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Overseas relocations create benefits tangle for employers

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PHOENIX—Employers that relocate workers to foreign countries and hire local employees in far-flung locations need to be well-prepared for the complexities of providing those workers with benefits, a human resources expert said.

"It's a complex arena," said Richard Polak, president and chief executive officer of IBIS Advisors, a Los Angeles-based international human resources consulting company. "No two countries are the same."

Mr. Polak, speaking at the Self-Insurance Institute of America Inc.'s 26th National Educational Conference & Expo in Phoenix last month, said that employers deal with unusual benefits and insurance challenges not only in remote places but in countries in Europe where borders are, in some cases, routinely crossed. Employees who may be standing next to each other in Belgium, "walk across the street and are in the Netherlands—an entirely different country," he said.

"The same applies in Pakistan and India," he said. And once those borders are crossed, laws apply that can change an employer's responsibility to the worker, Mr. Polak noted. "Keep in mind all the legislative differences" and exposures, he said.

Regarding local laws that detail the types of benefits that must be provided to expatriate and local workers, "I think the most heavily regulated market that I've seen...is the U.K.," apart from the United States, said Mr. Polak. "There's the European Union and all those directives, then there's a giant drop-off for everywhere else until you get down to countries like Afghanistan and Iraq, where it's basically whatever you want to do, just stay alive."

When setting up an operation outside the home country, beware of laws that call for work rules, Mr. Polak cautioned employers. Such rules are required by law in countries such as Japan and Korea "when you reach a certain number of employees," he said.

Work rules in Japan and Korea must be provided by the employer in an employee handbook "that is very defined" in laying out the legalities and rules that apply in the workplace, said Mr. Polak. "It is very important to have that, or you are breaking the local laws in those two countries," he said.

In many countries, there are requirements that multinationals have employment contracts with their workers, Mr. Polak said. "If you don't have them, you are automatically deferred to the most liberal provisions of the employment law," he said.

He cautioned employers that among their challenges will be communicating with local employees in a way that is in line with cultural expectations.

As an example, he referred to a Western company operating in China that was puzzled by the reaction of local employees to a slick brochure detailing insurance benefits. Workers did not appear to appreciate the detailed presentation, Mr. Polak said.

After reviewing the brochure, Mr. Polak advised the company that the material was "too slick" and caused suspicion among employees that something was being glossed over. "Employees will look at this in certain countries and say, 'What are you not giving me, that you're giving me this?"'

A single piece of paper outlining the benefits would have been better-accepted, Mr. Polak said. A "lot of bells and whistles" may be a good idea in some countries, "but don't make that assumption for everywhere around the world," he told employers.

Some employers see relocations fail because, while they provide for their employees, they don't consider the needs of the spouse, Mr. Polak said. "That's the number one reason that assignments fail; because they haven't done their homework ahead of time to help the spouse."

He advised employers to consider the U.S. Army's method of relocating families. Wives of personnel are directed to wives' clubs, schools for their children and other social and community organizations when their husbands are sent to a new assignment.

"I was an Army brat," Mr. Polak said. "We would move every year or three years and it was done like clockwork."