Transcript No Slide Title

DESIGNING AN EFFICIENT EXPAT
MANAGEMENT PROGRAMME
Felicity Smith
PepsiCo International
19 May, 2009
1
The Company
PepsiCo is a World leader in convenient snacks, foods and beverages
Home to hundreds of brands around the globe
Brands available in approximately 200 countries
2008 net revenues of USD $431,251 million
Approx 150,000 global employees
Taxes and Social Security
2
The Expatriate Population
PepsiCo has 518 expatriates working in 53 countries
AMERICAS
119 expatriates from 22
nationalities working 14
countries
• Argentina - 3
• Brazil - 10
• Canada - 2
• Chile - 2
• Colombia - 5
• Dominican Rep. - 2
• Ecuador - 1
• Guatemala - 7
• Mexico - 10
• Peru - 4
• Puerto Rico - 7
• United States - 54
• Uruguay - 1
• Venezuela 11
UK/EUROPE
153 expatriates from 26
nationalities working in
19 countries
• Belgium – 2
• Bulgaria - 2
• France - 3
• Germany - 4
• Greece - 1
• Hungary - 3
• Ireland - 12
• Italy - 1
• Netherlands – 6
• Norway - 2
• Poland - 5
• Portugal - 1
• Romania - 7
• Russia – 20
• Serbia - 2
• Spain - 14
• Switzerland – 49
• Turkey - 1
• UK - 18
AMEA - MEA
128 expatriates from 26
nationalities working in
8 countries
• Bahrain - 1
• Jordan - 2
• Lebanon - 1
• Nigeria - 2
• Pakistan - 2
• Saudi Arabia - 39
• South Africa - 1
• United Arab Emirates - 80
•
•
•
•
•
•
•
•
•
•
•
•
AMEA - ASIA
118 expatriates from 19
nationalities working in 12
countries
Australia - 3
China - 46
Hong Kong - 16
Indonesia - 3
Korea - 1
Malaysia - 2
New Zealand - 5
Philippines - 5
Singapore - 1
Thailand - 30
Taiwan - 1
Vietnam - 5
- Expatriates are sourced from 55 countries, with 10% from the US
- Majority (52%) of expatriates are in 5 countries – United Arab Emirates, US, Switzerland, China and Saudi Arabia
3
The Costs
Total Spend = Nearly $150MM+ Annually
($120MM+ Expatriate Program Plus Annual Relocation Cost of $24MM)
35%
21%
Net Allowances
Vendors
Other Expat Benefits
Taxes and Social Security
4%
40%
Estimated annual cost of current expat programme, excluding salary and bonus
4
Pepsi’s International Moves
Extended Business
Extended Business
Trips
Trips
Long Term
Assignments
Permanent Moves
Commuter
Assignments
Short Term
Assignments
Localisations
Repatriations
Developmental
Assignments
Virtual Assignments
Secondment to
Bottlers/Distributors/Joint
Ventures
5
Why are companies changing their expat programme ?
Unprecedented market conditions – 40% of companies looking to reduce costs
•Review market competitiveness
•Reduce allowances
•Avoid exceptions
•Localise long term expats
•Simplify / streamline procedures
•Alternatives to traditional expat package
Non-Executive / Developmental moves
The Evolution – making moves affordable to the business and attractive to the expat
FACILITATE MOBILITY
6
Alternative Package Types ?
PEPSICO EXPATRIATES ARE PAID UNDER 2 PRINCIPAL APPROACHES:
HOME/HOST TAX EQUALISED

DESTINATION PAY – ‘HOST BASE PAY’
BOTH PACKAGE TYPES ADDRESS DIFFERENCES IN COST OF LIVING, HOUSING, TAX
AND SOCIAL SECURITY BETWEEN THE HOME AND HOST LOCATIONS BUT THE
APPROACH AND DELIVERY IS DIFFERENT
THE PEPSICO APPROACH
Home Host
Paid under home country salary ranges; assignment
allowances are delivered in the host country and home
country deductibles taken in home country
Destination Pay
Paid under host country salary ranges; receive income differential
where costs in host location are higher than at home to protect
savings and investments
Participate in home country benefits & social security, where Participate in home country benefits, where legally possible
legally possible
Equity with peers in host location in similar positions
Maintain home country connection; equity with home country
nationals in similar positions
7
Why change your approach ?

Traditional Home/Host is typically more expensive than Destination Pay

Example:- Company costs: UK expatriate to Poland
HOME/HOST (TEQ)
DESTINATION PAY
POLISH LOCAL
US$ 480,000
US$ 388,000
US$ 240,000

Recent analysis in Asia has shown company cost to be 35% lower on average
with destination pay packages.

Both package types address differences in cost of living, housing, tax and
social security between the home & host locations but the approach and
delivery is different.
8
Review your existing approach
PepsiCo Approximate Position to Market - CPG Co's *
25th
75th
50th
Top
Tax Equalization
H&U Allowance
H&U Deduction
C&S Allowance
C&S Deduction
Hardship Locations
Home Leave
Education Support
Too Competitive
Need to align to
Market
Simplicity
Flexibility
Communications / Tools
Overall Competitiveness
* Based on collective input from AirInc, ORC and PwC. Custom surveys completed with National Foreign Trade Council Expatriate Management group and
RES European network (covering nearly 100 largest global companies) and also subscribed to ORC Select Benchmarking Survey group (70+ large, global
multinational companies for benchmarking practices / competitiveness.
9
Areas for Review
HOUSING
•Full expat versus modest approach to host housing
•House Savings programme
•Deductibles – no ‘free housing’, reflective of home country costs
COST OF LIVING
•Full expat standard versus conservative living pattern
•What elements are included – is anything being double counted (club, transport, medical) ?
•Calculated on full base salary ?
VACATION LEAVE
•Class of Travel
•Frequency of Flights
•Location / Intention
HYPO TAX
Reflective of home country deductions ? State taxes, tax deductions, reconciliations
EXCEPTION MANAGEMENT
•Centralised / regional process
10
The Time Is Right…..
NEXT STEPS…..
•Align on your International Mobility Strategy
•Look for alternative approaches to facilitate cross border moves
•Review your exisiting policies to ensure that they are effective
WHY ?
•Better management of the ongoing costs of your programme
•Realise some savings opportunities
•Ensure competiveness in marketplace
SUPPORT THE ONGOING AND GROWING NEED FOR AN
INTERNATIONALLY MOBILE WORKFORCE
11