an employee from relocating – listening to the employees who are concerned about relocation. I think it’s the first thing you should do because the reason might be solvable.

Another thing is to have a competitive location package. This is a must when you are presenting a new opportunity in a different location to an employee.

Furthermore will be compensation because it can be a difference between the cost of living in a home country versus a host country. And the employee, of course, we’ll look. I think that the company should provide the support that the employee will need and cover that.

Then, it’s important for the companies to work with a way to professional relocation firms because they will ease the stress on the employee and the family. It’s a big change and it’s not only for the employee, the entire family will feel it.

Lastly, it would be providing the employee with a house-hunting trip. A look-and-see trip to make the unknown a little bit known.

There are some destination services that are usually being used as incentives, clearly to help employees accept an assignment in a certain location. What kind of services should a destination provider have in place for such cases? Have you ever been in a situation where your services were used to help sell the location and the assignment? 

RAMAN NARULA:

The challenges have changed a lot, especially post-pandemic with people wanting to relocate. I think the first, most important thing, is they must have an attractive package. Today it’s all about the human mind. I think the willingness to accept the change in their life by relocating is very important.

Now, we must accept that during this pandemic time, people are more concerned. They have more anxiety. We actually engage in our team a psychologist, to be able to firstly train our own consultants on how to engage with candidates/ assignees/ new clients coming in one and how to change themselves and their own approach. And I think we develop what we call a 360 degrees need assessment tool. This is a FORMULA trademark.

We managed to engage a psychologist in our team so that we should be able to ask the right kind of questions to open up the person across on the other end of the line, sitting in another time zone, and so on. So that person would have, eventually, speak more freely about what are their concerns.

Have you noticed any changes in the way your clients purchase immigration services? How do you see the relationship between corporate, cutting costs, strategies on mobility processes, and the mandatory immigration services that they need to be delivered? Can immigration companies support these efforts in any way?

ANDREAS KRENSEL:

We obviously serve private clients as well as direct corporates and RSPs. So we still have a fairly large amount of private clients coming to us. For the private clients, there has definitely been a fundamental change in the requests. 

10 years ago, 20 years ago when I started, there was no real internet, so they just came to me because I was German and they spoke German or Austrian German.

But now obviously the other extreme – the younger clients are getting the Facebook groups, VFS, which is a service provider where you submit your applications. They think they know what is supposed to happen. So they come to us having two options: option A and B. They come to us for pure advice. Or they say: “Okay, I think I qualify for option A, here’s my documents. Can you review it? And can you just point out to me, um, what is missing?”.

I mean, if you really want to give advice, you need to be able to understand what the client really wants, where they come from, what are the expectations? And you need to be quite clear about it.

What is happening on the corporate side? I would say, is that you don’t charge for a phone call that you don’t charge for the emails, but there’s a package price. And then, you know, are available for all the updates and all this is kind of included.

It’s a bit of a bracket creep, so to say, but there are no fundamental changes there.

Have you ever thought that downgrading the packages to support the effort of cutting costs would be possible from an immigration services perspective?

ANDREAS KRENSEL:

With the corporates, it is a bit more tricky and quite frankly, I have a feeling they really want the advice and they want somebody who can advise and can give them the best solution. 

South Africa is competing internationally, a rather cheap destination from a service fee perspective. But if you compare it to Nigeria or Kenya or Morocco, typically high, expensive countries, then yes. I do think there might be a path to say, “okay, we’re going to compile the application.” And then we’re sending it off and the applicant has to do certain things themselves to just cut down the cost. 

The other lever is obviously the communication model. Are you in contact with the assignee with HR or only the RMC? If I’m not in contact with the corporate/assignee, then (I’m working on a case management system) I can use employees who are barely file orientated, very procedural oriented, but they don’t have to have a cultural experience like me.

Lastly, we were always a bit shielded because our currency got weaker compared to the Euro and the US dollar in the last 10 years. So we didn’t have to increase our prices because of the exchange rate. And we had Euro/ Dollar prices. We actually got price increases through the devaluation of our currency. So that’s what we could keep the pricing stable.

Are there any fundamental elements that should never ever be removed from a package?

RAMAN NARULA:

Firstly, eliminating a home search would be suicidal, especially when we’re going to companies at these times when everybody wants to grow and to be on that progressive path. I think not all companies can adapt the relocation packages that are given to their employees.

Also, the trends are changing. A lot of companies are changing the way they are recruiting and the way they are sending people. For example, in India, a lot of companies are moving away from sending people for long-term to short-term assignments.

We see a huge increase in requests for temporary accommodation or for corporate housing, which is from six months to 12 months because they’re sending in people for assignments for six months, several months to come and do the job and go back. And if they really need them back, they will send them back again for another six months. the need for temporary accommodation is going up a lot in India.

The next thing which is happening is that companies are hiring locally and moving them locally. It’s much easier and cost-effective for them to do that.

The third thing which is changing is that, because of challenges, there is a lot of Indian talent which is already working outside India in various countries. It’s much easier for companies to hire these Indians. They are moving those particular people who are Indian nationals back to India because they feel that it can be done more easily.

If you were to devise that essential package that we can’t live without, as expatriates, what would that be? 

RAMAN NARULA:

I think in India, you would definitely opt for home search support. In one/ two days, definitely, whether it’s a school search (if they have kids) or settling and support with utilities such as internet, wifi, water, connection, cable connection, whatever they need to live a comfortable life.

Then, I think ensuring that they have a chauffeur In India is very critical because nobody likes to drive. We’ve noticed that there has been a big part of everybody’s package to attract and keep them happy with that relocation move over there.

What should mobility practitioners consider when they have to keep the transferees happy and also keep the costs low?

DANIELA BADINU:

I think that the global mobility teams should have a frame to be able to juggle the benefits depending on the needs of the employees. And this frame can be achieved by implementing core flex policies. Companies can use segmenting policies and using that they will be able to shoot to shift the budget from less essential assignments to do the assignment with the bigger impact. 

Also, they can look at the way the costs are allocated between home and host. 

Lastly, I think it’s very important that the employees will keep a track of what was estimated and what is actually happening with the cost of an assignment. Here, the employee or the global mobility teams should leverage the advantage we have and the technology we have available now.

Through such a tool, you can get reports around the exception, around the cost, by each policy, about the division. And I think this will help to understand where the cost is coming from instead of randomly cutting things.

Thank you Daniela BADINU, Andreas KRENSEL, and Raman NARULA for your valuable inputs.

You may watch the entire interview with our 3 guests HERE.