July 16, 2014

Guide to Buying International Assignment Compensation Services



Guide to Buying International Assignment Compensation Services

There’s a lot of confusion in the marketplace about International Assignment Compensation, and that’s probably not surprising. I’ve been in the industry for 30 years, and as accounting firms have reduced or limited the services they offer audit clients as a result of The Sarbanes-Oxley Act and new providers have moved in, the disparity among what’s needed, what’s asked for, and what’s provided can have less than positive results for organizations sourcing this service.

Tips on Buying International Assignment Compensation Services

First, know what you want, and ask for it.
Decide what level of service your company needs, and be sure that your required scope of work is stated clearly, in detail, in your bid. If you want full-service International Assignment Compensation services that truly help you minimize risk and costs, your bid should include the following elements:

• Cost Projection 
• Cost Projection—Revisions
• Compensation Administration
• Letter of Assignment Revisions
• Compensation Administration— Ongoing Phase
• Compensation Accumulation & Reporting
• Certificate of Coverage
• Compensation Administration—Repatriation
• Compensation Accumulation & Reporting—Post Repatriation

Each of these areas has a set of specific tasks attached to it, and including all of them in your bid for services is key to managing your risks. For example, the Compensation and Reporting phase should include not only data that is available, but your supplier should also be performing the due diligence needed to ensure that all relevant data is sourced and captured, or you could be facing unpleasant surprises in terms of costs and informational gaps. A look at this detailed chart provides more information.

Second, once the proposals come in, take out your magnifying glass!
Recently, we’ve seen a few disturbing instances in which companies chose vendors who are unlikely to be able to deliver on the bid requirements and, ultimately, will cost the company dearly either in unanticipated costs or risk exposure. Usually, the decisions are based on price—not a bad thing in and of itself, as clearly procurement is charged with getting the company the most competitive pricing possible. However, there’s a price floor below which it’s doubtful that, realistically, any provider can deliver the services required for full international assignment compensation—not a simple service at best.

Here are some things you can do to “look under the hood” of your bid responses:

1. If the delta between the highest and lowest bid is significant, probe some more. There’s likely to be something unstated or misunderstood to create a gap that’s too large.

2. Take a close look at the providers you are considering: read their blogs and any presentations they have given, and check their references! Talk to past clients of theirs to see what their experience has been. The provider may be offering full service, but they may only be providing Advice, Consulting and Coordination on how a client company can set up Compensation Accumulation Services in-house, or with the relocation management company coordinating the compensation service with a third-party compensation specialty firm, not delivering these services with their own staff. By further outsourcing the compensation work and using a low management fee as a draw, they could be greatly increasing the amount of direct expenses to the client. This confusing pricing to scope scenario unknowingly exposes programs to increased costs and disjointed programs.

Third, ask pointed questions!
When you hear, “Sure, we do Full Compensation Accumulation and Reporting for a low or zero management fee,” make sure that these questions are answered:

• Can you please define the exact compensation scope that will be provided by your company and clearly list any part that would be coordinated with a third-party provider?

• Who is the third-party provider?

• Can you outline the exact vendor compensation fees and estimates for any and all direct expenses/third-party expenses that may apply?

What are the lessons here?
The lessons are: decide what you want—in detail. Share that detail with the potential vendors, meet the team, examine their systems, and check their international compensation references, understand all management fees, and know when direct costs/third-party vendor fees will apply.

Don’t let them submit pricing using their descriptive terms; use your detailed descriptions. And when you see someone offer to do International Compensation for a very low or zero management fee, open up that hood and look under it, because in the end, your company could end up on the hook for insufficient services or higher hidden costs.

For more information on how Cartus approaches International Assignment Compensation, visit us on cartus.com or email us at trustedguidance@cartus.com.

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