The level of volatility global enterprises are experiencing has never been higher and a global workforce has, potentially, never been more complex to manage. Mercer’s 2015 Quality of Living survey, released globally today, sheds light on the costs of managing employees around the world and reinforces the stability of New Zealand as an attractive destination for multinational companies
Auckland has retained its position as the world’s third best in quality of living, according to the Mercer 2015 Quality of Living Index based on influences such as culture and environment, political stability, safety, infrastructure and the ease of doing business.
Overall, European cities dominate the top of the ranking along with major cities in Australia and New Zealand. Vienna ranks in number one position, Zurich, Auckland, and Munich are in second, third, and fourth places respectively. In fifth place, Vancouver is the highest-ranking city in North America and the region’s only city in the top 10.
In New Zealand, Auckland (3) is the highest ranking city followed by Wellington (12). In Australia, Sydney (10) is the highest ranking city, followed by Melbourne (16), Perth (22), Adelaide (27), Canberra (30), and Brisbane (37). Singapore (26) is the highest-ranking Asian city and Dubai (74) ranks first across the Middle East and Africa. Montevideo in Uruguay (78) takes the top spot for South America.
Lorraine Jennings, Mercer’s global mobility practice leader, in the Pacific market, said, “Attracting and retaining the right talent from a global workforce is becoming increasingly competitive and cost containment is a major factor now in how companies handle the mobility of their staff.
Mercer conducts its Quality of Living survey annually to help multinational companies fairly when placing them on international assignments. Employee incentives include a quality-of-living allowance and a mobility premium*. Mercer’s Quality of Living Reports provide valuable information and hardship premium recommendations for over 440 cities throughout the world; the ranking covers 230 of these cities.
“Employers have to think outside the box in terms of benefits but they have to also get the fundamentals right in a cost-containment environment and our Quality of Living Index provides the data to help them do this,” said Ms Jennings.
“As the glamorous overseas posting becomes a thing of the past, with perks like fully serviced accommodation and round the clock childcare disappearing, employers need to consider what kinds of benefits maximise the employee experience in an environment of cost containment and shift their mindset from time-based contracts to more strategic contracts with key employees.
“Our 2015 Quality of Living Index reiterates New Zealand cities overall enjoy a high quality of living, providing an attractive location for global companies looking to place employees. The consistent performance of New Zealand cities, particularly Auckland, in Mercer’s Quality of Living Index illustrates the appeal of the region in providing a stable base for employees and their families,” said Ms Jennings.
Slagin Parakatil, Principal at Mercer, said, “Taking a short- or long-term work assignment in a new country is both an exciting and challenging experience for employees and their families. Cultures, societies, and comparatively different climates, as well as political instability, high crime rates, and poor infrastructure can be difficult to navigate and settle down in for employees and their families. Employers need to assess whether their staff and families will encounter any drop in quality of living when relocating and ensure they are fairly compensated for it.”
Mr. Parakatil added: “As with last year’s survey, we continue to recognise emerging cities that are increasingly becoming competitors to traditional business and finance centres. These so called ‘second-tier emerging cites’ are investing, particularly in infrastructure to improve their quality-of-living standards and ultimately attract more foreign companies
In the Pacific, New Zealand and Australian cities are some of the highest-ranked cities globally, with Auckland in 3rd, Sydney in 10th, Wellington in 12th, and Melbourne in 16th.
Asia is the region with the largest range in quality-of-living standards, with the highest-ranking city, Singapore, in 26th place and the lowest-ranking, Dushanbe, Tajikistan, in 214th place. Topping the ranking across East Asian cities is Tokyo in 44th place; Other key cities in this part of the region include Hong Kong (70), Seoul (72), Taipei (83), Shanghai (101), and Beijing (118). Notable emerging cities in this part of Asia include Cheonan (98), South Korea, and Taichung (99) in Taiwan. Chinese cities Xi’an and Chongqing (both ranked 142nd) are also emerging as business destinations. Their main challenges to improving quality-of-living standards are clean water provision and air pollution. However, advances in the telecommunications and consumer sectors have had some positive offsetting effects on their ranking.
Behind Singapore, the second highest-ranking city in Southeast Asia is Kuala Lumpur (84); other major cities here include Bangkok (117), Manila (136), and Jakarta (140). In South Asia, Colombo (132), ranks highest and is followed by emerging Indian cities Hyderabad (138) and Pune (145). Both cities rank higher for quality of living than the country’s more traditional business centres, Mumbai (152) and New Delhi (154). Considerable population increases in Mumbai and New Delhi in recent decades have increased existing problems, including access to clean water, air pollution, and traffic congestion.
Despite concerns about economic growth, the cities of Western Europe continue to offer a stable environment for employees and employers. Vienna (1) is followed by Zurich (2), Munich (4), Düsseldorf (6), and Frankfurt (7). With Geneva and Copenhagen in 8th and 9th places, respectively, Western European cities take seven places in the top 10. The lowest-ranking cities in Western Europe are Belfast (63) and Athens (85). Cities in Central and Eastern Europe have a wider range of quality-of-living standards. The highest-ranking cities are Prague (68), Budapest, and Ljubljana (both ranked 75th). Emerging city Wroclaw (100), Poland, has a thriving cultural and social environment and good availability of consumer goods. The region’s lower-ranking cities are Kiev (176), Tirana (180), and Minsk (189), with Kiev experiencing a considerable drop in the rankings following political instability and violence in Ukraine overall.
In North America, Canada and the United States continue to offer a high standard of living. Vancouver (5) tops the list for this region, followed by fellow Canadian cities Toronto (15) and Ottawa (16), whereas San Francisco (27), Boston (34), and Honolulu (36) are the highest-ranking US cities. Mexico’s highest ranking city is Monterrey (109), while Mexico City is ranked 126th. The lowest-ranking cities in the North American region are Havana (193) and Port-au-Prince (228).
In South America, Montevideo (78), Buenos Aires (91), and Santiago (93) are the highest-ranked cities, whereas La Paz (156) and Caracas (179) rank lowest. In Brazil, Mercer has identified Manaus as an emerging city –it is ranked 127th. The city is already a thriving industrial centre and has a free economic zone – its good supply of consumer goods and relatively advanced infrastructure partially counteract the impact of Manaus’ lack of international schooling options for expatriates and remote location.
Middle East and Africa
In 74th place, Dubai ranks highest for quality of living across the Middle East and Africa region. It is followed by Abu Dhabi (77), also in the UAE, and Port Louis (82), Mauritius. In South Africa, Durban (85) is an emerging city and ranks higher than the country’s traditional business centres, Cape Town (91) and Johannesburg (94). Durban’s higher ranking is mainly due to its high-quality housing, plentiful recreational offerings and good consumer goods availability. However, the city’s crime problems keep it from reaching the top 50.
Ranking 230th, Baghdad is the lowest-ranking city in the region and on the overall list.
Notes for Editors
Mercer produces worldwide quality-of-living rankings annually from its most recent worldwide Quality of Living Surveys. Individual reports are produced for each city surveyed. Comparative quality-of-living indices between a base city and a host city are available, as are multiple-city comparisons. Details are available from Mercer Client Services in Warsaw, at +48 22 434 5383 or at www.mercer.com/qualityofliving.
The data was largely analysed between September and November 2014, and will be updated regularly to take account of changing circumstances. In particular, the assessments will be revised to reflect significant political, economic, and environmental developments.
Expatriates in difficult locations: Determining appropriate allowances and incentives
Companies need to be able to determine their expatriate compensation packages rationally, consistently, and systematically. Providing incentives to reward and recognise the efforts that employees and their families make when taking on international assignments remains a typical practice, particularly for difficult locations.
*Two common incentives include a quality-of-living allowance and a mobility premium:
• A quality-of-living or “hardship” allowance compensates for a decrease in the quality of living between home and host locations.
• A mobility premium simply compensates for the inconvenience of being uprooted and having to work in another country.
A quality-of-living allowance is typically location-related, while a mobility premium is usually independent of the host location. Some multinational companies combine these premiums, but the vast majority provides them separately.
Quality of Living: City benchmarking
Mercer also helps municipalities assess factors that can improve their quality-of-living rank. In a global environment, employers have many choices as to where to deploy their mobile employees and set up new business. A city’s quality-of-living standards can be an important variable for employers to consider.
Leaders in many cities want to understand the specific factors that affect their residents’ quality of living and address those issues that lower their city’s overall quality-of-living ranking. Mercer advises municipalities through a holistic approach that addresses their goals of progressing towards excellence, and attracting multinational companies and globally mobile talent by improving the elements that are measured in its Quality of Living survey.
Mercer hardship allowance recommendations
Mercer evaluates local living conditions in more than 440 cities it surveys worldwide. Living conditions are analysed according to 39 factors, grouped in 10 categories:
1. Political and social environment (political stability, crime, law enforcement, etc.).
2. Economic environment (currency exchange regulations, banking services).
3. Socio-cultural environment (media availability and censorship, limitations on personal freedom).
4. Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc).
5. Schools and education (standards and availability of international schools).
6. Public services and transportation (electricity, water, public transportation, traffic congestion, etc).
7. Recreation (restaurants, theatres, cinemas, sports and leisure, etc).
8. Consumer goods (availability of food/daily consumption items, cars, etc).
9. Housing (rental housing, household appliances, furniture, maintenance services).
10. Natural environment (climate, record of natural disasters).
The scores attributed to each factor, which are weighted to reflect their importance to expatriates, allow for objective city-to-city comparisons. The result is a quality-of-living index that compares relative differences between any two locations evaluated. For the indices to be used effectively, Mercer has created a grid that allows users to link the resulting index to a quality of living allowance amount by recommending a percentage value in relation to the index.
Mercer is a global leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 42 countries and the firm operates in more than 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and human capital. With over 55,000 employees worldwide and annual revenue exceeding $13 billion USD, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.co.nz. Follow Mercer on Twitter @Mercer_NZ and @MercerInsights.