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DESIGNING AN EFFICIENT EXPAT MANAGEMENT PROGRAMME Felicity Smith PepsiCo International

DESIGNING AN EFFICIENT EXPAT MANAGEMENT PROGRAMME Felicity Smith PepsiCo International. 19 May, 2009. The Company. PepsiCo is a World leader in convenient snacks, foods and beverages Home to hundreds of brands around the globe Brands available in approximately 200 countries

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DESIGNING AN EFFICIENT EXPAT MANAGEMENT PROGRAMME Felicity Smith PepsiCo International

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  1. DESIGNING AN EFFICIENT EXPAT MANAGEMENT PROGRAMMEFelicity SmithPepsiCo International 19 May, 2009

  2. The Company PepsiCo is a World leader in convenient snacks, foods and beverages Home to hundreds of brands around the globe Brands available in approximately 200 countries 2008 net revenues of USD $431,251 million Approx 150,000 global employees Taxes and Social Security

  3. The Expatriate Population PepsiCo has 518 expatriates working in 53 countries • AMEA - ASIA • 118 expatriates from 19nationalities working in 12 countries • Australia - 3 • China - 46 • Hong Kong - 16 • Indonesia - 3 • Korea - 1 • Malaysia - 2 • New Zealand - 5 • Philippines - 5 • Singapore - 1 • Thailand - 30 • Taiwan - 1 • Vietnam - 5 • UK/EUROPE • 153 expatriates from 26 • nationalities working in • 19 countries • Belgium – 2 • Bulgaria - 2 • France - 3 • Germany - 4 • Greece - 1 • Hungary - 3 • Ireland - 12 • Italy - 1 • Netherlands – 6 • Norway - 2 • Poland - 5 • Portugal - 1 • Romania - 7 • Russia – 20 • Serbia - 2 • Spain - 14 • Switzerland – 49 • Turkey - 1 • UK - 18 • AMEA - MEA • 128 expatriates from 26 • nationalities working in • 8 countries • Bahrain - 1 • Jordan - 2 • Lebanon - 1 • Nigeria - 2 • Pakistan - 2 • Saudi Arabia - 39 • South Africa - 1 • United Arab Emirates - 80 • AMERICAS • 119 expatriates from 22 • nationalities working 14 • countries • Argentina - 3 • Brazil - 10 • Canada - 2 • Chile - 2 • Colombia - 5 • Dominican Rep. - 2 • Ecuador - 1 • Guatemala - 7 • Mexico - 10 • Peru - 4 • Puerto Rico - 7 • United States - 54 • Uruguay - 1 • Venezuela 11 • Expatriates are sourced from 55countries, with 10% from the US • Majority (52%) of expatriates are in 5 countries – United Arab Emirates, US, Switzerland, China and Saudi Arabia

  4. The Costs Total Spend = Nearly $150MM+ Annually($120MM+ Expatriate Program Plus Annual Relocation Cost of $24MM) 35% 21% Net Allowances Other Expat Benefits Vendors Taxes and Social Security 4% 40% Estimated annual cost of current expat programme, excluding salary and bonus

  5. Pepsi’s International Moves Extended Business Trips Long Term Assignments Extended Business Trips Permanent Moves Commuter Assignments Short Term Assignments Localisations Repatriations Developmental Assignments Virtual Assignments Secondment to Bottlers/Distributors/Joint Ventures

  6. Why are companies changing their expat programme ? • Unprecedented market conditions – 40% of companies looking to reduce costs • Review market competitiveness • Reduce allowances • Avoid exceptions • Localise long term expats • Simplify / streamline procedures • Alternatives to traditional expat package Non-Executive / Developmental moves The Evolution – making moves affordable to the business and attractive to the expat FACILITATE MOBILITY

  7. Alternative Package Types ? PEPSICO EXPATRIATES ARE PAID UNDER 2 PRINCIPAL APPROACHES:- • HOME/HOST TAX EQUALISED • DESTINATION PAY – ‘HOST BASE PAY’ BOTH PACKAGE TYPES ADDRESS DIFFERENCES IN COST OF LIVING, HOUSING, TAX AND SOCIAL SECURITY BETWEEN THE HOME AND HOST LOCATIONS BUT THE APPROACH AND DELIVERY IS DIFFERENT

  8. Why change your approach ? • Traditional Home/Host is typically more expensive than Destination Pay • Example:- Company costs: UK expatriate to Poland • Recent analysis in Asia has shown company cost to be 35% lower on average with destination pay packages. • Both package types address differences in cost of living, housing, tax and social security between the home & host locations but the approach and delivery is different.

  9. Review your existing approach Too CompetitiveNeed to align toMarket * Based on collective input from AirInc, ORC and PwC. Custom surveys completed with National Foreign Trade Council Expatriate Management group and RES European network (covering nearly 100 largest global companies) and also subscribed to ORC Select Benchmarking Survey group (70+ large, globalmultinational companies for benchmarking practices / competitiveness.

  10. Areas for Review • HOUSING • Full expat versus modest approach to host housing • House Savings programme • Deductibles – no ‘free housing’, reflective of home country costs • COST OF LIVING • Full expat standard versus conservative living pattern • What elements are included – is anything being double counted (club, transport, medical) ? • Calculated on full base salary ? • VACATION LEAVE • Class of Travel • Frequency of Flights • Location / Intention • HYPO TAX • Reflective of home country deductions ? State taxes, tax deductions, reconciliations • EXCEPTION MANAGEMENT • Centralised / regional process

  11. The Time Is Right….. • NEXT STEPS….. • Align on your International Mobility Strategy • Look for alternative approaches to facilitate cross border moves • Review your exisiting policies to ensure that they are effective • WHY ? • Better management of the ongoing costs of your programme • Realise some savings opportunities • Ensure competiveness in marketplace SUPPORT THE ONGOING AND GROWING NEED FOR AN INTERNATIONALLY MOBILE WORKFORCE

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