Israel vs the world: Relocation Policy Differences
The Israeli relocation policy is significantly different from the policy in the US, Europe and Asia. This could lead to organizational tensions and dissatisfaction among candidates for relocation. How to bridge the gaps?
Relocation policies of Israeli companies are radically different from the policy of US, European and Asian companies. According to surveys conducted by ORI, these differences touch all significant areas of relocation policies and make global Israeli companies a unique phenomenon among global companies worldwide.
This fact could have remained an interesting local story (or a sociological research), as long as Israeli companies focused on the relocation of Israeli workers abroad. The issue has become more problematic in recent years, with Israeli companies moving workers from different countries: an American worker to Australia, an English worker to Singapore, a Spanish worker to Argentina and so on. These workers’ willingness to relocate under the exceptional policy is very limited, creating tensions and organizational and operational difficulties. However, by understanding the differences and the nature of the differences, you can find ways to cope that will facilitate the process for both the employees and the organization.
Israel vs ROW (Rest Of the World) – The Main Differences
Status of employment: 86% of Israeli companies sever their employee – employer relations in the home country company and transfer the employee to the Company in the host country(). In contrast, the percentage of the ROW companies that sever employee – employer relations in the home country is only 18%, while the rest of the companies keep the employee on the home country payroll.
Wage-setting method: 91% of Israeli companies match the employee’s salary and wage package to the customary salary packages in the host country (Host Based Method) in the ROW however, 80% of the companies match the level of the employee’s disposable income in the host country to that of his disposable income level in the home country (Home Based Method).
Tax: 80% of global companies in ROW “protect” the employee from excessive taxation during relocation (Tax Protection) or make the level of taxation during the relocation equal to to that which the employee was exposed to before the relocation (tax equalization). In contrast, only 3% of Israeli companies take any responsibility for the taxation of the employee during the relocation. Other Israeli companies adopt a laissez-faire policy (or, to put it bluntly: That’s their problem, not ours …)
Pension: Only 9% of the Israeli companies continue contributing to the employee’s pension savings (insurance or pension fund) during relocation. In contrast, more than 80% ROW companies continue the employee’s pension savings in the home country at least at the same level as before the relocation.
Cost of living: about 95% of ROW companies provide a cost of living allowance (COLA Cost of Living Adjustment) calculated in accordance with the cost of living at the host country. In contrast, less than 10% of the Israeli companies provide such an allowance.
The level of difficulty of the host country: 57% from the ROW grant workers compensation benefits for the level of difficulty in the host country (Hardship Allowance), calculated according to the quality of life in the host country. This compensation system is not customary in Israeli companies (although in many cases there is informal compensation for lower quality of life in the host country)
Israel vs the ROW – Coping
The first and simplest advice for an Israeli company transferring an employee from one country to another is to study the relocation policies practiced in the home country of the employee. An English worker transferred to Singapore will examine the proposed relocation with English eyes, looking for comparative information at British companies, and will approach other British employees who were (or still are) on relocation. Even if the non-Israeli worker does not do his homework before his relocation, the odds are that during relocation, his social circle and reference point will be composed of other British citizens who are on relocation in Singapore.
After the “learning phase”, there are four alternative ways of coping for the Israeli company:
Think Local, Act Global:
Israeli relocation policies apply to all employees on relocation. The advantages of this approach are its consistency, its ease of operation and its compatibility with the “Israeli method”. Its main drawback is that it will be rejected (or accepted with reservations) by non-Israeli employees of the company. Even if the non- Israeli employee went on relocation, he is likely to feel that the company treats him unfairly relative to employees on relocation from other companies in the same host country. This method can be adapted by Israeli companies if the vast the majority of its expatriates are Israelis.
Think Local, Act Global:Practicing a differential relocation policy in which the relocation policy of “Israel” will be applied for Israeli workers, while for the remaining employees the “global” relocation policy will be applied. The advantage of this method is its relative fairness to the workers, but the problem lies in its operational complexity and a sense of non-equality between the Israeli workers and the rest of the employees.
Think Local, Act Global: Implementation of a “global” relocation policy for all employees. This method will prevent the feeling of inequality between the Israeli workers and other employees it will place the Israeli company on a par with the majority of global companies. However, the method will be difficult for Israeli workers to digest and difficult to operate for the company’s headquarters in Israel. This method is especially suitable for an Israeli company if the vast majority of its expatriates are not Israeli.
Net-to-Net equalization:the Israeli workforce under the relocation policy of “Israel” and other employees under the “global” policy, with the disposable income of all expatriates in the specific destination being equal. This method has obvious advantages, but it can significantly increase the company’s relocation expenses, and in all cases it elevates the level of operational complexity.
In summary, there are quite a few ways to deal with the differences between relocation policies used in Israel and those used in the rest of the world. However, each company should examine the most appropriate method, taking into all the considerations into account: the welfare of the workers, the company’s interests and the costs associated with any policy it adopts.
