The Impact of Hiring Expatriates on the Global Economy

The Impact of Hiring Expatriates on the Global Economy

Recently, some local communities have felt the effects of expats moving in. Foreigners bring in additional funds, gradually gentrifying communities in which they reside.

During the COVID-19 pandemic, closed borders and flight restrictions have forced expatriates away from their families. This research explores whether an adaptable compensation strategy could ease some of this stressors.

Increased Competitiveness

After 2008’s economic recession, MNCs had to make significant adjustments in their SGHRM approach, including terminating or scaling back expatriate programs without first undertaking an evaluation process, as these programs can foster talent that would otherwise be lost without them.

Scaling back international assignments can have serious repercussions for organizations, with costs increasing for both home employees and expatriates workers alike. Furthermore, this may result in the loss of critical knowledge from international assignments that cannot easily transition into domestic workforce. There are ways to minimize these effects and cut the cost of expatriate assignments.

One way of increasing flexibility of employees who will be sent abroad is increasing their flexibility; for instance, if an employee requires leave due to family obligations or illness, additional remuneration should be offered by their company. Another possibility would be using remote work arrangements so employees could continue focusing on projects while spending minimal time away from the office.

HR managers frequently fail to recognize what motivates expatriates. Instead, they tend to place more weight on tangible remuneration like cash compensation, benefits and allowances and ignore intangible rewards like career development and job contentment – leaving expatriates feeling their careers are heading in an undesirable direction and fearing reentry back into their parent organization following completion of overseas contracts.

Companies need to recognize and address the impact that macroeconomic uncertainty can have on their expatriate programs in an environment of macroeconomic insecurity. One approach would be assessing its effect on factors and paths of career development of expatriots using LISREL (a statistical software package used for measuring model fit and internal structural validity). LISREL’s results demonstrate that greater economic uncertainties have negative repercussions, potentially prompting expatriates to leave their positions early.

Increased Productivity

Although hiring expatriates might seem counterproductive, hiring them can actually increase productivity significantly. While adapting to new environments and systems takes some time, once familiarised they will work more quickly and efficiently resulting in an overall increase of company productivity.

Hiring expatriates can also reduce costs for businesses, as globalization makes it increasingly difficult to find locally sourced employees with the qualifications for specific roles within multinational corporations. Many businesses have found it more cost effective to bring in expats from outside rather than train local employees for these roles.

Hiring expats can also save money on housing and living expenses. Since expats typically receive payments in different currencies than local populations, they are able to afford much nicer apartments and homes than locals can, which in the long run will reduce company operating costs significantly.

Research indicates that expatriates with strong cross-cultural competence tend to adapt more readily to their foreign subsidiary environments and perform more effectively, due to a greater understanding of local culture and customs that reduce work stress, as well as finding ways of relieving their work stress such as shopping or traveling more easily.

Studies have also demonstrated that the COVID-19 pandemic caused a profound shock in labor market differentials, leading to repatriation of many expatriates. This research utilizes a structural equation model (SEM), employing both factor and path analysis in traditional statistics as well as linear structural relation (LISREL) modeling approaches in econometrics to simultaneously calculate multiple causal paths simultaneously.

Increased Innovation

As global economies become more globalized, businesses must adapt quickly and create products and services tailored to this new environment. Expatriates can assist these efforts by offering fresh perspectives and innovative ideas which may result in an efficient and productive workplace environment.

Expatriates hired by foreign worker services in Kuala Lumpur can also enhance their business relationships with local employees by helping them understand the culture and traditions of their host area, and also the various business practices implemented at their company.

Companies can increase global competitiveness and profitability through this strategy, provided expat workers accept the challenges inherent to working abroad – otherwise they could end up costing the company dearly.

At times of economic instability, multinational companies tend to look towards the expatriate program for cost savings. Unfortunately, this can be problematic as expats typically represent one of the costliest parts of an organization’s workforce. But cutting these programs could have severe repercussions for overall health of an enterprise.

Additionally, it’s crucial that expats receive adequate compensation to keep them motivated and content at work. This should include both financial and non-financial rewards; professional development opportunities should also be provided so they feel more satisfied in their current role and be better equipped for future assignments; ultimately leading to stronger relations between MNCs and their expat employees.

Increased Diversity

Expatriates are employees sent abroad by their company to further its efforts in foreign markets. Their skill sets combine management and leadership experience with cross-cultural knowledge – making them invaluable assets to companies seeking international expansion.

Deploying expat employees can be expensive, including costs related to housing, benefits, language instruction and family support. Learning a new culture takes time; furthermore the pressures associated with living and working abroad may cause expats to feel isolated and anxious; excess stress may impede job performance or health – therefore finding ways to cope is essential; cross-cultural competency will enable more rapid adaptation to a foreign environment and increased work efficiency.

One of the key benefits of hiring expatriates is their ability to help companies develop multilingual capabilities among teams. This can be especially advantageous for multinational firms with an international clientele base; with multilingual employees on hand, customers’ questions and issues can be quickly addressed; plus communication between cultures becomes much smoother which benefits businesses in the long run.

Relocating workers once required uprooting their lives and moving to a different location. Now, with remote work becoming increasingly prevalent, companies are finding it much simpler and cost-effective to hire expats for international assignments – saving both money and resources while simultaneously giving their business access to skills needed for growth.

Increased Global Awareness

Expats’ contributions to global business go well beyond individual employees. Their knowledge and experience are indispensable when expanding to other countries, particularly emerging ones where local employees may lack necessary expertise. Furthermore, expatriates often act as mentors for local workers by helping develop their skills while also aiding technology transfer from parent to subsidiary companies. Furthermore, expatriates play an integral part in global supply chains by overseeing selection and management of suppliers from around the globe.

Under economic uncertainty, expatriates often feel increased pressure to meet performance targets and financial goals which can increase stress and burnout (Sheehan 2012). Since 2008’s Global Financial Crisis, multinational companies have altered their SGHRM approaches; expatriate programs being among those first affected as MNCs scale back or discontinue them (Maley 2019).

Some expatriates still find international assignments rewarding and meaningful; however, most are no longer as satisfied with the experience as prior to the pandemic and report that work has become less stimulating, stressful and difficult than before. Many have seen income reduction or loss altogether as well as lifestyle disruption including travel restrictions that have kept them away from immediate family for extended periods.

Expats can bring invaluable experience, skills and knowledge to their host country; however, in order to thrive in an unpredictable economy they must also be flexible and adaptable. It is therefore imperative for multinational corporations (MNCs) to invest in training and support services for their expatriates employees so that they are as productive as possible.

Howard Coleman