The main findings
The payment of cash allowances in recognition of assignments to challenging or remote locations has long been a core element of expatriate compensation. Whether these allowances are calculated based on location assessments which focus on the living standards in just the host location, or compare the quality of living between home and host, their inclusion in traditional balance sheet compensation calculations is well-established. A quarter of respondents to Mercer’s 2015 Worldwide International Assignment Policy and Practices survey reported that the requirement to send employees to hardship or remote locations continues to be a barrier to mobilising their workforce however, which suggests that more still needs to be done to support employees and their families when asking them to move to locations which do not offer the equivalent standard of living to which they are accustomed.
When considering the most important criteria for determining location premiums, it is clear to see how poor scores in any of these categories would result in difficult living conditions by any objective measure. For example, the most heavily weighted criteria in Mercer’s Quality of Living assessments are:
- Political and Social Environment (e.g. international and domestic security, crime, law enforcement effectiveness).
- Medical and Health Considerations (e.g. medical/hospital facilities, pollution levels, hygiene).
- Public Services and Transportation (e.g. reliability of utilities such as electricity and water supply, availability of regular and safe public transport, level of traffic congestion, access to international airports).
While cash allowances certainly go some way to recognising and compensating for poor conditions in these areas, in reality additional support measures are often required to mitigate these risks in terms of day-to-day living. The most effective interventions will be those tailored to the nature of the challenges in each location, so it is important not to adopt a ‘one size fits all’ approach to such support. Equally, honest and constructive communication about risks and the support available to the employee and their accompanying family is essential with regard to exercising duty of care. The additional costs associated with the interventions highlighted below will vary, but are not significant when compared with the cost of a failed assignment, or being unable to mobilise the talent needed to the host location at all.