What are Localization, Local, and Local-Plus Assignment Packages?
As organizations continue to expand their global presence, there is still a need to export corporate culture as part of a knowledge transfer to offices based far from corporate headquarters. The traditional long-term expatriate assignment of one to five years is still one of the most prevalent compensation methods to entice employees to move abroad. The expatriate receives above-base compensation elements and tax equalization assistance that ensures the employee remains on a relatively equal financial plane had they not moved and worked abroad. However, expatriate assignments are admittedly expensive for corporations to support, which has resulted in the creation of several different assignment types that bring the expatriate more in line with local employees.
Localization Packages are provided to employees who are moved abroad with some extra benefits, such as a household goods shipment, housing allowance, school tuition allowance, or tax preparation for the year of the relocation, that is decreased over time until the employee is on the same compensation and benefits level as a local hire. We have seen this type of relocation as an effective way to bring locals “home.” These individuals may be non-Americans who have studied or worked in the U.S. and are interested in returning to their home country, but have become accustomed to the lifestyle they enjoyed in the U.S. The Localization Package can help the employee with re-entry and re-acclimation, though, of course, this option is not exclusive to returnees, and is applicable to a variety of globally mobile employees. An important element of a Localization Package is that the employee intends to live permanently in the host location. They will be transferred to the host country payroll immediately upon the termination of any additional benefits, and social security and retirement shift to the host location as well.
A Local Assignment Package is more often offered to a non-native to live in the host location. In instances where the employee is the driving force behind the relocation, many companies will provide only a local package; whereas if the employer is initiating the move, the package may include additional incentives. We have witnessed an increase in this type of mobility package in regions where there is a considerably large expatriate population already present, as in Hong Kong, mainland China and Singapore, resulting in a more competitive hiring environment where a traditional expatriate package may not be necessary. In these countries, the expatriate population is largely comprised of younger people and the jobs are more technical in nature. This method is also more easily applied to non-Americans who are not subject to taxation in both the home and host country, or to Americans with incomes not significantly affected by their global tax liabilities. Employees under a Local Assignment Package may also remain in their home country social security system and other long-term plans during their time abroad, and by definition, an employee on a Local Assignment Package intends to return to their home country.
While the definition of Local and Local-Plus Assignment packages is fairly fluid, the distinguishing feature of a Local-Plus Assignment Package is that the company provides more above-base compensation benefits, such as a subsidy towards housing, school tuition, tax assistance and/or preparation, or some other negotiated element, that places the employee in a similar, but not equivalent, level with local employees. These employees also remain on their home country social security program, and do not intent to move permanently to the host location. The Local-Plus concept has become more popular as a way for companies to bridge the gap between a full expatriate assignment and a true local package that may not be attractive enough to entice the very best candidates for the position.
Even in today’s economic climate, companies continue to have organizational needs that require global mobility. As companies continue to expand their global presence we will see continued evolution of assignment types in terms of both traditional expatriate assignments and business travelers.