Article: Looking ahead to 2021: will it be all doom and gloom for global mobility and employee salaries?

Employee Relations

Looking ahead to 2021: will it be all doom and gloom for global mobility and employee salaries?

International business travel came to a near-total standstill in 2020, and salaries were frozen or outright slashed across many companies. This year, what will the landscape for global mobility and employee salaries look like?
Looking ahead to 2021: will it be all doom and gloom for global mobility and employee salaries?

The economic downturn as a result of the pandemic has forced firms to cut costs, and international assignments have come under close scrutiny. Firms have had to reassess what is deemed truly essential for business viability, particularly with travel restrictions being a major disruptor to employee mobility. Employee salaries are also on the line, with firms reducing employee headcount and implementing salary and hiring freezes amid COVID-19. Based on our recent data, 4 out of 10 companies across Asia Pacific have implemented salary freezes this year.

These trends raise a number of questions for businesses planning for 2021. What key developments in global mobility and employee salaries can we expect in the new year? What changes in the types of mobility can we expect to see, and how should Human Resources (HR) teams respond to them? What salary trends do we foresee for workers in Asia Pacific in 2021, and how will COVID-19 impact costs associated with employee mobility such as accommodation rates?

While the future appears to be uncertain, here are a few predictions we can make for the new year based on the observations and lessons from 2020.

Virtual international assignments will continue to be commonplace in the absence of employee mobility

Virtual international assignments, the practice whereby an employee performs a role for a company or entity in one country whilst being based in another, were initially implemented as a response to the pandemic. Many employees were repatriated to carry out their responsibilities for their host country whilst in their home country. Now, companies have started to incorporate virtual assignments into their standard global mobility frameworks. For example, some companies who were planning to send staff on assignment in 2020 instead enabled them to start an assignment virtually by working from their home location, and only moved them to the host location when possible.

We will likely see this approach persist in 2021 as border restrictions will remain in place in many locations, at least initially. The relatively low costs, on paper at least, of these types of mobility are also appealing in the current economic environment. Furthermore, virtual assignments enable a company to place a person with the requisite talent and skills in the host location (albeit not physically).

However, it is important to note that new assignment types come with new challenges. As very few companies had a virtual assignment policy prior to the pandemic, we foresee many teams being tasked with developing and implementing a concrete and competitive policy amid an uncertain environment in 2021. Further, companies and their virtual assignees may be faced with the burden of double taxation as the role is based in one location while the person is in another. Employees may also be reluctant to manage a team, function, or operation in another country if this has a detrimental impact on their working patterns and lifestyles. For example, an employee may experience increased workflow inefficiencies or a need to work past office hours, coupled with feelings of disconnectedness if the host location is several time zones removed from their location of residence. As such, HR professionals will need to establish sufficient understanding of the potential costs and compliance issues, while empathizing with employees who may be reluctant to undertake virtual assignments due to the complexities involved.

Junior and even middle-level employees may no longer be needed in their host countries

We are also likely to see a change in the types of roles that employees are sent overseas to perform in 2021 and beyond. Jobs helmed by those in senior or C-level roles are often difficult to perform remotely as they require active oversight and leadership in the host country. It is likely that repatriated individuals in these roles will continue to be needed in their host locations, and have been or will be among the first to return via ‘green lane’ travel arrangements, which have come into effect in recent months

At the same time, the ability of many repatriated employees to perform their host country duties whilst at home during the pandemic has led companies to re-evaluate how they deploy and engage such employees when feasible—be it through virtual assignments or selective short-term assignments and business travel. For companies who operate in multiple locations within a region (such as a Singaporean company with operations in other ASEAN countries), this means that employees may remain at headquarters. For companies that operate globally, HR officers may be more likely to look towards sending these individuals to regional hubs instead of in-market locations, and have them perform their tasks from there.

Housing costs will continue to fall as employee mobility declines

With employee mobility predicted to remain subdued in 2021, we foresee housing rental costs for international assignees will fall in coming months. For instance, rental costs in Hong Kong, while named the most expensive location in the world for expatriate accommodation in our last Accommodation survey, are expected to drop significantly as a result of 2019’s civil unrest and the economic impact of COVID-19.

Similarly, while Singapore experienced a small increase in rental prices in 2019 after five consecutive years of falling rent, our research predicts that it is likely to be reversed by tighter restrictions on work permits and COVID-19, which has tempered the demand for housing by overseas workers. In addition, other types of accommodation, such as short-term serviced accommodation and hotel accommodation, have also been affected by lower levels of demand and their costs to consumers are also likely to remain subdued throughout most of 2021.

Rates of salary increases will rebound in 2021

In 2020, 40 percent of companies in Asia Pacific implemented salary freezes, with Macau reporting the highest percentage of businesses doing so (61 percent). However, 2021 is forecast to bring a more positive outlook for workers. Our recent Salary Trends survey reported that the majority of business respondents are confident about the economic recovery in 2021, and are expecting to be able to pay salary increases to their employees. This can be attributed to the fact that the number of companies implementing pay freezes in 2021 is expected to drop—in Singapore, for example, only 22 percent of businesses surveyed say that they will continue to freeze salaries next year, down from 36 percent this year. Based on the data collected, we can expect a similar phenomenon region-wide.

Nonetheless, major economic recessions can cause a significant long-term impact on salary growth rates, which may struggle to return to pre-recession levels. For example, the average rates of salary increases in 2019 in the region remained 25 percent lower than they were in 2008 just prior to the global financial crisis. Therefore, in spite of an expected rebound in 2021 and beyond, rates of annual salary growth may not soon return to pre-COVID-19 levels.

Looking ahead

The promise of vaccines within the next few months and stimulus spending from governments help paint a positive outlook for the world in 2021. Many companies expect a rebound in the economy and are optimistic about business recovery. Nonetheless, it is wise for HR teams to take this time to reassess how they deploy and engage currently repatriated employees as well future overseas assignees, when international assignments and business travel becomes feasible.

It is also critical for HR to implement an agile global mobility policy so that they can respond quickly to changes in the travel landscape while safeguarding their assignees, if they have not already done so. For instance, the much-hyped Hong Kong-Singapore travel bubble—albeit postponed at the moment amid an unexpected spike in Hong Kong’s COVID-19 cases—shows that countries are eager to open up borders in hopes of economic recovery. While it is unlikely that global travel will open up all at once, companies must be ready to act when the time comes.

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Topics: Employee Relations, #Outlook2021

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