1

Relocation 2011

Trends and Challenges

Israel Fruman, Sep 20118 Hamelacha St. Netanya 42505 Israel. Tel: 972.9.865.8616 Fax: 972.9.865.8619 www.oriil.com

Global HR & Relocation Solutions

2

DefinitionsRelocation: to become

established in a new residence of

place of business

Expatriate: an employee on a

work assignment outside of his

home country for a definite

period of time.

3

General TrendsOutbound assignments: Stagnation

Inbound assignments: Increase

Increased Variety in assignment

locations

Greater variety in assignment types

Increased resistance to mobility

4

Number of Israeli

Expatriates

0

500

1000

1500

2000

2500

3000

2003 2004 2005 2006 2007 2008 2009 2010 2011

5

Destination Countries

First Tier:US

UK

China

Second Tier:Russia, India

Australia, Hong Kong, Singapore

France, Germany, Netherlands

Third Tier:Canada

Taiwan, Thailand, Japan

Belgium, Italy, Spain, Switzerland

Czech Republic, Hungary, Poland, Romania, Bulgaria

Argentina, Brazil, Mexico

6

Israel: “Prime Destination”

Acquisition of Israeli companies

(Johnson & Johnson, Siemens)

Growth in a world of stagnation

Repatriation

Political Situation

Limiting Factor – Cost of Living

7

Reasons for Relocation

Global Business Opportunity

Technology/Knowledge Transfer

Brain/Talent Transfer - “Ability will Never

Catch up the Demand for It” (Malcom S. Forbes)

Span of Control

Global Market ≠ Global Companies

Career Development

“Dead Wood” Solution

“More than the cow wants to give milk – the

calf wants to nurse”… (Rabbi Akiva)

8

Cost of Relocation

Expatriates/Local Ratio (HRBS)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Ind Chi Kor Phi Tha Sin Tai Jpn Hkg Aus

9

Cost of Relocation IL-US(Product Manager, 2 years assignment, M+2)

Israel: Local US: Local US: Expatriate

Annual Base Salary $82,000 $115,000 $115,000

Annual Bonus $7,500 $12,500 $12,500

Payroll Costs $22,500 $27,500 $27,500

Car $14,500 $5,000 $5,000

Visas 0 0 $2,500

Pre-departure Visit 0 0 $3,000

Cargo 0 0 $7,500

Settling-in Costs 0 0 $9,000

Housing Allowance 0 0 $18,000

Repatriation Costs 0 0 $3,500

Home Leave/Travel $16,000 $12,000 $26,500

Total $142,500 $172,000 $230,000

10

Cost of Relocation

“Hidden Costs”Organizational Overhead: 1 Expatriate = 10 Employees

Ramp-up Time (two directions!)

Turnover: 9% terminate during relocation –

but this is just the “peak of an Iceberg”:

23% Terminate during 1st year of return

20% Terminate during the 2nd year of return

Reasons:

“Mental Turnover”

More marketable assets

Pay cut

Perceived Lack of opportunity

11

Cost Reduction Methods

Employee Initiated Transfer

Commuters

Short-Term Assignments

Localization

Repatriation

Pre/Post Family Relocation

12

Israel:

..."עם לבדד ישכון"

0

10

20

30

40

50

60

70

80

90

Pension Tax Equ/Pro Home Based

ROW

IL

13

Tax Exposure

True Issue – Over Emphasized

Not relevant in the majority of cases

In most of the popular destinations (US,

UK, AUS, CHI, IND) – higher tax rates

Address – Do not “Enslave” all other

relocation considerations:Assignment Length

Employment Status

Employees’ Retention

Pension/Insurance Continuation

14

Insurance Exposure

Health Insurance

Social Security

Long-Term Disability Insurance

Life Insurance

Pension

The Laissez Faire Approach ( ך"זבש )

“The Widow on HQ Stairs Test”