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Blog

Global Cost Estimates: Closing the Gap between Budgeted and Actual Costs of International Assignment

by Sue Wines | May 12, 2015

Organizations create cost estimates for multiple purposes – obtaining business approval, establishing the financial budget / accrual, and identifying potential cost savings through policy change. To fit the purpose of the estimate, corporations may deliver several versions of the document to suit their audience.

For the business
We use terms and explanations the business will understand. Each line item may contain a detailed explanation of the policy element that makes sense to the individuals approving the assignment and will highlight exceptions to policy.

For the finance team
We focus on broader categories (cost of the move, cost of the repatriation, ongoing costs) and the anticipated year of the expense so they can build appropriate budgets and accruals for the costs of assignment.

For preparation of a business case for change
Our estimates covering a span of time may be consolidated into a single report. From the consolidated results, we create the “cost model” to demonstrate what our cost savings (or additional expense) may be if we eliminate exceptions to policy or introduce changes in policy.

To make our cost estimates as accurate as they can be at the time of creation, data gathered for calculations should be current and reflect the true circumstances of the assignment. COLA and other allowance information should be up to date, tax calculations must reflect legislative requirements in home and host country, and employee specific data must be accurate (i.e. family size on assignment, age of dependents requiring education, home sale value, immigration status).

To ensure our assignments stay within budget
Tracking total assignment costs is critical. Actual spend must be collected from teams responsible for payroll delivery, expense  reimbursement, accounts payable (travel costs, tax payments and rent payments) as well as third parties (relocation provider, equity manager, pension fund manager). Collection of total global compensation creates a Global Statement of Earnings for each assignee, producing a snapshot of the true cost of assignment.

SIRVA creates global cost estimates for our clients using traditional cost estimate tools as well as online cost estimate calculators. Let us help you build your cost estimate models - contact Sue Wines at sue.wines@sirva.com  for more details.

For more information visit The Knowledge Center to see the SIRVA University presentation on Keeping Global Compensation Programs on Budget.

Material originally presented at SIRVA U in partnership with Honeywell (Quentin Wallace, Director of Finance and Operations)