- with readers working within the Basic Industries industries
The following case study shows why international assignments should not be assessed solely on the basis of direct costs. It also illustrates how indirect and hidden costs can have a significant impact on the success of an assignment, even if the international setup has been set up correctly from a technical standpoint and implemented correctly from an administrative point of view.
Initial situation
A Swiss company sends a young Swiss engineer to the US for two years. The assignment is planned as a classic long-term assignment. The contract terms and the tax and social security issues associated with the assignment are clarified at an early stage. Tax equalization is agreed and payroll is correctly implemented with some external assistance. From a practical point of perspective, the assignment is relatively quick and easy to administer.
The employee is single, has four years of professional experience, and is moving from Switzerland to the US without his family. There is no relocation of household goods, no school costs, and only one planned flight home to Switzerland every 12 months. Costs could hardly be lower. The assignment is to a rural area in the USA. Intercultural training was deliberately not provided, as it was considered unnecessary and too expensive.
From a budget perspective, the assignment seems very attractive. The direct costs are manageable and easy to calculate. However, this is precisely where the false conclusion lies.
Direct costs: low and easy to plan
The direct costs of this assignment are significantly below the average for comparable assignments. In addition to the basic remuneration, there are only a few additional benefits. Housing costs are moderate, flights home are limited, and there are no family-related benefits. The tax situation also remains clear, as tax equalization is clearly defined and no special issues arise.
From the company's perspective, the assignment appears to be efficient. The budget is being adhered to, there are no major additional costs, and there is hardly any special administrative effort. At this level, the assignment is a model example.
Indirect costs: technically correct, but personally difficult
The indirect costs are also moderate at first. The clarifications were made early on, the implementation on the payroll is stable, and there are hardly any corrections.
The administrative effort is relatively low for an international employee assignment.
However, the personal and social factors were underestimated. The employee is unable to connect with others in the rural environment in the US and feels increasingly lonely. There is no social network, and the cultural differences are experienced as stressful. Without intercultural preparation, the employee lacks reference points to realistically assess the situation and deal with it constructively. These personal aspects do not appear in any budget planning. However, they gradually generate additional expenses. Discussions with HR become more frequent, the business tries to help, and expectations must be clarified again. The focus thus shifts from the administrative implementation of the assignment to stabilizing the situation.
Termination after seven months
After seven months, it becomes clear that the assignment cannot be continued. The employee's motivation has fallen sharply and the performance is consequently significantly impaired, increasing the risk of complete failure. The company, therefore, decides to bring the employee back to Switzerland early.
This results in costs that were not originally included in the budget. The employee's early return and the need to fill the position in the US tie up a lot of resources within the company. Although the formal termination is handled well both from a human and administrative perspective, it is not without consequences for the company and the employee.
Hidden costs after termination: Impact on the company and the employee
From the company's perspective, the greatest costs arise retrospectively in areas that could not be included in the assignment budget. Termination after seven months means that part of the investment in setup and start-up time is lost. The project loses momentum because roles and responsibilities have to be redistributed and a second attempt is necessary. Added to this is the internal effort required to reverse the process and reestablish the position. These costs can rarely be documented as individual items, but they have a direct impact in terms of lost time, additional workload for the team, and delayed project results.
From the employee's point of view, the termination also has its price. The return does not take place as planned, but under the impression of failure. This makes reintegration more difficult because the role, expectations, and performance profile have to be redefined. Productive gaps often arise until the employee can be reliably deployed again. This can lead to additional management effort, a phase of reduced performance, and in individual cases, a subsequent change of company. For the company, these are follow-up costs because they tie up capacity and the originally planned development and retention of the employee does not occur as intended.
The comparison case: higher direct costs, lower risk
After the first assignment was terminated, a second engineer was sent to the US. He was also assigned to a long-term assignment in the US and was also highly qualified for the job. The difference lies in the personal circumstances. The employee had previous experience in the US, traveled with his family and two small children, and was familiar with the cultural conditions.
However, the direct costs for this assignment are significantly higher. Housing costs are higher, school costs are added, and the overall assignment package is much more extensive. From a budget perspective, this assignment is clearly more expensive. At the same time, despite the increased personal complexity, the assignment is stable. After an initial settling-in period, the family establishes connections in the US, the employee integrates relatively quickly into the US company both professionally and personally, and the project progresses successfully.
Viewed over the entire term, the assignment thus proves to be more economical than a look at the direct costs alone would suggest.
The limitations of traditional cost considerations for expatriate assignments
This case study shows that low direct costs are not a reliable indicator of a successful assignment abroad. The decisive factor is not how inexpensive an assignment appears on paper, but how stable it can be maintained over the planned duration.
HR and global mobility cannot completely eliminate these risks, but they can make them visible. This includes taking seemingly "soft" factors such as cultural preparation, social integration, and personal resilience seriously and not automatically viewing them as potential savings.
From a business perspective, a cheap but failed assignment is more expensive than an assignment that has been realistically calculated from the beginning. Project delays, knowledge loss, and operational disruptions are real costs, even if they are not shown in any assignment budget.
Conclusion
Originally published by Linkedin
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
