One of the most difficult things about managing a company with significant employee movement between geographies, locations and jobs, is the different local expectations for compensation, benefits and employment protections, balanced with the local laws and norms which can vary widely across states and countries. As employees increasingly work across different cities, states, countries and their own homes, traditional compensation, benefits and employment protection models may no longer be fit for purpose.
For decades, companies provided benefits like healthcare, retirement plans and leave to employees. However, with the growth of talent mobility and the freelance economy, we must fundamentally rethink the structure of work – including social support, benefits and protections – for our new era.
While there are many benefits of employment mobility, its growth brings challenges. Companies and business leaders that want to succeed in the talent mobility era must rethink their compensation and benefits models, creating a new worker value proposition. Those that do this will attract and retain top talent and skills; those that don’t will lose out to their more forward-thinking competitors.
Setting compensation can be challenging. Should you adjust an employee’s salary if she works in another location for 3 months? What should you do if an employee elects to move to a lower cost geography? Or, does projects in multiple places? Or, works remotely while traveling the world? Or, works four days per week balancing childcare needs alongside work, but contributes significant hours over the weekend? And, how do you compensate a remote freelancer doing the same work on the same project team as a full-time employee in the office?
These are just some of the scenarios amid the talent mobility revolution. And, all of them introduce compensation complexity. Continuous movement is a growing part of today’s workforce. For geographic movement, companies should consider two compensation structures: Local Benchmark or Global Benchmark.
This compensation model is based off the traditional model. In a local benchmark model, compensation is set based on a local market norms based off a cost of living index. The goal is to be competitive in the local market with local employees. If an employee moves from a lower to higher cost of living market, compensation is adjusted upward; similarly, if an employee moves the other way, compensation is adjusted downward. (Note, that this can be a challenging conversation and expectations should be set early for this operating norm with all employees).
For traditional expatriate policies that are business-driven, it remains common to offer tax equalization benefits, but the numerous allowances of prior years are less common, except in very hardship locations, like moves to certain African countries. For permanent one-way relocations or hiring relocations, tax equalization is generally not used.
Companies should adopt policies that dictate that compensation is only adjusted to the local market when an employee is there for more than six months consecutively, e.g. for a long-term assignment or relocation. Otherwise, living adjustments should be covered in the benefits for the given policy, with things like corporate housing or per diem allowances.
This compensation model is increasingly looked to as a way to support the continuous movement of employees in the talent mobility era. In a global benchmark model, compensation is tied to a fixed global norm and all employees have their pay set to this global norm (which replaces the local cost of living indices). Effectively, this decouples compensation from local markets and means that all global employees with similar competencies and skills are paid consistently, making it easy to work from everywhere. The HR team gets new efficiencies by not going through complex salary adjustments with each move – an unrealistic expectation when there are many of them.
Adjustments needed for cost of living considerations for moves to certain places or with certain personal circumstances, are still considered, but dealt with on a case-by-case basis. To get started, companies may first apply this model to a specific subset of employees who they expect to be regularly mobile across geographies, locations and jobs (for example, high potential employees). This mobile talent pool may also be employed by a global employment company that administers a global benefits model and eases legal friction.
The talent mobility revolution not only brings compensation challenges with geographic and location mobility, but also questions on how to compensate external freelance workers, who are increasingly part of project teams. The standard compensation methodology for freelance workers is to agree on project compensation upfront as an hourly, day or monthly fee. In certain instances, companies may also agree a project fee upfront, but it can often be difficult in this dynamic world of work to know how long projects will take.