“A professional cannot know everything on international HR,

1. “A professional cannot know everything on international HR, that is why it is important for him to be a member of a dynamic network on a world scale.”

2. The Magellan Network is the leading professional and International Network dedicated to : • Compensation & Benefits managers • International Human Resources managers • Mobility managers In 2007, over 160 multinational companies form the Magellan Network with almost 40,000 expatriates

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4. The Magellan Network is providing the members of its two International communities with : A website offering updated information on : • Country regulations (immigration, labour law, remuneration, tax systems and social protection) •  International practices and trends • Bilateral tax treaties and social agreements • Income tax and social contribution rates • Online forums to share best practices • Thematic web conferences conducted by HR leaders and experts • A Network of International service providers duly accredited by the company members

5. Magellan Network Europe 85 Bd St Michel 75005 PARIS – FRANCE Tel (33 1) 42 34 75 75 Fax (33 1) 40 46 83 97 communication@magellan-network.com Magellan Network Asia-Pacific 105 Cecil Street, #06-01 The Octagon SINGAPORE 069534 Tel (65) 6827 4416 Fax (65) 6827 9601 communication@magellan-network.com

6. Packages « light » ? Benchmark subject • Localization: changing an expatriation contract to a local contract. • “Local +” Contract: a single contact in the host country plus several incentives are given to an employee abroad. • “Local” Contract: an international staff member is locally recruited and is given a single contract in the host country.

7. Participants

8. The objectives 1/3 Budget issues : • Reduce the gap in costs between expatriated employees and local staff members • Cutting costs, namely for employees abroad in high cost countries (USA) • Allow certain subsidiaries of the group who are not able to pay the expatriate package to hire employees on international mobility - Respond to the increase of employees abroad

9. The objectives 2/3 • Career Management : • Desire for decentralized employee management • Rethinking mobility in the context where opportunities to return to the home country are increasingly rare. • Instilling loyalty among employees would like to work abroad.

10. The objectives 3/3 Development of an International Group : - Young employees just beginning they career • Developing mobility between subsidiaries in the context of creating an international identity of the group • Developing third country mobility

11. Peopleconcerned • - Young employees at the start of their career • Localization of employees who originally had an expatriation contract. • Regional mobility (the Americas, Asia, Europe) • - Direct, local recruitment

12. Selection criteria between the different packages 1/2 • Theposition of the person (members of the Management Committee, Executive Officer, top management, staff position) • Experience (<2 years, >2 years, experts) • Source of the request: the company or the employee ? • The company’s structure: centralized or decentralized, and the degree of autonomy of the subsidiaries • The person’s area of expertise: finance, technical... • - Geographic choices (mobility within the same zone or to certain countries)

13. Selection criteria between the different packages 2/2 • Important differences according to : • Company culture • Success in international employee recruitment and retention. • Geographic localization of host countries and cities

14. 5 types of approaches • The benchmark session revealed 5 types of approaches to “light” contracts : • Localization of expatriate employees • “Local +” contracts • Specific local contracts for young employees • An approach specific to expatriates within the same geographical zone as their country of origin • 5) Local recruitment of foreign nationals abroad.

15. 1 – Localization of Employees Originally Given Expatriation Packages • Always provided for in the clause to the original expatriation contract. • No later than six years, sometimes even less. • Localization is rarely resorted to because it systematically leads to case-by-case negotiations due to an expatriate’s reluctance to renounce a package that is very attractive. • The supportof the Managing Board of HR is needed to compel employees to renounce their expatriation packages. • Localization is only possible in countries where remuneration is high, such as Western Europe, the USA and Canada.

16. 1 – Localization of Employees Originally Given Expatriation Packages 2007 Survey of International Localization policies and Practices 285 participating companies (55 % Americas; 34 % Europe, 11% Asia) 44% formal policy of localisation 10.5% informal policy of localisation 19% will strictly apply their policy 77 % case-by-case basis www.orcworldwide.com

17. 2 – “Local +” Contracts (1/3) • Several companies refused policies leading to a local contract with a light package: • In order to avoid creating inequalities between employees abroad. • Because the company quickly becomes accused of irregularities and discrimination. What criteria should be used to give advantages? • Because employees refuse international mobility with such packages. • On the other hand, these companies develop short- term contracts (maximum of 11 to 18 months) with lighter packages.

18. 2 – “Local +” Contracts (2/3) Other companies systematically use the “local +” contract instead of an expatriation contract Ex 1 : High-tech company Ex 2 : Auditing company “The management of the career is under the care of the 2 parties : the employee must know how to take risks and the company must support them”

19. 2 – “Local +” Contracts (3/3) • Most companies give « local + » contracts to the following population: • Persons who express their desire to go aboard • Persons below members of the Management Committees • Persons who do not have a lot of experience • Contracts are more or less generous according to how the employee is key for the company. Borders between local + or expatriation are often unclear leading to negotiation

20. 3 – Young Workers • Some company policies are formalized on this point. • Social protection is sometimes the only aspect that differentiates the young employees from the employees from the host country. • In Europe, companies favor the coordination of social security schemes at the level of the European Union • - In certain companies, these contracts fall within the framework of a formal development program where being assigned abroad is part of the work experience

21. 4 – Interregional Mobility Policies Some companies have thought about specific expatriation policies inside a geographic zone (Asia, Europe, North America, Africa, etc.) with “local +” type contracts. These policies allow them, for example, to reduce gaps in remuneration for employees that go on an interregional assignment. For certain companies, these policies are difficult to propose to employees and create recruitment difficulties.

22. 5 – Direct, Local Recruitment of a Foreigner • Recruitment of a foreigner in the local employment market. • Local hiring of Europeans already in the country in the context of the company’s strategy. Often, these are young persons and/or targeted populations. • Eventually, a transfer abroad of employees who directly contacted a local HR department for a job. • Sometimes, social protection elements are added from the host country. • Certain companies offer some advantages: moving, house hunting assistance, loans, maintenance of employment contract in the country of origin

23. Pros and cons regarding “light” packages (1/4) Complex procedure, especially considering that it must be handled in the context of local legislation. The assistance of local consultant firms becomes necessary.  The end result is that employees are managed on a case-by-case basis  The long-term risks, namely in terms of retirement, are more difficult to manage. With all this in consideration, the idea of saving money through this process is not necessarily guaranteed.

24. Pros and cons regarding “light” packages (2/4) • Decrease employee motivation : • “Light” contracts are not very attractive, even if the assignment abroad includes a career promotion. • Difficulties in recruiting high-potential and in fostering employee loyalty. •  Employees no longer ask to go abroad, but wait until the company approaches them to negotiate a more favorable expatriation package

25. Pros and cons regarding “light” packages (3/4) • Difficulty encountered in maintaining a coherent policy over time within a system that allows numerous exceptions in negotiating a small compensation, and the inequalities between employees are created by this “case-by-case” approach.

26. Pros and cons regarding “light” packages (4/4) • For many companies, local + contracts may be justified on condition that a veritable career managementfor employees concerned is set up. • To be consistent, setting up a policy of “local” or “local +” contracts should occur only after answering those basic questions: • What do we mean by “international mobility” in our company ? • How can international mobility help us achieve our goals ? • Up to what point does international mobility make sense for my company?

27. Packages« light » Thank you for your attention. www.magellan-network.com Anne-Laure BUDIN Communication & Development Director al.budin@magellan-network.com 00 33 1 42 34 75 75 Claude MULSANT HR & Mobility Club Director claude.mulsant@magellan-network.com 00 33 1 42 34 75 75