Secondment allowance is a type of allowance that companies use to cover on-assignment expenses in host countries. Unlike a balance sheet approach that categorically breaks down each allowance type, secondment allowance is usually delivered as one allowance.
Secondment allowance can mean different things for different companies, but it generally refers to the broad but ambiguous practice when companies combine different on-assignment allowances into one.
I find the practice of using secondment allowance is more prevalent in companies with newer global mobility programs. For companies just starting to deploy employees on international assignments, the initial volume may not justify setting up a mobility department, having a mobility strategy in place, or even using 3rd party providers.
International expansions are daunting for even the most successful companies. Just because they are domestically successful, this success might be difficult to replicate internationally. This could be due to the lack of knowledge and expertise , and HR are often required to make decisions based on limited host country knowledge.
Companies that practice the use of secondment allowance often face similar challenges, such as equitability. In the absence of a standardized policy, the configuration of secondment allowance can differ significantly from one assignee to another. This makes it difficult for companies to project the cost of assignments and to develop consistent allowances.
Assignees want to understand how their allowances are developed over time and if allowances are updated for inflation and exchange rates changes. The absence of a consistent methodology can lead to assignee dissatisfaction or an erosion of trust that the company does not have their interests in mind.
Another pivotal disadvantage of using secondment allowances is the lack of flexibility to provide assignees with incentives. If companies can provide a clear breakdown of how allowances are calculated, it would be easier for companies to provide additional premiums or incentives to encourage successful assignments.
We have seen many companies make successful changes to improve the use of secondment allowance. They often start by standardizing and adopting the use of a consistent methodology to define the allowance. Some work with a 3rd party consultant to gain access to data so that appropriate allowances can be developed. Once allowance amounts are determined, companies must agree on how they will be updated going forward.
The global mobility journey is different for every company, and it is important to constantly evaluate its effectiveness. If the same problem keeps emerging, this means that there is a gap in the program. We have seen numerous companies make successful transitions by making decisive decisions on how to address secondment allowance.
Get in touch with us to find how we have helped companies make meaningful improvements to their global mobility programs.