Do we still need expatriates?

Expatriates are typically needed for their specialised skills that are not present in the local workforce. With governments increasingly focusing on the “local core” of workers, Jerene Ang finds out how companies are getting the talent they need in this situation and if expats will be needed in years to come.

Globalisation is inevitable, as Kofi Annan once said: “It has been said that arguing against globalisation is like arguing against the laws of gravity.”

With the world being increasingly interconnected, the challenge for a business to succeed in today’s context is it must ensure its employees are able to work on an international level.

As such, it is becoming increasingly common to see companies relocating their staff, either for developmental purposes or to fill the needs for certain skills yet to be present in the local talent pool.

According to Jobvite’s 2015 Recruiter Nation Survey, the top obstacle confronting 56% of the 1,404 recruiters surveyed is the lack of skilled or qualified candidates.

Being a region of many emerging markets, it is very likely Asia Pacific will see a greater inflow of expatriates to fill the skill gaps in the local market.

True enough. After speaking to HR leaders across the region in the past month about the talent challenges they face, we found the main reasons they relocate employees or bring in expatriates are to fill the need for certain expertise and niche skills not present in the country or region, as well as to develop a globally relevant talent pool.

Haroon Bhatti, chief HR officer of Malaysia-based communications provider Digi, reveals that when considering candidates, the company has always taken the best-fit approach, seeking the best person for the job with regards to merit and skill sets, be it locally or from overseas.

“More than merit, when it comes to expatriates, we are very clear that it is to fill a needed skill gap. This helps us keep a check and balance of our talent pool within the organisation on the types of capabilities and diversity of experience brought into the mix,” he says.

“Strong economies thrive on diversity; a diverse pool of expertise and experience means bringing best practices from around the world not just into Digi, but contributing to Malaysia and its economy.

“A great way to remain competitive in the global economy is building a local talent pool whose skills are globally relevant.”

Similarly, at FJ Benjamin, which specialises in luxury brand products, Jassy Tan, divisional director of human resources for FJ Benjamin (Singapore), reveals “there are some roles where expatriates play a key role”.

“For example, we carry Swiss-made timepieces so we need specialists who understand the European watch market, as well as the technical and operations of the timepiece industry. For such, we rely on expatriates with that relevant skill set.

“Besides this, as we carry luxury brand products, we have senior brand managers and heads of businesses who have the international experience and exposure in retail luxury products to run the business function.”

A similar situation can be seen at BASF. Being a multinational company, and one of the largest chemical producers in the world, expatriates are also needed for their expertise and specific skill sets.

Jennifer Kwan, head of the regional transfer centre for Asia Pacific at BASF, says: “In certain cases, the right specialists are even only available outside of Asia. One example is project engineers with extensive experience in building a particular type of new chemical plant.”

-Jennifer Kwan, head of the regional transfer centre for Asia Pacific at BASF

Also, at BASF, delegation is a key component of people development, giving employees the opportunity to broaden their exposure and gain international experience.

“The international exposure and experience of the expatriate – including delegations to and from every country within Asia and to other locations – are valuable to our business.

“From their delegations, expatriates gain a global perspective and new ideas in areas such as research, product innovation, technical improvements and new customer approaches.

“It is also important to note that not every expatriate is delegated at a high level – sometimes expatriates from junior levels are delegated to gain experience, which includes both in and out of various markets within Asia and around the world.

“In this context, legislated salary targets do not support the development of local staff.”

Having said that, what are companies doing to attract expatriates with sought-after skills?

Srikanth Chandrashekhar, head of talent management for Asia Pacific at materials science and engineering firm Pall Corporation, feels the challenge is not in attracting them, but more about managing the cost of hiring the expatriates and integrating them.

“For a country like Singapore, I would argue that not a lot needs to be done to relocate expatriates into Singapore. The multi-cultural vibe, a very large English-speaking population and an excellent standard of living and healthcare are all great attributes that attract people from all over the world.

“Having said that, addressing basic things such as shipping of goods, temporary housing when you first get here, banking and tax assistance, and an induction tour of Singapore are great ways to quickly integrate expatriates into Singapore.”

Nowadays, with Asia Pacific’s economy growing at a faster rate than that of the West, as the Western job market gets more competitive, expatriates relocating to Asia are more often granted slightly cheaper local-plus packages instead of full expatriate packages.

Nevertheless, according to ECA International’s recent MyExpatriate Market Pay Survey, Singapore and Hong Kong have one of Asia Pacific’s costliest expatriate pay packages.

As a result, Tan says: “In our context, where possible we look to localise all jobs. If not possible, we will offer competitive packages, but on local-plus terms. Easily the cost of hiring an expatriate versus a local is at least three times more expensive.

“For expatriates, typically they will be provided housing, relocation packages, airfares, hardship allowances, tax equalisation and if they bring their family across, we will have to provide for the education for the children as well.”

Chandrashekhar agrees, and adds the cost of these expatriate packages relative to the cost of hiring local employees is also dependent on various factors.

“The difference is not a standard multiplier. It depends on which country an individual is relocating from and going to, family size, nature of work, statutory laws, etc.

“In addition, what most companies don’t assess is the total cost of an expatriate assignment, including one-time costs, compensation as well as administration costs.”

The clampdown on foreign workers

It has been established that expatriates possess skills that might not be present locally and are a valuable part of many workforces in the Asia Pacific.

However, governments in Asia Pacific – especially in Singapore – are increasingly focused on keeping a “local core” workforce instead of relying on expatriates.

With Singapore’s Ministry of Manpower (MOM) launching new schemes to support companies in creating growth, generating better jobs for Singaporeans, and various quotas to keep the number of foreigners in check, what do these HR professionals think about this focus?

And, are they facing any challenges with acquiring the skills they need for their businesses to function?

Srikanth Chandrashekhar, head of talent management for Asia Pacific at Pall Corporation

Chandrashekhar feels that all organisations “should think global, but act local”.

“Having a ‘local core’ workforce is very critical to any business since the success of an organisation will largely depend on their ability to compete with local as well as global players in any given geography.”

Tan, while acknowledging the influx of foreign workers over the past decade has helped with the country’s economic growth, adds it is not without some negative effects to the local workforce.

“Employers who are seeking to reduce their cost of production will inevitably go for the cheaper foreign labour as an alternative, and where all things being equal, results in Singapore workforce wages being suppressed.

“Net result is unemployed locals who although have the necessary skills, are deemed to be more expensive by potential employers.”

She feels these measures by MOM are timely reminders to employers that the local workforce should form the core of our workforce.

Nevertheless, she reveals that with the clampdown on foreign workers, her organisation does face challenges in getting the talent it needs.

“In our context, the definition of ‘talent’ is our retail front end sales workforce. In our industry, we require people good with good customer service, selling skills, etc.

“They are not the highly specialised skilled people, nor are they considered the unskilled group. So more likely they fall within the S pass category group. This is where the quota is most severely reduced.

“In this industry, the paradox that we face is that it’s not that there are no locals who are fit for this job, but it’s a question on their willingness to take on a retail job where they would be required to work retail hours and weekends.”

Unfortunately, due to the nature of the business, working hours and conditions cannot be changed and while more attractive salaries can be offered to entice these people into the workforce, there is a limit as to how much more can be paid while making economic sense.

As for the highly skilled specialised jobs, Tan reveals that locals with the relevant skills will be preferred over expatriates.

“Expatriates do not come cheap and they will not have a long-term plan in Singapore so there’s a high risk that after a few years they may decide to go back to their home country and we may in effect lose the talent.”

In order not to lose the talent and skills expatriates bring into the country, it is necessary for companies to facilitate the transfer of skills from these expatriates to local staff who will be their successors after they return to their home country.

Bhatti says: “If expatriates play the important role to responsibly transfer these knowledge and skills to develop local talent, we will see a globally competitive workforce begin to emerge and I believe organisations will become more structured on how they will make this happen.

“As part of the Telenor family, we have also seen the merits of building a diverse workforce.

“In recent years, we’ve seen this knowledge transference increasingly become a two-way street as Asian businesses continue to thrive and compete at the global stage, contributing ways and means of innovation to the group as much as vice versa.”

He believes that more of this will be seen in years to come and it will definitely benefit countries and their economies.

Haroon Bhatti, chief HR officer of Digi

Sharing similar views, Kwan says: “Learning transfer between expatriates and local staff is two way: local staff and expatriates have a great deal to teach each other.”

She reveals that at BASF, part of its developmental programme places expatriates in the role of mentors to their local successors to facilitate the transfer of knowledge and skills.

At the same time, the expatriates will gain experience and knowledge from the local market.

Expatriates will always be needed

Should this transfer of skills be successful, will expatriates still be needed?

Tan is of the opinion that for the highly skilled and specialised jobs, there will still be expatriates, however, in fewer numbers than in the previous few decades.

“Nowadays (local) workers are more skilled where in the past there was heavy reliance on foreign workers. With regionalisation, a lot of locals have foreign experience and exposure,” she says.

Similarly, Kwan is certain that expatriates are needed at BASF worldwide and at its global headquarters.

“They play a positive and important role in our highly international business. With the ongoing change of the general situation, however, the composition of the expatriate community and the number of expatriates in any given country may change.”

Echoing her view, Chandrashekhar says: “Expatriates will be needed, period. The same as, ‘outsourcing’ will continue to take place.

“These are the realities of the marketplace and will take place across the globe. However, it is always good to keep such programmes dynamic since they need to be refreshed based on market and internal organisational requirements.”

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