Originally published by Business Manager, HR magazine here
The COVD-19 pandemic continues to disrupt global economies and talent movement, having an impact on whether, where and how we work and what we work on. Global trends suggest companies are introducing more flexibility – for example policy segmentation and more personalized solutions to better accommodate assignees' specific situations – in line with an attempt to curate and enhance the employee experience and build an attractive employee value proposition.
Closer home in India, various factors are contributing to newer talent models such as:
As a consequence, India is at the center of an aggressive talent war, experiencing heightened activity across inbound, domestic and outbound assignments.
With changing dynamics and easy availability of cost-effective talent, India is becoming a preferred location for global organizations. Inbound expatriates are coming primarily from United States, France, Singapore and the UK to India. Companies offer assignments to expatriates in India to facilitate the setting up or management of new facilities, project supervision and know-how transfer.
The balance sheet approach remains the most common approach to managing international assignees, and has proved to be a flexible solution that can accommodate many different assignment scenarios. Most organizations follow a home based balance sheet approach, followed by use of ‘home plus’ and hybrid approaches (the latter combining home and local/host compensation approaches).
Companies with long-term assignees in India typically provide benefits such as accommodation, medical support, dependent education and other benefits.
Typically, assignees return to their home location at the end of the assignment period, although they may be sent on to another assignment. India acts as an opportunity for expatriates to build their knowledge and enhance their experience in a dynamic and challenging working environment.
The last year has seen many changes to corporate ways of working. Adaptations to state and national restrictions amid the COVID-19 pandemic have led to the rise of domestic mobility.
Moving an employee from one location within India to another is not something done casually. It is important to make sure that the employee is properly incentivized to make the move; and equally that the move is fair in comparison to prior employee relocations, competitive with the wider market, and in line with company budgets. Key points for reference are both the cost of living and the cost of labor in a particular location.
As per *Mercer’s 2021 Cost of Living Ranking, Mumbai and Delhi, two of India’s Tier 1 cities, rank among the top 25 most expensive cities in Asia. Mumbai is India’s financial hub, while New Delhi is the capital of the country and the hub for general industry. The country’s IT and GIC activity is concentrated in the south in Chennai and Bangalore, the third and fourth most expensive cities in India.
Prior to 2019 most corporate jobs would be located or sourced from these locations. However, in the current scenario we see an increasing trend towards talent sourcing from Tier 2 and Tier 3 cities, given the boom in employees’ capacity to work from anywhere. In the current highly uncertain environment, companies and employees are contemplating hybrid work arrangements encompassing both remote working and time in the office.
Companies are considering strategic moves to lower-cost locations from a compensation perspective. For example, for a company where employees have moved from a Tier 1 city such as Mumbai to a city such as Vadodara, there is a considerable difference in terms of cost of living for the employee. Similarly, for the company, the cost of labor is lower, while a larger talent pool is now available from these cities.
Companies can therefore take advantage of a cost-beneficial compensation approach, taking into account the lower cost of living and of labor and adjusting the package accordingly with a negative differential.
With more than 70% of the Indian population fully or partially vaccinated and international flights resuming, we see outbound movement from India increasing in 2022. Business expansion, project-based assignments and the need to fill resource gaps continue to be the top drivers for outbound mobility from India.
Among those companies sending their employees on assignments outside India, we see a bifurcation in policy bases between hi-tech and general industries. India is a global supplier of tech talent across the globe, typically to fulfil project needs or provide technical skills not available locally, while non-tech talent is sent on assignments focused on business expansion or to provide managerial skills not available locally.
The compensation philosophy for the two industries will also vary. That for tech assignments maintains parity with existing assignees in the host location and follows a hybrid model (a mix of home-based and host-based approaches or using multiple approaches), while that for non-tech ensures quality of living is in line with the host location and crafts expatriate packages accordingly.
New mobility types, assignee wellbeing, cost containment and sustainable mobility are key trends shaping the Indian market. The country is now preparing for a 'new normal’ with opportunities arising as it is recognized as an attractive destination to do business. In the coming year we therefore expect an increase in inbound and outbound as well as domestic mobility, embracing the changing definition of work, workplace and workforce.
* Mercer's widely recognized ranking is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation strategies for their expatriate employees. New York City is used as the base city for all comparisons and currency movements are measured against the US dollar. The survey includes over 400 cities throughout the world; this year’s ranking includes 209 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. The data collected provides all of the key elements employers need to design efficient and transparent compensation packages for international assignees.