Before Saying Yes To Going AbroadGrace W. Weinstein
Does two years in Brussels sound like the answer to a stagnant career? While many executives promptly say "yes" to the offer of a foreign assignment, such a stint no longer is necessarily a straight line to career advancement. At the same time, the perks associated with a job overseas have lost some luster.
When Jeffrey Kaufman, national director of services to executives abroad at Coopers & Lybrand in New York, returned in the summer of 1994 from five years in Europe--two in London followed by three in Brussels--he moved smoothly into a new position utilizing skills honed overseas. But many of today's expats find reentry more difficult. "Surveys show," he says, "that lots of expatriates leave the firm within one year of return." Either the position they return to doesn't require their new skills--or there is no position at all.
GOING NATIVE. Meanwhile, companies are reevaluating both the need to send employees overseas and the costs associated with doing so--especially in high-cost cities such as Tokyo and Paris. "Companies are beginning to understand just how expensive these assignments really are," says Michael Fischer, national director of international assignment services for Deloitte & Touche. "It can cost three to four times what it costs to maintain an employee in the U.S."
As corporations downsize, they are cutting compensation and benefits for international assignments, bringing both more in line with what a foreign national might expect in the same position in dollar terms. So in today's brave new world, you probably won't lose money if you go overseas--most employers still try to "keep employees whole"--but you shouldn't count on lavish perks.
More than 80% of North American companies seek to provide a standard of living comparable with that in the home country, according to an August survey by Organization Resources Counselors, and 96% pay a cost-of-living allowance (COLA). Nonetheless, says Fred Piker, ORC's director of international compensation, marketing, and consulting services, after an initial orientation period of a year or so, you may be expected to live more frugally and to shop as a native would.
On a larger scale, companies are rethinking what kind of lifestyle they are willing to support. Holly Juday, a consultant with Runzheimer International in Rochester, Wis., says there can be a $30,000-a-year difference in rent between central and suburban Tokyo. That's why an increasing number of companies are now questioning whether an employee on a two- or three-year assignment needs to be in central Tokyo--or, for that matter, has to live in an expensive expatriate ghetto.
But each company is different. So if you're offered an overseas position, you'll want to ask certain questions before jumping at the opportunity. First, find out exactly how long you're expected to stay. The typical assignment abroad is three years. But Mark O'Reilly, director of international services for Buck Consultants, notes that a task-oriented approach is becoming more common. Companies send employees to a foreign location for a specific reason; once the task is accomplished, the workers come home. Employees who stay overseas much longer than five years tend to remain abroad indefinitely and get paid more in line with local salaries of the host country.
The next step is to get a handle on compensation and benefits. Juday says "an extra 10% to 15% of base salary used to be commonplace, over the whole course of an assignment, as a foreign service premium." Today, incentives are more likely to take the form of a lump-sum payment, made in the U.S., at the beginning and end of the tour. Amounts range from 2% to 30% of base pay, with most companies offering 10% to 15%. That way, the employee has a reason to finish the job quickly and doesn't come to view the extra money as a permanent addition to pay.
But the biggest shift is in the realm of benefits. Typically, companies used to pick up the tab for any difference in costs between comparable housing in the home locale and abroad. Instead, according to Piker, some companies now give a target number for foreign housing costs. If the employee is able to find lower-cost housing, both company and employee benefit because they split any savings.
Cost-of-living allowances are being scrutinized as well. More than three-fifths of ORC's corporate clients now use an "efficient purchaser" index to peg living costs. This index assumes that expats quickly learn to shop more efficiently gnce they're accustomed to the local environment so that cost-of-living allowances can be pegged to buying the same quality goods and services at lower prices.
Companies also are getting smarter about assuring that their benefits are not redundant. "An example would be making sure that an in-kind benefit like a company car is not also covered by a COLA factor included in a cash payment to the individual," says Fischer.
Be sure to look at all the personal economics of the move, including your employer's policy on taxes. More than 90% of U.S. employers use a tax-equalization package, under which employees' aftertax net income is neither more nor less than in the U.S. Under tax protection, on the other hand, the company pays any excess taxes, but you could come out ahead if you happen to be sent to a low-tax jurisdiction, such as Saudi Arabia. More tax information is available in a free booklet, U.S. Nationals Working Abroad. Write Coopers & Lybrand, 1800 M St. N.W., Washington, D.C., 20036.
One of the biggest decisions you will face is what to do with your home during your absence. Usually, if you decide to sell a house, the Internal Revenue Service gives you two years to roll the profits into a new home without being taxed on the gain. But you get an extra day for each day that you are living overseas on assignment, up to a maximum of four years from the date of sale.
If you decide to rent the house because you expect to move back, consider the consequences of turning your residence into an investment property. While you'll be able to deduct maintenance costs, you could lose the ability to defer capital-gains tax on a later sale. In any case, if renting does make sense, consider using a local manager to keep tabs on the property in your absence.
But don't just restrict your attention to real estate. Before you go overseas, take the opportunity to clean your financial house as well. The move "is a demarcation point in life, a good time to get your wills drafted, make sure everything is in order," Fischer says.
One bit of employer assistance that might help before you leave is cross-cultural training. There are potential land mines in adapting to life abroad, both personally and professionally. An increasing number of companies offer orientation sessions to employees and their families so that they can avoid problems. A major reason for the failure of an overseas assignment, Kaufman believes, is that the family is unhappy. Cross-cultural training won't help if your spouse is unable to find a job or your kids don't like their new school, but it can go a long way toward smoothing other bumps in the road, such as knowing what to expect of colleagues or neighbors and how to behave in return. For example, both the exchange of business cards and ritual gift-giving are very formal in Japan.
"LIP SERVICE." When all of your questions have been answered to your satisfaction, ask for a letter of agreement. "Don't listen to lip service or rely on an informal handshake," Fischer insists. "Get it in writing." And see that the letter spells out all the terms of your assignment, including how long you're expected to be abroad and any special components, such as home leave or educational assistance for private schools.
Don't expect the letter to guarantee you a specific job upon your return. But do look carefully at how the move fits into your career plans. Try to determine what will happen if the person you report to leaves or is displaced, or if your entire division disappears while you are gone.
Then make sure you do your bit to avoid disaster by keeping in regular contact with the home office while you're abroad. When it's time to return, be flexible. Expect cultural adaptations--bagels at breakfast, say, instead of baguettes. And know that when you report to work, it may take a while before you stop feeling like a foreigner.
What You Should Know About that Overseas Job
HOW LONG YOU'RE EXPECTED TO STAY
The average assignment lasts three years, but many companies now send employees abroad to accomplish specific tasks, rather than for a set period of time.
WHAT YOU'LL BE PAID
Salaries typically equal at-home compensation plus an incentive premium.
HOW COST OF LIVING IS FIGURED
Instead of an American standard of living, your employer may expect you to accept the lifestyle of your local peers.
YOUR COMPANY'S TAX POLICY
You shouldn't have to pay more tax on salary abroad than you would at home.
WHAT EXTRAS YOU CAN EXPECT
Ask about home leave, reimbursement of educational costs for your children, and temporary living assistance when you return home.
YOUR NEXT MOVE
Does your employer have a specific job in mind for you when you complete your assignment?