ITX Insights - December 2024

?

In focus: How GECs Can Deliver a Competitive Advantage

Despite the ongoing geopolitical uncertainties and economic shifts, businesses are still operating in an interconnected landscape. The global market is no longer defined by geographic borders alone. In fact, talent, as much as products and services, moves across the world in search of opportunities. While organizations strive to navigate this evolving terrain, they are not only competing for new markets but also for the best talent. As this competition intensifies, companies must rethink their operational strategies to maintain a competitive edge and ensure survival in an increasingly dynamic environment.

At the core of an organization’s ability to compete lies its internal structure. A business can only thrive if it has a robust, efficient, and agile framework in place. This framework needs to ensure that every department functions smoothly, aligning with overarching business objectives and strategies. The organization must retain its current customer base, effectively manage costs, minimize risks, and ensure a high return on investment (ROI). Moreover, compliance with local and international laws is essential, alongside the agility to adapt quickly to ever-shifting market demands.

For an organization to progress beyond survival mode and truly compete, its focus must extend to areas like selling more to existing customers, acquiring new ones, developing innovative products and services, reducing operational costs, enhancing quality, and driving overall innovation.

However, the success of these strategies is inherently tied to a key resource: people. To execute any competitive strategy, businesses need to ensure that the right people are in the right place at the right time, performing the right tasks. Furthermore, agility is critical to respond swiftly to both internal and external changes. This is where Global Mobility plays an important role.

An effective global mobility model, aligned with the organizational strategy, ensures that talent is deployed efficiently across borders, maximizing organizational impact while managing risks, costs, and compliance.? In this context, Global Employment Companies (GECs) play a crucial role in supporting organizations in this competitive race.

As highlighted in previous issues of this newsletter, GECs are powerful tools for companies operating internationally, allowing them to streamline and enhance their global mobility efforts. When strategically designed and managed, GECs help deliver a range of benefits that can give an organization a significant competitive edge. These benefits are particularly relevant in a world where flexibility, governance, control, compliance, and the ability to adapt quickly to market changes are paramount.

GECs offer a simplified approach to managing international employees, ensuring that organizations can navigate the complexities of global employment while maintaining a centralized model of operations. GECs can reduce administrative burdens and eliminate redundancies that might otherwise slow down business operations. This centralization not only ensures better visibility into costs, risks, and ROI, but also allows organizations to react more swiftly to changes in market conditions or strategic direction. Additionally, a well-structured GEC model offers enhanced governance and control over operations. Corporate headquarters usually find it easier to execute strategies through GECs, compared to other more decentralized models.

While the GEC model itself provides significant advantages, many leading organizations have gone a step further by exploring how to enhance the agility, resilience, and scalability of their global employment operations. One key approach is the co-sourced model, where certain operations within the GEC framework are outsourced to reputable external partners. This model allows organizations to retain control over their global workforce while benefiting from specialized expertise, service level guarantees, and the flexibility to scale “up” or “down” as needed, whilst reducing the need for significant investments in infrastructure, technology, and human resources. This approach helps businesses maintain a lean operational structure while ensuring that they have access to the expertise and resources required to stay competitive in the global market.

In summary, GECs are a powerful tool enabling companies to maintain a competitive edge in an interconnected, fast-paced global economy. Through strategic implementation, GECs can deliver the operational agility, compliance, and cost control needed to ensure long-term success. By integrating these frameworks into their global mobility strategies, organizations can not only survive but thrive, staying ahead of the competition and maximizing their potential in the global marketplace.

If you wish to discuss whether a GEC could potentially work in your organization, please feel free to reach out to an ITX consultant for a free consultation.? You can also take the self-assessment using the QR Code below and receive a customized report in about 60 seconds.

?

?

Dispelling the Myth: Compensation structures for GEC employees

A common misconception in global mobility is that expatriates employed within a Global Employment Company (GEC) must always be compensated according to an international salary structure. This belief, while widespread, is not only inaccurate but also overlooks the flexibility and strategic potential offered by GECs.

To understand the true value of a GEC, it is essential to recognize that a GEC is essentially a legal entity or branch wholly owned by the parent organization. This ownership gives the company full control over the GEC's operations, provided they comply with local regulations, including compensation policies.?

A GEC allows organizations to implement compensation strategies that align with the specific needs of the business, and there is no mandate to adhere to an international salary structure. In fact, many organizations take a segmented approach to compensation within their GEC. For example, it is not uncommon to see GECs that employ traditional long-term expatriates, as well as "rotators" and Senior Executive. In principle, it is possible to have 3 different compensation approaches for these 3 segments.

Ultimately, the choice of compensation structure for the GEC is influenced by the profile of employees that it hosts, and this, in turn, depends on the underlying objectives for establishing a GEC in the first place. Understanding these fundamental points is of critical importance. The myth that GECs are associated only with an international compensation structure has led several organizations to dismiss GECs as expensive, inflexible and inefficient.?? By contrast, many companies that have recognized the full potential of GECs, and implemented compensation systems that cater to various employee segments. These organizations have maximized the utilization of the GEC, and successfully delivered substantial value, both to their business operations and to their employees.

In essence, GECs offer a level of flexibility that allows organizations to create compensation strategies tailored to their specific needs, employee profiles, and business objectives. Far from being limited to an international salary structure, GECs can host a diverse range of compensation models that enhance business efficiency and ensure competitive compensation for employees at all levels. By dispelling this myth, organizations can unlock the full potential of GECs, driving value across the board.

If you have questions on the optimal segmentation and compensation structure for your GEC, feel free to reach out to an ITX consultant.

?

?

Learning Corner: Can an organization have more than one GEC?

Most organizations that adopt a Global Employment Company (GEC) model opt to establish a single GEC in a carefully chosen location. The idea behind this structure is to simplify and centralize global employment and deployment processes, enhancing visibility, governance, and control while reducing duplication of effort across various countries or regions. This streamlined approach has made the single-GEC model the most common practice. However, some organizations have chosen to operate more than one GEC, although such situations appear to be the exception rather than the rule.

There is nothing inherently wrong with having more than one GEC in place, but it is critically important to question why. For example, an organization might choose to have multiple GECs to manage employees of particular nationalities who are hesitant to transfer their employment contract to an overseas entity. Sometimes, regional employment hubs might be established for practical reasons, such as addressing specific regional or operational needs. In many cases, these decisions may have been intended to be temporary solutions, allowing for a phased transition toward a more centralized, single-GEC model.

The key to understanding whether having multiple GECs is the right approach for an organization lies in critically evaluating the reasons behind this structure. If the decision to maintain multiple GECs was a deliberate strategy, it is essential to clearly articulate the rationale. This might include addressing concerns such as legal, regulatory, or operational challenges that a single GEC model cannot easily resolve. For instance, regional regulations or specific employee preferences might have justified the need for more than one GEC. If these reasons are sound and continue to be valid, then maintaining multiple GECs may still make sense.? Understanding and benchmarking how other organizations address such concerns could be a valuable exercise.

Conversely, if the reasons for a multiple-GEC model are not clearly defined, it may be an indication of a legacy decision that no longer serves the organization’s best interests. Over time, practices that made sense in the past may become outdated, and sticking to an old model without reassessing its relevance can lead to inefficiencies and missed opportunities. The evolution of the global business environment, advancements in technology, and the increasing complexity of regulatory frameworks may all suggest that a more centralized, streamlined model could offer greater advantages.

For organizations operating with more than one GEC, it is highly recommended to conduct a thorough diagnostic check. This involves an analysis of whether the current multiple-GEC model is still justifiable or if transitioning to a single GEC could enhance operational efficiency. A comprehensive evaluation should weigh the benefits of having multiple GECs, such as addressing specific regional or national concerns, against the potential advantages of consolidating to a single GEC, including improved governance, reduced administrative overhead, and enhanced scalability.

Such an analysis should also consider the long-term strategy of the organization. If the multiple-GEC approach is rooted in temporary solutions or outdated business practices, it may be time to revisit the structure and explore how a unified GEC could provide greater flexibility, cost savings, and operational efficiency. Conversely, if the rationale for multiple GECs remains compelling and aligned with the company’s strategic goals, then the model may continue to deliver value.

In conclusion, while having more than one GEC is possible in principle, it is essential for organizations to periodically assess whether this structure remains the best approach. By carefully evaluating the reasons for multiple GECs and considering the advantages of a single GEC, businesses can ensure that their global employment strategy continues to align with their broader organizational goals.

?

?

ITX News:

?ITX at the Talent Mobility Workshop in Dubai - December 9, 2024

On 9th December 2024 ITX was privileged to participate in an exclusive workshop in Dubai, organized by WERC, Baker Hughes and Aurecon. The event, designed specifically for leaders in talent mobility, gathered top professionals and service providers in the field, focusing on enhancing success through strategic insights and collaborative innovation.

Representatives from the UAE, USA, Australia, UK, Singapore, Hong Kong, and many more countries were in attendance, contributing rich thought leadership and ideation, creating a truly global experience.

This full-day corporate-only event featured interactive and engaging sessions, offering valuable insights and proven best practices for mobility professionals. Participants had the opportunity to advance their expertise, gain fresh perspectives, and strengthen their organization’s mobility strategies.

ITX would like to extend our sincere gratitude to the hosts, WERC, Aurecon, and Baker Hughes, as well as to the other thought leaders from AltoVita, AIRINC, ITX, KPMG, Nomad Temporary Housing, PerchPeek, and Workia. Their valuable knowledge and insights were instrumental in making this event a success.

ITX to Launch 2025 GEC Survey in early 2025

In the first half of next year, ITX will launch its highly anticipated 2025 Global Employment Company (GEC) survey, inviting all organizations currently utilizing a GEC model to participate. This exclusive survey, conducted every two years, provides valuable insights into the evolving trends and practices within the GEC framework.

The 2025 survey will focus on understanding how organizations are currently using the GEC model, exploring key priorities, challenges, and future projections. It will also examine how GECs are evolving in response to changes in the global workforce, technology, and talent mobility.

By participating, organizations will gain access to essential benchmarks and data that can inform strategic decision-making and help optimize their GEC operations. The insights provided will enable companies to better understand emerging trends and anticipate the future needs of their global workforce.

We invite all organizations using a GEC model to reach out to ITX as soon as possible to express interest in participating. Don't miss this opportunity to contribute to and benefit from the valuable findings of this comprehensive survey. Stay tuned for further updates as we prepare to launch the 2025 GEC survey!

Get a customized report in 60 seconds – Discover what a GEC could potentially do for you

?#globalmobility #expatriates #internationalhr #globalhr #globalemployment

?