Achieving balance in your domestic mobility program Achieving balance in your domestic mobility...

Achieving balance in your domestic mobility programDomestic Mobility Survey 2014

ii | Achieving balance in your domestic mobility program

1Domestic Mobility Survey 2014 |

ContentsSurvey highlights 2

Introduction 4

Respondent demographics 5

1. Talent management: a missed opportunity? 7

2. The gender equality challenge 9

3. Benefit delivery: getting the most out of your program 11

4. Identifying potential risks in your domestic mobility program 15

2 | Achieving balance in your domestic mobility program

Survey highlights

11.7%

44%

87%

60%

of domestic relocations are for career development.

of companies are missing out on salary sacrifice opportunities in their domestic mobility policies.

of respondents report domestic assignees are predominantly male.

of respondents fail to track domestic relocations centrally.

Only

More than

More than

Almost


Human resource professionals are responsible for increasingly complex LAFHA vs. business travel decisions in over 30% of cases.


IntroductionMobility priorities tend to focus on overseas destinations as companies expand their international presence. This can overshadow the considerable opportunities and hidden risks associated with domestic relocation. To achieve balance in your domestic mobility program, and make the most of its potential, it’s worth asking:

• Are stakeholders aware of their roles and responsibilities to source the right advice at the right time to help manage risks?

• Do you have domestic mobility policies and processes in place to align domestic mobility opportunities to key talent and future leaders?

• Have your diversity and inclusiveness policies been cascaded to the domestic mobility program?

• Can you increase or maintain assignee satisfaction but still manage costs by offering salary sacrifice benefits?

When companies consider the opportunities, risks and costs associated with mobility, international mobility is often their first priority. However, domestic mobility can be just as valuable. Also, the complex nature of the Australian tax landscape means companies also need to understand the risk and cost considerations of domestic mobility programs.

Based on our recent Domestic Mobility Survey, which received more than 170 responses, we believe the top three issues are:

1. Missed opportunities for talent management

Companies are missing opportunities to reap the benefits associated with mobility at a local level.

As noted in the EY 2013 Global Mobility Effectiveness Survey: Your Talent in Motion, 83% of respondents reported that mobility had a positive impact on an employee’s career.

However, according to our Domestic Mobility Survey, only 44% of companies include domestic mobility as part of their talent management strategy — and only 11.7% of relocations are driven by career development requirements.

2. Achieving a gender equality balanceCompanies aim to provide employees with the same opportunities, regardless of gender. Getting this equity balance right expands the talent pool and improves retention and loyalty. Yet, when it comes to domestic mobility, many companies are struggling to achieve equity. More than 87% of respondents advised that their domestic assignees are predominately male.

3. Managing domestic mobility risk and the role of human resources

Human resources professionals are typically responsible for managing domestic relocations, with survey results indicating that the human resources function has ownership of 82.2% of domestic mobility programs. However, Australian tax considerations mean human resources professionals often have to make difficult decisions, requiring in depth tax technical knowledge, frequently without support — exposing their companies to additional risk and cost.

For example, almost a third of decisions regarding Living Away From Home (LAFH) vs. Business Traveller assessments are made by human resources professionals. Additional risks are also being taken by the 45% of respondents that do not have a definition of business travel.

The lack of consultation with a tax professional on such cases, either internal or external, can expose a company and its employees to financial and reputational risks. It also means companies aren’t fully utilising opportunities to benefit from cost effective salary sacrifice arrangements.

This report explores these three issues and outlines potential approaches to achieve a better balance between the risk, cost and talent considerations associated with domestic mobility.

Kathy McCombie Partner Human Capital

Paul Ellis Partner Human Capital


Respondent demographics


More than 63% of respondents have less than 50 domestic assignees

Most domestic relocations are permanent

Respondent industries

Breakdown by domestic relocation type

Transport/logistics

Professionalservices

Mining and metals/oil and gas/

power and utilities

Manufacturing and automative

Consumer products and life sciences

Construction/engineering/ real estate

Banking and capital markets/insurance/ weath and asset management

Fly in fly out / drive in drive out

Long-term

Short-term

Permanent 84.8%

75.3%

68%

26.1%

Yes

73.9%

32%

24.7%

15.2%

No

1Talent management: a missed opportunity?



Domestic mobility: opportunities for talent managementIn recent years, global mobility has become increasingly important on the talent management agenda, with global opportunities seen as vital to developing future leaders. According to EY’s 2013 Talent in Motion, Global Mobility Effectiveness Survey, talent management is on the agenda for 58% of organisations globally. However domestic mobility is not being given the same priority. Only 44% of survey participants have made domestic mobility part of their talent management strategy.

Almost 45% of organisations advised that their domestic relocations are typically in response to business critical resource needs.

In addition, only one in ten companies report that their main reason for domestic relocation is for talent development purposes. This may mean that relocations are typically reactive in nature.

A 2012 EY report1 found that 53% of high performing companies create experiences for talent overseas, emphasising the importance of international experience for business success. Yet it seems companies are missing local opportunities to leverage experiences and develop their talent through domestic mobility.

So where are the opportunities to include domestic mobility on the talent management agenda? We believe companies should explore the potential to integrate talent management and domestic mobility by:

• Aligning talent development needs to business critical or project resource needs, rather than a focus purely on skill set

• Introducing interstate or area rotations for graduates or junior talent to increase their knowledge of the business nationally as a first step

• Developing policies and processes to cater for domestic mobility in talent development programs.

In comparison, 24% of companies report that ‘contributing future leaders to the talent pool’ is the main reason for global mobility2. 1 Paradigm shift: Building a new talent

management model to boost growth, EY, 2012

2 Driving Business Success: Global Mobility Effectiveness Survey 2012

Careerdevelopment

Businesscritical

resource need

Projectresource need

Unknown Other

11.7%

33.1%

44.9%

5.9% 4.4%

58% have aglobal talent

agenda Only 44%include domestic

mobility

Global vs. domestic focus on talent management Reasons for domestic mobility

2The gender equality challenge


12.5%

87.5%


Achieving the gender balance in mobilityAs well as connecting domestic mobility with talent management, companies also need to consider the equity of the opportunities they provide to key talent.

For the Australian Government and Australian-based companies, diversity and inclusiveness, particularly around gender equality, is high on the agenda. Since workplace gender reporting was introduced through the Workplace Gender Equality Act in 2012, companies are under more pressure than ever before to attract and retain a balanced workforce.

Respondents to this survey include 13% of companies who received 2014 citations as employers of choice for gender equality. Despite this encouraging statistic, 87.5% of survey participants report that domestic relocations are mainly male.

To address this challenge, companies need to conduct further analysis to understand the reasons behind their gender gaps in domestic mobility. They should also work to better integrate their mobility and business strategies. This is vital if domestic mobility programs are to mirror broader diversity and inclusiveness strategies.

Are your domestic assignees mainly male or female?

3Benefit delivery: getting the most out of your mobility program



Common practice in domestic mobility provisionsIn addition to using domestic mobility opportunities to motivate key talent, companies also need to deliver cost effective benefits and streamline administration while balancing employee and business needs.

The respondents to this survey are involved in multiple types of domestic mobility:

• 84.8% have permanent relocations

• 75.3% have short-term assignments

• 68% have long-term assignments

• 26.1% have fly-in fly-out (FIFO) or drive-in drive-out (DIDO) assignments.

Typically, different benefits apply under each of these domestic relocation types. However, common practice benefits generally include relocation costs, such as household goods removal and temporary accommodation.

Not providedProvided

Relocation allowance

Destination services

Storage at home

Temporary accommodation

Travel to host location

Transport of pets

Transport of motorvehicle

Relocationof goods

Preassignment

trip

70%

30%

15%

40%

23%

34%

20%

2% 2%

100% 85% 60% 98% 98% 77% 66% 80%

0


Preassignment

trip

Relocationof goods

Relocationof motorvehicles

Relocationof pets

Travel tohost city

Temporaryaccommodation

75%

25%

61%

39%

82%

18%

53%

47%

8%

92%

8%

92%


Accommodationon or off site

Meals* Travel

80% 63% 95%

5%

37%

20%


AccommodationTravel tohost city

Relocationof personal

goods

75%

25%

5%

100% 95%

Long term

Types of benefits by assignment type

Permanent

Short term

Fly-in fly-out / drive-in drive-out

* Meals include per diem, cost of living allowance, canteen and actual costs.


Domestic mobility policy enhancementsAlthough companies typically have domestic mobility populations of less than 50 assignees, they still need policies and/or benefit guidelines to manage both assignee and business expectations. Encouragingly, more than 70% of respondents have domestic mobility policies or guidelines in place.

However, when considering domestic mobility entitlements, the survey reveals a number of policy and process gaps including:

• Different approaches for employee vs. company initiated moves

• Different approaches to executive moves

• No formalised approaches to salary sacrificing domestic mobility benefits.

More than 44% of respondents miss opportunities to achieve cost efficiencies by including salary sacrifice in their domestic mobility policies. Of these companies, 33.9% do not have separate salary sacrifice policies in place.

Salary sacrificing Fringe Benefits Tax (FBT) exempt benefits allows companies to give an employee a benefit, while only incurring the administration costs. The survey identifies a number of areas, such as employee initiated relocations, where companies should consider implementing salary sacrifice arrangements for relocation costs. Such win/win opportunities deliver both cost savings for the business and enhanced assignee satisfaction.

19%17%of respondents allow for salary sacrifice of home purchase costs in the host city

of respondents allow for salary packaging of home sale costs

For permanent relocations:


More than 47% of respondents indicated that relocation benefits were different, depending on whether the relocation was initiated by the employee or the employer. Respondents also report that:

• Employee-requested relocations are provided with limited or no benefits

• Management discretion plays more of a role in entitlement provisions for employee-requested moves

• Formal policies are less likely to govern employee-requested relocations.

Although these informal provisions give companies the flexibility to negotiate benefits based on employee circumstances, the ad hoc nature of such approaches can result in additional costs and potential risks for both the company and employee.

Expanding policies and processes to include employee-initiated moves will aid in managing business and employee expectations across the entire program. Companies should consider:

• Providing core vs. discretionary benefits to encourage consistency within the domestic mobility program but also allow flexibility to consider business and assignee circumstances

• Using salary sacrifice opportunities for FBT exempt benefits to provide the benefit to the assignee and reduce costs for the business.

Whichever approach is adopted, formal policies and processes are essential. They ensure benefits are applied consistently, companies have clarity around costs and assignees have certainty around benefits, increasing satisfaction. Processes and roles and responsibilities need to not only outline who does what when, but how processes would be updated to account for changes in FBT legislation; for example, when external advice is required.

Relocation transport

Removal and storage of goods

LAFH food and LAFH rent

Home sale and purchase

costs

Destination services

* Current FBT exempt benefits (December 2014)

4 Identifying potential risks in your domestic mobility program



Which function or individual role in the company reviews eligibility to LAFHA criteria for concessional FBT treatment?

Identifying and managing risks in your domestic mobility programSalary sacrificing of domestic mobility benefits can allow companies to minimise costs and increase mobility. However, given our dynamic and complex local tax system, such approaches do not come without risk.

The Living Away From Home (LAFH) changes introduced in October 2012 have increased the complexities of managing domestic mobility placements. New restrictions apply to domestic assignees and eligibility is more rigorously tested. For example:

• A home must be maintained in the home location

• Exemption for housing is based on actual cost not reasonable amount

• The maximum period is 12 months

• Declarations need to be completed, increasing administration

• Special rules now exist for FIFO/DIDO work cycles.

As a result of these changes, understanding eligibility for LAFHA and keeping track of changes in legislation can be challenging, requiring specialist expertise. Yet, almost a third of decisions regarding business trips and LAFH cases are left to human resources professionals alone.

To improve decision making, in-house tax and human resources professionals should analyse each case together, combining compliance and commercial practicality. Companies should also:

• Develop guidelines to aid in decision making

• Develop processes outlining required approvals from both in-house tax, human resources and the business

• Better manage assignee expectations by implementing policies or guidelines co-developed by human resources and tax.

Periodic review and discussion with employment tax professionals is vital to manage risks and ensure guidelines and processes remain relevant.

Which function or individual role in the company is responsible for making the LAFHA vs. business trip assessment?

Combined23.6%

Finance7.3%

Humanresources30.9%

Other5.5%

Tax32.7%

Combined24.7%

Humanresources16.5%Other

3.5%

Unknown1.2%

Finance17.8%

Tax36.5%


Business travellers vs. LAFHAAlthough the ATO guideline for business travel is 21 days, respondents report a number of varying definitions. These include:

• Travel that is undertaken for business reasons

• A time period of less than four or six weeks

• Less than 60 days

• Travel for three months or less, based on specific considerations being met

• Considerations such as travel patterns and cost/headcount allocation.

Tax risks and/or unexpected tax costs can arise if a definition of business travel is not in place, as is the case for 46% of respondents, or differs from that of the ATO. Companies should review their policies and processes to consider the risk implications of this issue.

Measuring compliance time limits is particularly important, requiring domestic mobility processes to include detailed discussions between human resource and tax professionals and centralised tracking of the domestic mobility population.

Keeping track of your populationAlmost 30% of survey respondents are either not tracking their domestic population or are not aware if their domestic mobility population is being tracked.

As with an international population, tracking a domestic mobility population can aid in managing several risks, by supporting processes to:

• Monitor time creep, in the instance that the arrangement changes and the employee transitions from a business traveller arrangement to LAFH

• Track limitations on benefits, such as the 12 month application of LAFH arrangements

• Detail benefits delivered to employees relocating domestically to aid in FBT reporting and return processes

• Manage immigration risks if staff on temporary work visas relocate inter or intra-state

• Create general awareness about those on domestic mobility assignments.

Central tracking ensures that companies have consistent processes and positions in relation to the above issues. Business unit tracking can be just as effective, provided processes and procedures are also in place to ensure consistency within the company.

Do you track your domestic mobility population?

Do you have a definition for business travellers?

Yes34%

Unknown20%

No46%

Central trackingdatabase40.4%

Unknown6.2%

Not beingtracked23.3%

Tracked perbusiness unit

30.1%

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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About EY’s Human Capital services In today’s increasingly regulated and competitive global business environment, an organization’s people are essential. EY’s Human Capital Services’ holistic approach, across a broad continuum of services, and our responsive, high-performing teams provide the interconnected competencies and insight required to address broad business issues and minimize risk. Our exceptional client service helps make an organization’s people agenda an integral part of business strategy. It’s how we help our clients compete in the evolving global economy and realize sustainable economic growth.

© 2013 Ernst & Young, Australia. All Rights Reserved.

APAC no. AU00002137 S1527389 ED none

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This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. Liability limited by a scheme approved under Professional Standards Legislation.

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ContactsIf you have any questions about the survey please contact:

Anne Giugni Human Capital Leader, Oceania [email protected] Tel: +61 3 8650 7624

Kathy McCombie Human Capital Partner [email protected] Tel: +61 2 9248 4424

Paul Ellis Human Capital Partner [email protected] Tel: +61 2 8295 6250

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