DESIGNING AN EFFICIENT EXPAT MANAGEMENT PROGRAMME Felicity Smith PepsiCo International

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DESIGNING AN EFFICIENT EXPAT MANAGEMENT
PROGRAMMEFelicity SmithPepsiCo International

• 19 May, 2009

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The Company
PepsiCo is a World leader in convenient snacks,
foods and beverages Home to hundreds of brands
around the globe Brands available in
approximately 200 countries 2008 net revenues of
USD 431,251 million Approx 150,000 global
employees
Taxes and Social Security
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The Expatriate Population
PepsiCo has 518 expatriates working in 53
countries

• AMEA - ASIA
• 118 expatriates from 19 nationalities working
  in 12 countries
• Australia - 3
• China - 46
• Hong Kong - 16
• Indonesia - 3
• Korea - 1
• Malaysia - 2
• New Zealand - 5
• Philippines - 5
• Singapore - 1
• Thailand - 30
• Taiwan - 1
• Vietnam - 5

• UK/EUROPE
• 153 expatriates from 26
• nationalities working in
• 19 countries
• Belgium 2
• Bulgaria - 2
• France - 3
• Germany - 4
• Greece - 1
• Hungary - 3
• Ireland - 12
• Italy - 1
• Netherlands 6
• Norway - 2
• Poland - 5
• Portugal - 1
• Romania - 7
• Russia 20
• Serbia - 2

• AMEA - MEA
• 128 expatriates from 26
• nationalities working in
• 8 countries
• Bahrain - 1
• Jordan - 2
• Lebanon - 1
• Nigeria - 2
• Pakistan - 2
• Saudi Arabia - 39
• South Africa - 1
• United Arab Emirates - 80

• AMERICAS
• 119 expatriates from 22
• nationalities working 14
• countries
• Argentina - 3
• Brazil - 10
• Canada - 2
• Chile - 2
• Colombia - 5
• Dominican Rep. - 2
• Ecuador - 1
• Guatemala - 7
• Mexico - 10
• Peru - 4
• Puerto Rico - 7
• United States - 54
• Uruguay - 1
• Venezuela 11

• Expatriates are sourced from 55 countries, with
  10 from the US
• Majority (52) of expatriates are in 5 countries
  United Arab Emirates, US, Switzerland, China
  and Saudi Arabia

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The Costs
Total Spend Nearly 150MM Annually(120MM
Expatriate Program Plus Annual Relocation Cost of
24MM)
35
21
Net Allowances
Other Expat Benefits
Vendors
Taxes and Social Security
4
40
Estimated annual cost of current expat
programme, excluding salary and bonus
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Pepsis International Moves
Long Term Assignments
Extended Business Trips
Extended Business Trips
Permanent Moves
Commuter Assignments
Short Term Assignments
Localisations
Repatriations
Developmental Assignments
Virtual Assignments
Secondment to Bottlers/Distributors/Joint Ventures
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Why are companies changing their expat programme ?

• Unprecedented market conditions 40 of
  companies looking to reduce costs
• Review market competitiveness
• Reduce allowances
• Avoid exceptions
• Localise long term expats
• Simplify / streamline procedures
• Alternatives to traditional expat package

Non-Executive / Developmental moves
The Evolution making moves affordable to the
business and attractive to the expat
FACILITATE MOBILITY
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Alternative Package Types ?

• PEPSICO EXPATRIATES ARE PAID UNDER 2 PRINCIPAL
  APPROACHES-
• HOME/HOST TAX EQUALISED
• DESTINATION PAY HOST BASE PAY
• BOTH PACKAGE TYPES ADDRESS DIFFERENCES IN COST OF
  LIVING, HOUSING, TAX AND SOCIAL SECURITY BETWEEN
  THE HOME AND HOST LOCATIONS BUT THE APPROACH AND
  DELIVERY IS DIFFERENT

THE PEPSICO APPROACH THE PEPSICO APPROACH
Home Host Destination Pay
Paid under home country salary ranges assignment allowances are delivered in the host country and home country deductibles taken in home country Participate in home country benefits social security, where legally possible Maintain home country connection equity with home country nationals in similar positions Paid under host country salary ranges receive income differential where costs in host location are higher than at home to protect savings and investments Participate in home country benefits, where legally possible Equity with peers in host location in similar positions


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Why change your approach ?

• Traditional Home/Host is typically more expensive
  than Destination Pay
• Example- Company costs UK expatriate to Poland
• Recent analysis in Asia has shown company cost to
  be 35 lower on average with destination pay
  packages.
• Both package types address differences in cost of
  living, housing, tax and social security between
  the home host locations but the approach and
  delivery is different.

HOME/HOST (TEQ) DESTINATION PAY POLISH LOCAL
US 480,000 US 388,000 US 240,000



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Review your existing approach
Too CompetitiveNeed to align toMarket
Based on collective input from AirInc, ORC and
PwC. Custom surveys completed with National
Foreign Trade Council Expatriate Management group
and RES European network (covering nearly 100
largest global companies) and also subscribed to
ORC Select Benchmarking Survey group (70 large,
globalmultinational companies for benchmarking
practices / competitiveness.
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Areas for Review

• HOUSING
• Full expat versus modest approach to host housing
• House Savings programme
• Deductibles no free housing, reflective of
  home country costs
• COST OF LIVING
• Full expat standard versus conservative living
  pattern
• What elements are included is anything being
  double counted (club, transport, medical) ?
• Calculated on full base salary ?
• VACATION LEAVE
• Class of Travel
• Frequency of Flights
• Location / Intention
• HYPO TAX
• Reflective of home country deductions ? State
  taxes, tax deductions, reconciliations
• EXCEPTION MANAGEMENT

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The Time Is Right..

• NEXT STEPS..
• Align on your International Mobility Strategy
• Look for alternative approaches to facilitate
  cross border moves
• Review your exisiting policies to ensure that
  they are effective

• WHY ?
• Better management of the ongoing costs of your
  programme
• Realise some savings opportunities
• Ensure competiveness in marketplace

SUPPORT THE ONGOING AND GROWING NEED FOR
AN INTERNATIONALLY MOBILE WORKFORCE