Expatriate vs. Local Employees: Advantages and Disadvantages

Posted on Jan 16, 2025 in Business Administration and Management (BAM)

Expatriate vs. Local Employees

An expatriate is a citizen of one country who lives and works in another country.

Local Employees

Advantages:

  • Reduced labor costs.
  • Shows confidence in the citizens of the host country.
  • Improves acceptance of the company in the local community.
  • Maximizes the number of options available in the local environment.
  • Effectively represents local considerations and constraints in the decision-making process.
  • Eliminates language and adaptation barriers for expatriates and their families.
  • High motivation and career opportunities for local staff.

Disadvantages:

  • Makes it difficult to balance between local requirements and global priorities.
  • Usually causes difficult local decisions to be postponed until they become inevitable, when it is more difficult, expensive, and painful to make these decisions than if they had been made before.
  • Can hinder the recruitment of qualified personnel.
  • Can reduce the amount of control exercised by headquarters.
  • High distance between local managers and central branch due to:
    • Cultural differences
    • Language
    • National loyalties

Expatriate Employees

Advantages:

  • Cultural analogy with the parent company guarantees the transfer of business practices/directives.
  • Allows tighter control and better coordination of international subsidiaries.
  • Offers employees a multinational orientation thanks to the experience of the parent company.
  • Creates a set of executives with international experience.
  • There may not be qualifications available in the host country to realize the full value offered by expatriates.
  • More loyal to the interests of the central.

Disadvantages:

  • Creates adaptation problems to the environment and foreign culture.
  • Increases the “foreignness” of the subsidiary.
  • Can involve high labor costs, transfers, and others.
  • Can cause personal and family problems.
  • Has a negative effect on the morale and motivation of national managers.
  • Public contracts may be subject to local government restrictions.
  • Retributive inequity between national/local employees.

Issues from the Expatriation Experience

Work:

  • The best: Attractive features of the post (autonomy, variety), improvement in the career, economic benefits, attractive work environment.
  • The worst: Pressure at work, stagnation in the career, inadequate salaries by local standards, central problems, cultural difficulties.

Family:

  • The best: Opportunities for the family, experience for children, the spouse does not need to work.
  • The worst: Family dysfunction, problems with the adaptation of the children’s education, difficulties for the spouse.

Life in General:

  • The best: Personal growth, learning a language, new friends, savings capacity, lifestyle.
  • The worst: Difficulties of integration, separation from home, poor living conditions (expensive life, personal safety, pollution).

Difficulties of Repatriation

  • Lack of respect for acquired skills: International experience is not usually highly valued.
  • Loss of status: Returning expatriates often have a significant loss of prestige, power, independence, and authority.
  • Poor return planning: Often, the management decides to return an expatriate without knowing what job they will have after their return.
  • Reverse culture shock: Expatriates are often unaware of the profound psychological change they have experienced until they return home.

Failure of Expatriates

  • Career blockage: Many believe that their headquarters has forgotten them and that their career has been disrupted.
  • Culture shock: Many people who accept international allocations cannot adjust to a different cultural environment.
  • Lack of pre-departure training in different cultures: Only a third of multinational enterprises offer some type of training in various cultures to expatriates.
  • Too much emphasis on technical qualifications: The same features that lead to success in the home country could be disastrous in other countries.
  • Getting rid of a problem employee: International assignments can be considered a convenient way to get rid of managers who have problems at headquarters.
  • Family problems: The inability or unwillingness of the expatriate’s spouse and children to adjust to life in another country is one of the most important reasons for failure.