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Exploring Trends and Practices in Global Employment Companies: A 2023 Survey Review

As we step into the new year, it is insightful to reflect on the key practices and trends that shaped the landscape of Global Employment Companies (GECs) throughout 2023.

Background

Some of the world’s leading organizations have a GEC in place, which is used to host at least some of their international assignees, and often Senior Executives too.  As the world’s leading experts in the area of GECs, early in 2023 ITX invited 70 GEC organizations to participate in a survey. The following summary provides an overview of the experiences and insights of 32 such organizations across various industries, sizes, and geographical locations.

Diverse Representation and Industry Presence

The survey exhibited a broad representation of organizations, with a predominant focus on European entities. A wide variety of industries were represented, including Oil & Gas, Mining, Engineering, Manufacturing, Life Sciences, Utilities, Financial Services, FMCG, Transportation, NGOs, and others. Industries such as Oil & Gas, Mining, Engineering, and Construction showcased a natural inclination towards GEC adoption due to the inherent cross-border mobility integral to their operations.

Preferred Locations and Size Dynamics

Switzerland and Singapore emerged as preferred locations for GECs, accounting for a significant majority of responses. Other locations, including the United States, United Kingdom, United Arab Emirates, Luxembourg, Netherlands and Hong Kong were also mentioned.

Interestingly, the survey indicated that the feasibility of a GEC is driven more by the number of "home" and "host" country combinations rather than the size of the expatriate population. In fact, one of the key operational benefits of a GEC model is to reduce the complexities inherent to having many permutations of home and host countries. The data suggested that even some organizations with relatively small populations of mobile employees found GECs to be a viable solution.

Operational Dynamics and Employee Profiles

The median number of assignees managed by GECs across responding organizations was 158, revealing that GECs are potentially suitable for organizations with mobile populations of this size and above. The majority of organizations utilized GECs for hosting and managing "third-country nationals," Global Nomads, and Senior Executives. Long-Term Assignments were prevalent, though only a portion of organizations reported that all long-term assignees were employed by the GEC. Notably, Remote Employees were still not widely supported by GECs in early 2023, but became increasingly part of the scope over time.  Today, ITX is helping several clients to harness the GEC for the management and support of Remote Employees.

Centralization and Technology Challenges

Most organizations preferred centralizing tasks within the GEC, retaining responsibility for contracts, cost projections, assignee briefings, vendor management, and payroll. However, the implementation of an integrated technology infrastructure remained a challenge, with a notable portion of organizations either using various tools or none at all, with the exception of those organizations outsourcing the operations of their GEC, who could use the service provider’s technology tools.

Benefits, Challenges, and Future Outlook

GECs were overwhelmingly reported to have helped organizations achieve better governance and compliance, improved employee experience, consistency in policies and processes, enhanced visibility of mobility costs, and mitigation of Permanent Establishment risks.  Survey respondents also indicated that a GEC delivers better results compared to other more traditional Global Mobility administrative models, particularly in terms of efficiency, compliance and employee experience.

Despite the numerous advantages, challenges such as cost, continuity of service, and technology infrastructure were mentioned, although it should be noted that less than 50% of survey participants reported such challenges. Looking ahead, 50% of the survey respondents anticipated an increase in the number of assignees in GECs over the next 5 years.

In conclusion, GECs have proven valuable across diverse industries, offering benefits in governance, coordination, and visibility of mobility processes. As organizations anticipate a rise in GEC usage, readiness for agility, scalability, and leveraging specialized service providers for flexible capacity and streamlined processes becomes crucial.

We extend our gratitude to all survey participants for their invaluable input, which contributed to the success of the survey.

If you have questions regarding this survey or any aspect of global Employment Companies, please do not hesitate to contact ITX.

The Enduring Relevance of Global Employment Companies (GECs)

It is a common misconception to think that Global Employment Companies (GECs) are becoming obsolete. As a matter of fact, GECs remain a vital and extensively utilized framework, particularly by some of the world's leading international organizations.

This particular myth can be attributed to a couple of key factors. Firstly, a considerable number of Global Mobility professionals still find themselves relatively unfamiliar with the concept of GECs. This lack of awareness can lead to a failure in recognizing instances where other organizations effectively employ this model. The unfamiliarity of many Global Mobility professionals with GECs is a hurdle that can be overcome through education and awareness initiatives. As the business landscape continues to evolve, staying updated on emerging models and strategies becomes imperative for professionals navigating the intricate realm of global employment.

Secondly, identifying organizations utilizing GECs is not always a straightforward task. GECs, in essence, are often just another wholly-owned legal entity of the organization, or at times, a branch of a subsidiary. This integration ensures a smooth alignment with the broader organizational goals and functions. However, this lack of distinctiveness can make it challenging for external observers to pinpoint which organizations have integrated GECs into their operational structure. 

Perhaps the first step in dispelling the myth is to understand that GECs are not “a thing of the past” but rather contemporary solutions embraced by some of the most prominent players in the global arena. These entities serve a crucial role in managing global workforces, providing a centralized framework that aligns with the complex demands of international business operations.

In summary, dispelling the myth surrounding the obsolescence of GECs requires a paradigm shift in perception. These entities are not outdated relics but, in fact, dynamic solutions embraced by leading international organizations, including numerous Fortune 500 companies and notable NGOs. These organizations actively opt for the GEC model to streamline their international deployments, and in some instances, even entrust GECs with the hosting and management of their top executives. The endorsement from such influential players underlines the continued relevance and effectiveness of the GEC framework.

Monitoring the evolving GEC landscape is a task that requires precision and expertise, and in this arena, ITX stands as a thought leader. As the world's leading consultants specializing in GECs, ITX maintains regular contact with numerous organizations to understand how GECs are evolving. ITX conducts GEC surveys every 2 years, and fosters a collaborative space for senior Global Mobility professionals through the "GEC Network Club," a biannual congregation that facilitates the exchange of insights and strategies among leaders steering GEC initiatives for leading organizations.

In essence, GECs are not just a niche concept but rather well-established solutions embraced by many industry leaders.  It is unquestionable, therefore, that many other organizations with an international footprint could benefit from the establishment if a GEC.  However, a word of caution is essential: while the advantages are significant, making informed decisions is paramount. ITX recommends a thorough feasibility analysis before organizations embark on the GEC journey.

Key Aspects of Global Employment Company (GEC) Design 

Many of the world's leading organizations have already harnessed the power of Global Employment Companies (GECs) to effectively manage their expatriate workforce. Today, there are still numerous organizations contemplating the establishment of a GEC, while others remain unaware of the myriad benefits such a model could bring to their operations.

Before diving into the complexities of setting up a GEC, it is crucial to align all key stakeholders behind clear strategic objectives. This involves defining the improvements expected from establishing a GEC and the time frame for achieving them. Identifying the variables to measure the success of these objectives and understanding how the cost/benefit ratio will evolve post-GEC implementation are also essential considerations. Without this alignment, organizations risk delaying the project or neglecting potential benefits such as efficiency gains, enhanced governance, compliance, simplified processes, better cost control, and improved employee experience.

Many organizations find it challenging to answer these critical questions, leading to a temptation to shelve the project. However, an experienced consultant can guide stakeholders through this strategic thinking process, helping them articulate clear objectives and setting the stage for a successful GEC implementation.

Once strategic objectives are well-defined, the next step is to conduct a Feasibility Study. This study aims to assess the extent to which a GEC can help the organization achieve its goals and under what conditions. The primary purpose is to facilitate a decisive "go/no-go" decision at the leadership level. During the Feasibility stage, potential GEC locations and the segments of the assignee population within the scope of the GEC can be identified. Feasibility Studies can take a qualitative or quantitative approach, with the latter including scenario simulations for a more comprehensive analysis.

The outcome of the Feasibility Study sets the stage for the pivotal decision of whether or not to proceed with the establishment of the GEC. If the initiative gets the green light, meticulous planning becomes imperative. Planning should encompass not only the activities required for GEC setup but also the operational aspects needed for seamless post-setup operations. This includes designing the GEC's Transfer Pricing rules, policies, processes, compensation structures, benefits, and daily operation forms and templates. Furthermore, finance, accounting, and compliance processes must be established. When it comes to operational infrastructure, decisions on resource allocation for Mobility, Finance, and Accounting processes, as well as technology tool deployment, particularly in payroll management, are critical. 

The sheer complexity of GEC design and implementation often poses a challenge for Global Mobility leaders, who are already immersed in the demands of Business As Usual (BAU) operations. To overcome these hurdles and expedite the implementation process, organizations frequently turn to external consultants with specialized expertise.

GEC projects led solely by internal resources often face extended completion timelines compared to those driven by experienced external consultants. The latter bring valuable resources with relevant experience, significantly reducing implementation timelines and avoiding common pitfalls. Moreover, when GEC operational activities are fully or partially outsourced, a cascade of benefits unfolds. This outsourcing model eliminates the time-consuming process of selecting, deploying, and training internal staff. It also bypasses the protracted timeline for budgeting investments in real estate and technology infrastructure, which are followed by the lengthy stages of procurement, installation, testing, and staff training.

Hence, the outsourcing approach offers a swift and streamlined route to operational readiness. A solution worth exploring is to outsource most GEC activities for the first couple of years. This period allows organizations to thoroughly understand the infrastructure, resources and skill-sets required to operate the GEC.  Armed with this knowledge, leaders can make informed decisions about whether to continue outsourcing or bring GEC operational activities back in-house.

In summary, while GECs hold the promise of incredible value for organizations and their employees, the key to unlocking this value lies in strategic design, rapid implementation, and impeccable ongoing operations. Working hand-in-hand with specialized consultants ensures that the GEC design is "fit for purpose" and aligns with organizational goals. Moreover, outsourcing, particularly in the initial stages, accelerates the realization of expected benefits, positioning organizations to thrive in the global landscape.

ITX News: Meet ITX in Dubai: 29th to 31st January 2024

Meet ITX at the JW Marriot Dubai Marina between 29th and 31st January 2024 for the event “Talent Management: Redesigning People Development organized by Marcus Evans.

ITX will discuss how the competitive advantage of the world’s leading businesses rests heavily on their ability to access the skills and experience of their best talent across the entire organization, and how, in this context, Talent Mobility becomes a critical component of organizational strategies.

In this presentation, ITX will share how some of the world’s leading organizations succeed in managing cross-border talent deployments in the most effective way, achieving better compliance, cost management and service quality, and ultimately delivering value to the business and to the employees.  ITX will also share how these models could be relevant to business and, potentially even to government-linked organization in the Gulf. 

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