With more and more clients in the manufacturing industry moving away from offering expatriate packages for employees working outside their home base, we take a look at the impact this may have on the industry.
Traditionally, expatriates have been used as a method of importing skills into an area that was otherwise short of local candidates with the appropriate experience and qualifications. The model was simple and mostly aimed at management/senior level roles. A manager would be parachuted into a role with a view to training up the local staff and passing on the skills they have. In return, this candidate would be compensated with an inflated tax-free salary (paid in their home currency), accommodation, travel and other benefits inc. schooling. They would normally also have the opportunity to work and live in a different country/culture – both personally exciting and professionally beneficial.
For the company, they benefit from filling a void in skills, training up a local workforce and also investing in an employee; offering them experience that can be utilized in other areas of the organization in the future. One of the only downsides can be the considerable extra costs.
In a time when organisations are making huge efforts to reduce expenditure by being leaner in structure, cost-efficient and reducing overheads, the expatriate model has been one of the major areas that has been affected. As a result, many expatriates are returning to their native countries and returning to their local contracts.
What impact do we expect this to have on employees?
As mentioned above, over the next 12-24 months many employees are in a repatriation process to take up local positions where possible. If there are no opportunities in their home countries, then this leaves the employers with three options; redundancy, remain on a local contract or negotiate to find something in another country on a local contract.
In this case, we have seen the ‘local plus’ contract become more commonplace. Essentially, this is an ‘all-in’ salary that will be in local currency and subject to local tax laws. This salary will still be inflated in comparison to standard local salaries but will not be a net figure. It will also be assumed that the cost of housing and in some cases, schooling and flights will be covered by the employee personally.
For an employee in the manufacturing industry, one of the greatest assets is the ability to travel and be flexible on location. Employees who can relocate will climb the ladder much faster because they are able to be available regardless of the location. In turn, this will hugely increase the number of opportunities coming their way. The exposure to a range of cultures and markets will also add key skills to any candidate’s CV which will again, make them a far more attractive proposition to future employers.
How does this impact employers?
The first expatriates were generally used for two reasons; firstly, in less economically developed areas where the education standards did not meet expectations and secondly in areas where there was simply a shortage of skills.
With generations of expatriates training up local workforces, these skills have since been passed on and will continue to be passed on. As a result, the standards and quality of employees has improved significantly in the last 15 years.
The idea of needing ‘boots on the ground’ is also changing with the incredible technological advances which have revolutionised the way we communicate, share information and even automate our manufacturing sites. Centralised technical centres allow companies to have ‘experts’ based from one hub who will travel from site to site globally or regionally working on long-term projects and training up local workforces.
This reduces the requirement for very specific skills to be based on any one particular site and provides the employer with flexibility.
On the topic of redundancies, for most companies, this is considered the last resort and most would rather successfully repatriate the employee concerned. In this case, many candidates are left to make a decision that will determine their own future.
In the short term for all parties, there will be a significant impact. Many employees have relocated with families and settled down which adds further complications (especially where schooling is concerned). Employers risk losing top talent which is hard to find and also the skills that they have invested so much in.
For employees, big decisions need to be made, particularly for those who want to consider long-term career goals. Just because the expatriate package may no longer exist, doesn’t mean that the opportunity to work and live in a different country should not be considered. At the end of the day, money isn’t everything and the long-term gains will be huge.
For employers there stands to be huge future gains. Not only will this reduce costs but hopefully it will place more emphasis on the nurturing of local workforces which in time will completely eradicate the need for expatriates. In the immediate future, finding the necessary skill sets may be incredibly difficult and leave large gaps in important positions.
For Chad Harrison International, there is a call for focusing efforts on finding local candidates in hard markets or candidates who are prepared to travel without the comforts of an expatriate package.
About the Author
Callum Taylor is the Head of the Built Environment division and focuses on senior, technical and skilled hires globally. Key industries in which Callum operates include manufacturing, building materials, cement, industrial minerals and aggregates.
Highly experienced in delivering specific and hard to find profiles for multinational clients in Europe, Middle East, Africa and Asia, Callum has an extensive global network of industry professionals. Recent successful campaigns include the placement within Built Environment of Operations Director – Asia Pacific, Group Head of Mining & Geology, Project Engineering Director & Technical Director – Northern Europe roles.