Minority expats see UAE as ‘hardship’ posting

A small minority (11 per cent) of respondents polled for a global expatriate survey still see Dubai as a hardship posting and expect a ‘hardship allowance’ as part of their salary package, a new survey points out.

According to an Economist Intelligence Unit (EIU) report titled ‘Up or Out – Next moves for the modern expatriate', Nigeria tops the ‘new markets’ where companies offer a hardship allowance to expats, with 37 per cent of the 418 respondents saying the country qualified as a hardship destination, followed by India (34 per cent), China (31 per cent), Colombia and Vietnam (30 per cent each), Indonesia (29 per cent) and Russia (26 per cent).

One in four respondents also polled Egypt (25 per cent) and Saudi Arabia (24 per cent) as a hardship posting while only 11 per cent did so for Dubai.

The EIU report highlights the trend of declining expatriate salaries across the world due to a combination of factors. “High demand to acquire career-propelling overseas experience has meant that companies feel empowered to offer local salaries plus allowances, rather than the full expat package, to more junior assignees. In other words, the need to attract potential expatriates with extremely attractive financial arrangements has diminished,” the report maintains.

The “hardship” estimate is based on such factors as political stability and crime levels, and the quality of housing, health and education. According to the report, fewer destinations are as tough as they once were, but increased demand from employees is also certainly exerting downward pressure on these allowances.

Pharmaceutical firm AstraZeneca, which faces tougher times when many of its patents expire in coming years, sees opportunities to grow the business in fast-growing emerging economies.

The firm runs a scheme for high-potential young employees, in which they are sent to various locations for up to a year to gain management experience. No hardship allowances are paid. “There’s no such thing as hardship in this case,” explains Helen Walton, Director of Global Mobility at the company.

“South Africa, China — it’s a great opportunity, not a hardship. It’s a hardship if you are uprooting your family, if you have an established pattern of life, not generally when you are 25.”

All this should not lead to the conclusion that the full “bells and whistles” expatriate package is dead, the report says. It may be on the wane, but particularly for more senior staff located in the developing world it is still very much in operation.

According to the survey, 39 per cent of companies offer free private schooling, and 56 per cent say expatriate staff are given regular, paid trips back home.

Siobhan Cummins, Managing Director of international compensation services for HR consultancy ORC (owned by Mercer) in the Emea region, believes there has been a gradual move towards “multi-tiering” of packages. Junior employees are happy to be relocated on more modest or locally based salaries, whereas senior executives perceived to be capable of substantial impact have to be offered generous packages in order to persuade them to undergo the inevitable disruption in their personal and family lives.

Often these executives will be asked to go on sequential assignments, further compounding this disruption. “If companies wish to keep their senior people mobile, they need to have the flexibility to reward them appropriately,” says Cummins.

Michael Geoghegan, Chief Executive of HSBC, the banking and financial services company, was certainly not the victim of unreasonable corporate parsimony when he relocated to Hong Kong in 2010.

In addition to his basic salary of £1.15m (Dh6.6m), Geoghegan was reportedly awarded a relocation allowance amounting to £300,000, and a separate payment for housing and “other benefits in kind that are normal for this location”.

The report also underlines the fact that while the overwhelming majority of surveyed executives would still welcome an expatriate posting, given the stresses of expatriate life – cultural conflicts and misunderstandings, and insufficient empathy from bosses back home – those who already have experience abroad are less interested in a new assignment than those yet to have a foreign posting on their résumé.

In researching the report, EIU conducted a survey in July 2010 of 418 executives who were either currently or recently in expatriate assignments, or had responsibility for them. The surveyed executives were based in 77 different countries.

Over half the respondents were board level or C-suite; the rest were in senior management roles, in a wide range of functions, covering 19 industries. Almost two fifths (39 per cent) worked in companies with annual global revenues below $500m and 28 per cent in companies above $10bn.

In addition, the agency conducted in depth interviews with 10 company executives, academics and consultants with expertise in the field. Most expatriates hail from North America and Western  Europe, where the multinational company has traditionally been based, the report said.

According to the survey, the most popular destination of all for expatriates is China, with 35 per cent of respondents believing it to be one of the top three destinations for their company’s overseas representatives. “Other Asian destinations”, a category that excludes India and Japan, was selected by 32 per cent.

The Middle East is one of the popular destinations too, with 19 per cent of respondents sent to the region. “With India [16 per cent] also featuring strongly, it appears clear that the Asian region is attracting more significant corporate interest and investment than any other emerging market region,” the report stated.

“When we establish something new,” explains Ellen Shipley, head of global mobility and international assignments at BT, the telecommunications company, “we generally send people over for three years – the first year learning about the market and commercial culture, the second year hiring, and the third year training the new hires.” The positions of “country manager” and “regional manager” are those most likely to be filled by an expatriate. 

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