Limited Changes to Overseas Assignment Support Programs Amidst Rising Costs: Insights from the 10th EY Mobility Survey

The EY Tax Corporation has recently conducted the 10th EY Mobility Survey, shedding light on trends related to overseas assignments amid shifting economic conditions. This year, the focus centered on the support programs for expatriates, specifically examining the provisions for return trips, relocation expenses, and stock compensation.

Key Findings of the Survey

Despite significant inflation and fluctuations in exchange rates that have affected the overseas assignment landscape, the survey found that more than 30% of companies have not reassessed the relocation expenses set before 2020. This raises questions regarding the survivability of traditional support mechanisms in a rapidly changing economic environment.

Return Trip Support

According to the survey, a majority of companies, over 50%, subsidize at least one annual return trip for expatriates, regardless of their family situation—whether accompanied, single, or single expatriates. For employees accompanied by families, 60% of firms support trips once a year, demonstrating a consistency compared to previous years. Among single expatriates, 62% reported annual support for their return trips, showcasing that most companies adhere to a minimum of one annual re-entry support policy.

One notable takeaway involves how these trip expenses are managed. Approximately 80% of firms cover the round-trip airfare from the host country to Japan, positioning this as the most prevalent form of support. However, accommodations during these trips are only covered by around 13% of the companies, indicating that support frameworks have shifted towards maintaining work performance rather than purely supporting employee welfare.

Relocation Expenses

The survey revealed that 93% of companies offer some form of relocation allowance, a standard support mechanism associated with overseas assignments. The assistance is generally disbursed before the assignment begins, with 64% of firms following this practice. The average allowances were found to be ¥300,000 for the expatriate, ¥160,000 for accompanying spouses, and ¥50,000 for children. Interestingly, 42% of firms treat these allowances as tax-exempt payments, while the remaining 37% consider them taxable, highlighting disparities in how organizations manage these fiscal aspects.

Unfortunately, the timing for reviewing these allowances is troubling, with 33% of companies reporting that no adjustments have been made since 2020, thus lagging behind the rising costs of living abroad.

Stock Compensation Plans

On the topic of stock compensation plans, the survey found that 71% of companies have yet to introduce these benefits for expatriates. However, a growing number of firms are contemplating the implementation of stock plans as part of their strategic approach to attracting and retaining top global talent. Currently, Restricted Stock (RS) is the most common form of stock compensation, with other models like Stock Options (SO) and Performance Share Units (PSU) gaining traction. A significant challenge remains in maintaining tax compliance for these schemes, with only about 40% of firms adeptly managing these obligations in host countries.

Conclusion and Commentary from EY

Megumi Fujii, a partner at EY Tax Corporation, remarked, "The findings from the 10th EY Mobility Survey indicate that while traditional support measures such as return trips and relocation allowances are crucial, many companies have failed to adjust these policies in light of ongoing economic changes. This creates a sizeable gap between organizational offerings and expatriate expectations." Fujii also noted the increasing awareness of the importance of implementing stock compensation plans as part of a broader strategy to secure global talent amidst fierce international competition.

Economic conditions such as currency depreciation have drastically reduced the financial benefits that expatriates once enjoyed, prompting urgent calls for firms to meticulously reassess traditional support frameworks. With the increasing prevalence of remote work, many employees are becoming more hesitant about long-term overseas assignments, indicating a shift in mindset from mandatory company directives to more personal choices.

Furthermore, the findings signify that a transition is occurring within global mobility programs—from a rigid approach focused on temporarily relocating Japanese employees to one that accommodates diverse work styles and family arrangements. Companies must consider restructuring their compensation and support systems to effectively manage talent in this competitive landscape.

In conclusion, the EY Mobility Survey presents a pressing call for organizations to reevaluate their expatriate support policies, adapting to modern demands while ensuring they remain competitive in attracting and retaining global talent.