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Expatriate policy, expatriate assignment manuals, and clear policy documentation for expatriates removes a tremendous amount of liability from a global employer. Call us today to review your existing expatriate assignment handbook.

 

A Best in Class Expatriate Policy & Procedure Manual, and A Way to Communicate This Information, Can Save Millions.

The savings are mostly generated by problem avoidance and by providing an easy way for expatriates to answer their own questions without bogging down home office staff.

The reason the leading companies in every industry group have rock solid policy when it comes documenting the international employee handbook, is not because "they have had the time or money to do it," but because they see this process as an absolute necessity. The most successful companies, or admired NGOs set policy first not after there have been problems or after programs have been put in place.

The reasons international HR policy for expatriates, third country nationals, and international travelers should be the very best it can be are listed below, from the most obvious (and critically important) to the not-so-obvious as you move down the list. A "best in class" expatriate employee handbook can:

1. Shield the company from legal or even criminal judgments to include discrimination suits, "duty of care" failures, and local and international labor law violations.
2. Protect the company from liabilities that do not come from the court system. For example, a denied insurance claim to an employee could place an employer in a situation where they would be liable to pay the claim because of poor policy and communication. We have many examples.
3. Protect the companies bottom line. We are not just talking about company ex gratia payments or unbudgeted payouts, but the time, effort, and expense to solve problems. What does a group of disgruntled expatriates cost you? Have you ever calculated what it cost you when an expat packs his/her bags?
4. So the employee is not personally injured. Expatriate employees that take foreign work assignments, especially those that work for those all powerful blue chips, make certain assumptions about what they company is providing or not providing during the expat assignment. If an employer is not providing a certain service or insurance coverage, with personal liability insurance being the most common, it is the duty of the employer to clearly state what is NOT being provided, not just what is being provided. This is mistake # 1.
5. Because the ROI (Return on Investment) of putting in the proper policy will pay more dividends per dollar spent than any service, tax, security, relocation, or insurance program.

What are some of the problems we have seen in the past from those that lacked proper policy or did not even publish and expatriate handbook?

We have seen companies have to absorb unnecessary costs in the millions simply because many items that were "unforeseen" came to fruition in an emergency situation.

P&C lines, when expatriates leave behind the home country, are the area of international insurance that is most misunderstood, not property addressed, and can cause some of the biggest problems.

P&C is the "forgotten side of the river" for expatriates, while the employee benefits side gets all the attention, with fancy medical plans and medical evacuation and assistance. Does it make sense that one side should be the employer's sole focus, while expatriates are left to fend for themselves on the other side? In the past 5 years, employers have begun to address these issues and you will see the costs are little to none, especially when compared to expensive medical plans.

When you send an employee abroad, their P&C problems can quickly become your problems. (please read "ramifications to the employer" section below) Many of the expatriate groups we have encountered are a demanding, complaining, lot. Let's examine the coverages:

• International Property Protection: An expatriate goes abroad with personal items worth $5,000 to $100,000 USD (yes, we have seen 100K and the grand piano hauled overseas!). Who's protecting it? (Answer; probably not the U.S. homeowners policy like State Farm or Allstate).

• International Liability Protection: An expatriate does not know the customs or most of the local laws of the new jurisdiction. Although most countries don't nearly have the lawsuits common to most Americans, lawsuits do exist, and an American is a target. A non-U.S. expatriate also creates a lot of exposure because not knowing the local laws can lead to a negligent act or what we call at "tort" in English law. (Again, in most cases don't look to the U.S. homeowners policy for assistance).

• Vacant Homeowners: If an expatriate goes abroad are they leaving an empty home unoccupied or vacant for over 60 days? This is where we see the largest difference between long term assignees and short term expatriates. If one is going overseas for over one year, in MOST cases, the expat will explore options and investigate how to make sure the home is protected. However, someone going overseas for 3 to 6 months may not have a second thought about leaving the home with the existing homeowners insurer, and probably will not see the need to make special arrangements. Having a relative come by the house once a week to check on things will not satisfy coverage requirements in most cases.

What are the potential problems?

All of the coverages above are generally covered by your standard HO3, HO5 or HO6 homeowners package policy. Many expatriates believe they can rely on their existing domestic coverage when they are overseas. In most cases, this is a ticking time bomb situation.

Lose a watch in Tibet while on vacation. In most cases you will have full coverage and can claim under your homeowners policy. Lose a watch in Tibet when the insurance company learns you have take up residence there for 7 months and the situation can be entirely different.

Lose control of your car and hit a pedestrian in Turkey while on vacation you may find some protection from your homeowner's policy. Cause the same negligent act that leads to a judgment of $200,000 U.S. after taking up "residence" in Turkey for 4 months on an expatriate assignment of 2 years, and you will probably be left in the cold. (Try leaving Turkey after a judgment has been awarded and you have not paid your debt.)

With a vacant or unoccupied home, the loss of coverage can happen much more quickly and the outcomes much more severe. An expat that gets a call in the middle of the night while spending their 4th month in Israel may likely find the $200,000 fire loss not covered. Vandalism coverage on a property that has been unoccupied or vacant is almost non-existent. Spend over 60 days (30 under some policies) outside of the country while leaving a home vacant, and watch the "covered perils" of your homeowners policy slowly disappear one by one.

As an employer, why should I care about these expatriate concerns?

1. "Case History" has shown the employer is often seen as responsible or liable for many aspects of an employees health and welfare because they were sent overseas on assignment. In the U.K for example, these are known as "duty of care" laws and employers are liable. If an employee is negligent or commits a "tort" overseas and is sued abroad for $1,000,000, and then loses the judgment, the employee will turn to the employer that sent the employee overseas for a financial bailout. What would be the organizations level of responsibility? Do you want to leave it up to legal interpretation? Employers cannot defend themselves without a detailed international employee handbook.

2. Just by offering some programs on an elective basis with no premium paid by the employer, the employer can protect itself from the situation above. If employees were offered insurance solutions and information outlined in the expatriate employee handbook, and the employee declined coverage or ignored the advice, they have no recourse against the employer. The employer is no longer liable.

Solution: An employer can set up an elective program for personal property protection (valuable articles and personal effects) where employees elect the coverage and pay the insurer via credit card. The employer is not involved in the transaction. If an employee has lost $10,000 of valuables to theft, he has no recourse against the employer that has offered these products to all expatriates (at open enrollment for example) and this employee chose to decline coverage.

3. Many expatriates are great at their occupation, but do not have an understanding of insurance. Would they know the difference between "all risk" and "named perils" coverage? Why do employers send employees overseas and invest millions of dollars in their success and leave it to chance that employees have their personal insurance managed correctly when the solution costs the employer almost nothing (and in some cases, nothing!)

4. An expatriate that has lost $20,000 of property via fire or theft, or one sued for $2,000,0000 will directly hurt the employer via poor job performance due to time lost and emotional distress. If a good carrier is not standing behind these claims the productivity of the employee may turn negative and the employee may turn on the employer and demand compensation for damages.

5. Most homeowners plans covering homes in the U.S. may end coverage after just 60 days if the house is vacant or "unoccupied" depending on the policy language. If an expatriate on overseas assignment for 14 month has lost a home in the U.S. valued at $400,000 due to an electrical fire, where will they turn when they find out the U.S. policy is denying the claim? They will demand to be indemnified by the "company that sent them overseas that did not explain or provide these insurance solutions."

7. Many companies falsely feel no need for concern because they have a comprehensive corporate blanket liability policy but..

• Will a corporate policy even pay if the loss is personal and not work related? Yes or no, the employee may still sue the employer if a denied claim was large enough. Loyalty goes out the window when hundreds of thousands of dollars are at stake.

• Was the corporate policy even designed to cover international loss, and has it been "dusted off" since you started sending people overseas?

• Why would an organization want to get involved in a dispute over the personal effects of an employee, in a non-work related incident, that could harm the good name of the organization? This is best left to a third party; an insurer.

8. "My organization is large enough where we self insure everything. We don't need an insurance solution and will bail out an employee if anything happens….." There are many problems with this approach. Let's assume a U.S. company pays an expatriate $30,000 for items lost in a fire in Singapore to "bail them out." (The employee had not secured proper coverage or was relying on a home country plan that quickly denied the claim.)

• Would the IRS see this payment as income? (yes) Did the employer do the proper host country and home country withholdings for this income?

• Would the parent company make the mistake of treating this as a business expense, and illegally take a tax deduction? What would be the effort to monitor the payment to make sure it was paid properly and legally.

• Would a State's Department of Insurance now need to view the employer as being "in the business of insurance," and would the employer need to implement all the complicated procedures and reporting that goes along with this classification?

• Would a dangerous precedent be set, forming new expat policy? If an employee was indemnified for loss, it tells other expatriates that their claims must be honored as well, in order to avoid discrimination. All employees in the same class need to be treated equally.

ALL these problems can be solved, or at least severely mitigated with quick and easy updates to the existing expatraite handbook or international employee handbook if one is constructed for all classes of international assignees.