Human capital

Tax agenda 2013

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How to manage and retain outstanding young talent?

Do any companies really understand what motivates Generation Y to reach their potential and perform at their optimum for the business?

For Generation Y, the world has no boundaries. They are motivated by experiences, rather than just monetary incentives. Generation Y actively seek international opportunities with many gaining overseas experience through studies or traineeships. Demand amongst Generation Y for international assignments is even higher in the emerging markets.

Generation Y expect to receive market-competitive salaries. However, this alone will not be enough to retain them. Strategically planned, positive developmental experiences matched with career progression are paramount to retaining future high potentials.

Today, approximately 50% of developmental assignments are less than 12 months in tenure. We expect the majority of new-generation developmental assignments to be on an unaccompanied, short-term basis, or a set of rotational assignments in different countries to accelerate learning in technical as well as leadership skills. Traditional, long-term assignments will be offered mainly to senior executives to deliver business results, transfer knowledge and develop local employees.

For Generation Y, we see a clear trend towards a host-based compensation approach, aligned with host country salary grades and taxation. A host-based approach not only provides cost savings for the company, but also takes away the administrative hassle of building balance sheets, delivering tax equalisation and administering a long list of expatriate benefits. A host-based approach is subject to certain limitations, and its applicability depends on assignment country combinations. We have already seen and helped companies undertake comprehensive country combination analyses to identify where (given the different salary levels, taxation, costs of living, immigration, social security, company pension plan and other criteria) it is possible to effectively deploy employees on a host-based assignment approach. Differences in salary levels remain a challenge for developmental assignments. However, this is potentially offset by lower costs of living and, possibly, differences in tax regimes.

Developmental assignments need to be supported by robust talent management processes, from assignee selection to post-assignment reintegration. The return on investment of developmental assignments must be considered before and after the assignment from a mobility, talent management and business point of view. Assignees will still receive relevant in-house and third-party support, so that they can focus on delivering business objectives, while managing compliance risks for the individual or the company. Developmental assignments are to be regarded as long-term investments, therefore when developing indicators to measure success, employers should focus on the long-term return to the company instead of short-term assignment relocation costs. Depending upon the business drivers of a particular company, metrics can include: post assignment retention; speed and degree of progression upon return; absolute and relative salary accumulation; contribution to talent pipelines and pools; cross-functional deployments; and relative quantitative and qualitative performance, to name just a few.

Traditional expatriate benefits for developmental assignments, such as mobility premiums, cost of living allowances and relocation allowances are fast becoming irrelevant. Companies should not underestimate the value of non-financial incentives, such as challenging assignments, learning opportunities, inspirational career coaching, regular constructive feedback and, if feasible, progression opportunities upon return.

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