Adele Yeargan, Head of Global Mobility, AIG
Ed Hannibal, Global Practice Leader , Mercer

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What We’ll Cover Today
• Talent Supply and Demand
• Basic Philosophy for Compensating International Assignments
• Challenges in Compensating Assignees from Developing Markets
(in this presentation, “DMs”)
• Solutions
• AIG; A Case Study
• Managing Future Talent Compensation
• Key Takeaways

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Contradictions in Global Talent
Shortages and Surpluses Coexist
• Only 25% of Indian and less than half of Brazilian and Chinese professionals considered employable by global standards
• Reverse “brain drain” – top talent increasingly returning to emerging markets
• 45 million new entrants in the global job market annually
• Significant attrition at mid-career levels; employees move 2–3 times per year to advance career
• 300 million new jobs needed between now and 2015
• Labor laws and visas – complexity limits mobility and development
• By 2030, the US will need to add around 25 million workers, and
Western Europe around 45 million
• 214 million migrants worldwide; 40% move between developing countries

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WEF Highlights of Talent Mobility Research Findings
Definition must expand to fit the new age of talent mobility
Talent Mobility: tal·ənt mō·bil·ətē
The movement of workers between organizations or among locations of an international organization
Talent Mobili industries or co ty: nt of workers anizations, or the professi workers acro onal moveme nt of r skill permanen t and may also in employed, mov ing jobs to pe l mobility.
volve employed to ople or

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The New Definition of Mobility
The Need for a New Global Mindset
Career mobility Geographic mobility Position mobility
People move based on their experience and jobs.
People move where the jobs are.
Positions move where the talent is.

Global Mobility Program Development
Maturity Level on Mobility
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• First foreign operation
• Local packages
• Equity stake
• Few foreign operations, not integrated
• ‘Adolescence’
• Adventurous staff
• Local plus packages
• Equity & nonequity
• Growing international maturity
• More HQ staff replaced by
TCNs, local nationals
• Home-based balance sheet
• Career path focused
• Less equity focus
• Worldwide integration and planning
• Global talent sourcing with less emphasis on nationality
• Home-based balance sheet/globalist comp approach
• Well-developed career planning, repatriation process

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Building an Integrated Approach to Talent Mobility Strategy
Successful Outcomes Through Clearly Linked Programs
TOTAL
REWARDS
TALENT
The right PEOPLE… in the right PLACES and ROLES…
Talent segmentation
Talent identification
Candidate profiles
Selection criteria
Identification of need and locations
Critical roles
Key skill requirements
Selection process at the right COST… for the right length of
TIME and RESULT…
Contract type
Remuneration, benefits, allowances and support
Assignment purpose
Type and length of assignment
Funding arrangements
Assignment lifecycle management
Management of other related costs
Transition management
INVESTMENT
PLANNING
Audit Your Mobility Population!!!
, HR service delivery, Outsourcing

Context for Increasing Global Assignments
Global Mobility Key Drivers
Key drivers for international assignments:
• Skills gaps in international locations
• Management development
• Technology transfer
• Senior management role
• Training
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Primary compensation design decision drivers:
• Operational need
• Cost
• Motivation to accept assignment
• Deploying key/core competitive resources
• Administrative simplicity
• Equitable treatment

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Philosophy for Compensating Mobile Employees
The ‘Home Build Up’ or ‘Balance Sheet’ Approach

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Context for Increasing Global Assignments
Why is it complex?
• Gross and net compensation varies between countries
• Purchasing power varies between countries
• Exchange rates change
• Tax structures differ
• Benefits and social security systems differ
• International moves disrupt employees lives
• Some locations are unattractive
• Language and culture differ

Philosophy for these Alternative Mobile Employees
Pay Approaches Vary from Traditional International Assignments tax tax x x $ tax
$
Home
| salary
Home salary balance sheet
HQ base
Net salary
International scale
Hybrid/ expat
“light”
Local plus
Local salary
Extended business trips Global nomads/career expats Localized expatriates
HQ secondments
Short-term assignments
Locally hired foreigners
“Prevailing wage” assignments Returnees
Commuter assignments
Long-Term assignments
Permanent transfers

Context for Increasing Global Assignments
Where Expats Are Going (sorted by 2010 %)
Assignment locations
Middle East
Western Europe
U.S./Canada
Asia Pacific
China
Latin America
Africa
Japan
2000
5%
27%
21%
19%
6%
8%
3%
2%
Source: Mercer’s/ORC’s Worldwide Survey of International Assignment Policies and Practices
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2006
10%
29%
17%
16%
9%
5%
5%
2%
2008
15%
20%
15%
18%
9%
4%
9%
2%
2010
22%
19%
18%
15%
9%
5%
4%
2%

Context for Increasing Global Assignments
Where Expats Are Going (sorted by 2010 %)
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Source of Expatriates
Western Europe
Asia Pacific
U.S./Canada
Japan
Latin America
Africa
Middle East
China
2000
33%
3%
28%
27%
3%
1%
1%
0%
2006
31%
13%
27%
17%
3%
1%
2%
1%
2008
28%
12%
23%
15%
3%
12%
1%
1%
2010
24%
23%
22%
16%
4%
2%
2%
1%

Philosophy for Compensatin Mobile Employees
Transfers from Less-developed (developing) Countries
• Home country pay structure
• Moves from Developing Markets (DMs) to developed countries
• Moves from one DM to another
• Disparity of base pay levels between home and assignment location
• Pay disparity does not equal cost-of-living disparity
• Limitations of conventional pay approaches
• Repatriation to a developing country
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Philosophy for Compensating Mobile Employees
Key Questions
• What are the job levels of transferees?
• What is the nature and length of assignments ?
• What is the economic level of the home country ?
• What is the economic level of the assignment country ?
• What are the cost differences between the two countries?
• What is the salary structure of the home country?
• How well do host peers tolerate pay disparities ?
• Should a lower standard of living carry over on assignment?
• Does a consistent compensation approach for all expatriates matter?
• How many such transfers are you likely to have?
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Philosophy for Compensating Expatriates from DMs
Elements of Compensation
• Pay delivery practices:
– Number of months’ pay
– Variable pay
– Other allowances
• Local executive perks & benefits:
– Supplementary pension plans
– Housing allowance/loans
– Representation allowances
– Dual employment contracts
– Car and drivers
• Statutory requirements:
– Extra month’s bonus
– Profit sharing
– Vacation pay
– Transportation allowances
– Social security
– Termination indemnities
• Executive perquisites
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Philosophy for Compensating Expatriates from DMs
Compensation Levels
Base
Pay
Guaranteed
Cash
Base
Pay
Other
Benefits
& LT
Incentives
Short-Term
Incentives
Guaranteed
Cash
Base
Pay
Total Cash
Compensation
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Challenges in Compensation Assignees from DMs
Income Disparities Among Employee Levels
Developing location
Salary level
Developed location
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Entry level
Executive
20

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Challenges in Compensating Assignees from DMs
Market Salaries/GM Salary as Multiple of Secretary

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Solutions
Local Salary + Expatriate Allowances/Benefits

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Solutions
Differential + Position Allowance
Differential
Home Budget
Host Country
Peer Budget
Position
Allowance
Differential
Home Budget
Host-Country
Spendable
Host-Country
Peer Spendable
Equivalent
Peer
Spendable
Income

AIG

Implement a
Global Job Grade
Structure
• A company-wide initiative to establish GJG
• Gave us a clearly defined structure for TDC (Total Direct
Compensation: Base, Short & Long Term Incentive)
Establish a Home of
Record Philosophy
• Defined Home of Record for all employees
• Where the employee was last employed as a local (if applicable)
Transition all
Assignees to one
Policy Worldwide
• All assignees transitioned to the new mobility policy
• Scorecard used to calculate the changes based on GJG & TDC

Design a CoE
Delivery Model
• Design the optimal delivery model for Mobility at AIG
• Align and Integrate to the HR Vision
Execute the
Design Plan
• Write business case with project plan, secure budget
• Deploy resources to manage change as well as “BAU”
Knowledge
Transfer,
Communications
• Perform RFP, Selection, Contracting, Implementation
• In-house team(s) transformed
• Regular stakeholder communications

Assess the
Business Needs
• Constantly listen to business leaders and passionate stakeholders
• Look future-forward: what are the business drivers and initiatives
Beta Test Programs
Regionally and
Globally
• Regional, country or project based tests provide insights, help refine final state
• Hard to perform Global tests, may need to “extrapolate” from smaller markets
Socialize, Secure
Leadership
Approval, Roll out
• Build relationships with those who will champion change – sometimes your harshest critics
• Align changes to other initiatives for support and momentum: i.e.: Global Policy projects, Organizational Effectiveness restructuring, Geographic Optimization

Create a Framework that Can Easily Flex – the Mobility Program should be as Dynamic as your Business Needs & be able to Manage Global
Complexities from Compliance to Employee Profiles to Talent Development

Segmenting Assignees: Four-box Model
Current Assignees by Category (Median Values )
Emerging/High-Potential Talent
International learning/ development to grow next generation of leaders
N=199
N=28
N=20
20%
20%
15%
17%
17% have a specific policy for this category
38%
Career-Building Volunteers
International experience to fulfill personal objectives
(opportunistic, employee-driven moves)
N=108
N=14
N=8
10%
10%
10%
13%
3% have a specific policy for this category
20%
BUSINESS VALUE
Strategic Business Leaders
Fill mission-critical roles and deliver specific, strategic business results
N=251
N=37
N=21
40%
30%
60%
21%
14% have a specific policy for this category
48%
Seasoned Technical Experts
Providing specialist skill/expertise to fill local gap or to complete a specific project/task
N=247
N=38
N=24
40%
55%
35%
19%
16% have a specific policy for this category
52%
Source: Worldwide Policies and Practices Survey
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Taking It to the Next Level
Intra-company Collaboration – Mercer Point of View
• Developing an integrated strategy for global talent mobility
• Guiding principles shape strategy, design, and measurement
PLANNING Locations
Talent Supply
& Demand
Quantity &
Duration
Lifecycle
Management
Purpose & Skill
Requirements
TALENT Segmentation Key Roles
Performance
Requirements
Leadership
Capabilities
Employee Value
Proposition
TOTAL
REWARDS
Elements and
Purpose
Comparators &
Positioning
Performance and Risk
Equity, Choice,
Flexibility
Communication
& Transparency
INVESTMENT
Governance &
Accountability
Affordability &
Sustainability
Administration
Oversight &
Advisory
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Success
Measures

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Case Study
Flex Policy Example
Relocation allowance
Home sale closing costs
Pre-move house- hunting trip
Economy class airfare
Business Class airfare
Housing deduction
COLA
Dependent education
Tax prep
Transportation
E xec. Level
X
Core benefit
LT IA Policy Intra-Regional
X
X
X
Local Plus
X
X
X X
Discretionary benefit
X
X
X
X
X
X Not applicable

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Case Study
Flex Policy Example
Policy Core/Flex Elements
Compensation Home country compensation guideline
Benefits Home country compensation guideline
Work Authorization Temporary visas/work permits; no permanent ones
Healthcare International Plan
Tax Preparation Core
Dependent Education Core
Emergency Leave
Core
Home Auto Loss on Sale Optional
Cost-of-Living Differential
Expatriate or EPI Index
Tax Equalization Optional
Home Leave Optional – Economy Class
Host Country Transportation Optional
Cultural Orientation Optional/On-line
Core
Optional

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Key Takeways
What We Covered Today
Organizations will continue to source talent globally
• Become part of the talent conversation
• Ongoing need to validate mobility program philosophy
• Educate mobility staff on pay challenges from countries with disparate compensation levels
• Establish a “Watch List” of problematic countries
• Audit, evaluate, and evolve your Mobility policies
• Implement Mobility Workforce Planning programs

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Daily living allowance for groceries, meals out, recreation, transportation, incidentals
Normally one fixed per diem established per location, but practices vary
Customize allowance per what is provided at assignment location
For example, does accommodation
Adele Yeargan Ed Hannibal
Chicago
+ 1 312 917 9297 ed.hannibal@mercer.com
+ 1 212 770 8254
Adele.yeargan@aig.com