Before you make the decision to localize an overseas or cross boarder employee’s expat benefits, take a minute to read Alliant First Vice President and expat/localization benefit expert Kelly Soto’s advice. She’s outlined her rules of the road below to help you before you take the plunge.
Localization is not always less expensive. There is a stigma around expat benefits being overloaded and therefore expensive. This is not always the case. Before you localize make sure you consider any buy-outs, new social contributions required by the employee and employer, cost of living increases, and other employee assistance benefits. Additionally, you need to consider the tax impact of a change. For example, will a US-based employee be taxed by the US federal government and their host country if benefits are localized?
Check local requirements. Ask about compliance, local visa/citizenship requirements, timing, and sponsorship.
Consider if this is a permanent or temporary status. This decision especially impacts longer term benefits like retirement where cutting ties with the native country can carry significant consequences. Questions you should ask include; will the employee be coming off of home country benefits completely? Should you only localize short-term (current) remuneration (salary, perks, bonus) to keep on par with other employees in the same location? Or, should everything be localized including longer term benefits (social security, retirement). Ancillary benefits also need to be considered.
Make sure you have a formal and documented process. Typically, companies will have a written process for expatriate assignments, but not have one for localization. To avoid verbal promises made into perpetuity (e.g. no documented end date), consider creating formal policies and procedures for localization as well.