Strategy

When Relocating Employees, Send Them Here

A new study finds that European cities continue to have the world’s highest standards of living.
Marielle SegarraDecember 1, 2011

CFOs don’t have to worry too much about sending employees to Vienna, but they might want to budget for extra compensation for those being sent to Baghdad, according to a newly released study by Mercer. The 2011 Quality of Living survey ranks more than 200 cities according to their quality of life in an effort to help companies determine the appropriate level of compensation for the employees they relocate. Mercer’s researchers considered 10 criteria, including each city’s political, social, and economic environments; health and sanitation standards; and approach to censorship and personal freedom.

Vienna, Zurich, and Auckland top the list, followed by a number of German, Canadian, and Swiss cities, among others (see chart below). At the bottom of the list are Baghdad, Bangui in the Central African Republic, N’Djamena in Chad, and many other cities across South Asia, the Middle East, and Africa. Although European cities continue to dominate the top of the list, the study notes that economic turmoil and widespread unemployment could depress their rankings in the future.

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Cities within the United States consistently rank in the upper middle of the pack. The top-rated U.S. city is Honolulu, at number 28, with San Francisco (29) and Boston (36) close behind.

Cities in China, an increasingly popular destination for U.S. companies looking overseas for growth and reduced production costs, land in the middle and at the bottom of the list. The highest-ranked Chinese city is Shanghai, at 95. Next is Beijing at 109, followed by Guangzhou at 119, Chengdu at 127, and several others, including the lowest-ranked Chinese city, Jilin, at 160.

The study recommends that companies establish two types of compensation payments for employees on overseas assignments. The first is a hardship premium that pays staffers for changes in their quality of living, and the second is a mobility payment for the hassle of relocating. The firm contends that separating the two, rather than lumping them together, makes the compensation process clearer and more transparent.