The pandemic has been brought under control, borders are open, people are returning to the office and travelling for work and leisure. A natural follow-up to this would seem to be the return of corporate relocations, where employees are assigned to overseas positions for the long term.

In fact, relocations ought to be part of getting back to normal – in 2020, when borders closed around the world, thousands of expatriates rushed back to their home countries in order not to be stranded abroad. So, shouldn't this movement reverse itself, and see a flow of talent back into host countries?

Not necessarily, says Lee Quane, Asia regional director for international worker management specialist ECA International, and in some cases, quite the opposite.

“Companies will be much more circumspect about moves in 2023,” he predicted in a conversation with People Matters. “They are looking at a 20-40% increase in costs right now, and if they cannot justify paying that amount, they will not move their people.”

Statistics from ECA International's latest global mobility survey show that cost of living has become one of the top three challenges in moving people across borders for work - up from being one of the bottom three in 2019.

This interview was originally published in the January 2023 issue of People Matters Digital Magazine and subsequently updated with figures from the survey.

So where are the costs coming from?

The days of the expat living it up have been declining for quite a number of years, and the pandemic may have put the nail in the coffin. At this point in time, in fact, long-term overseas assignments are almost more like hardships – for both the company and the assignee.

“The cost multiplier of relocations has increased,” observed Quane. “To begin with, you are looking at the cost of incentivising people to go overseas at all."

"People are far less willing to move than they used to be, especially after the pandemic. They are concerned about the risks to their health. They are thinking, much more than before, about the personal and financial costs if they fall ill.”

That translates into people demanding a much higher salary to relocate, and also demanding more benefits, especially medical insurance – which can be costly depending on the host country.

Furthermore, he pointed out, the cost of relocation logistics has soared. The supply chain problems that started in 2020 are still not resolved, and basics such as shipping and accommodation have become drastically more expensive, especially in host countries or cities where property prices are soaring – within the Asia Pacific region, Singapore and Australia are already seeing enormous spikes in property inflation.

And then there is overall economic inflation, which the IMF projected to peak in late 2022 before slowly coming back down. But lower inflation does not mean lower prices. If anything, costs are still rising.

Is this the end for relocation?

Not quite: a different model will emerge, Quane predicted.

“Relocations will recover at a different pace depending on seniority and rarity,” he said. “Movement will pick up first for senior executives, essential personnel, and specialised talent. Here, we are looking at those people who are most needed on location, whose work cannot be done remotely, and who cannot be easily replaced locally.”

This has several implications for the way international companies currently do career pathing, he added. Relocations for junior staff will take much longer to come back because the cost cannot be justified, which means that international opportunities for this group of employees will be low for some time to come. As a result, the importance of international experience in talent development and possibly even leadership development will go down.

Furthermore, he said, distributed leadership will become much more common, and companies are likely to adopt a flexible model: instead of permanent relocation, they might fly leaders and specialists in and out as and when these people are needed on site.

“You might see someone flying in to the host country for one week, then spending the next two or three weeks in their home location, and alternating between locations like that,” he suggested. “Remote work will be much more acceptable under this model – if someone can do the job remotely, the companies will be far more likely to let them remain remote.”

Unsurprisingly, international remote work is now the number one challenge faced by global mobility professionals, although this is more a combination of management and compliance issues than a cost issue.

Are there pitfalls companies need to be aware of?

In the new normal of relocation, costs will be the biggest stumbling block, Quane said. One major challenge companies are facing is outdated cost structures.

“If a company has set its cost structure in 2017 or 2019, and failed to review it when the pandemic happened, they would have been totally unprepared for 2021,” he said. “And if they did not review it again in 2021 or in 2022, then their projected budget will be unable to cover the changes due to present-day inflation, which affects logistics costs, accommodation costs, and so much more. Companies will need to be much more agile now, and review their cost structure much more promptly.”

And HR, being the function responsible for payroll, is going to have to be much more on the ball about relocation costs, he warned. “HR needs to start tracking costs more proactively,” he said. “They especially need to keep an eye on volatile items, which includes day to day costs – those that are being affected by inflation – and accommodation.”