Wednesday, November 28, 2001

Working for less The gap between expat and Czech pay is slowly shrinking By Sam Beckwith In 1999, Anna earned 23,000 Kc ($605) a month at Motorola in Prague. Her colleague, a foreign contractor doing roughly the same job, implementing mobile phone networks, earned around 1,650 Kc an hour. "Some of them were real experts," she said of the foreign contractors brought in, "but there were some in the same position as I was," said Anna, indicating that their level of experience in the field was no greater than hers. "At the time I was angry," said Anna, who asked that her real name not be used, "but you get used to it." She now works as an independent contractor herself and says that an increasing number of Czechs working in her field are doing the same. Now, she says, "there are quite a lot of Czechs who are being paid the same [amount] as foreigners. They found an agent and they found a way." Such discrepancies in pay, though fewer in number and less dramatic in scale than they were in the early 1990s, remain a sensitive subject in the business world. There is no official data available on levels of expatriate pay in the Czech Republic. But strong anecdotal evidence suggests that a gap between pay for foreign professionals and Czech professionals still exists. Many foreign executives interviewed for this article acknowledged paying expats more for doing the same job as their Czech counterparts, but defended the practice as one that lured badly needed foreign expertise from around the world. As Czech salaries rise and the need for foreign expertise diminishes, the salary gap is slowly shrinking. "The differences in salary have diminished," says Frans Hoekman, director of recruitment firm Robert Half International CR. "The Czech equivalent [of an expats'] salary is similar in some cases." Part of the reason is that the Czech Republic is no longer considered an inhospitable place for foreigners to live and work. "If you were to go back eight or nine years, many places in Eastern Europe were seen as a hardship placement," explains Justin Matthews, regional director of recruitment firm TMP Worldwide for the Czech Republic, Slovakia and Ukraine. "Now it's not. It's like Western Europe -- the infrastructure is very similar. In Russia you still see expats being very well compensated by their employers, but not in the Czech Republic." Comfort zone But Hoekman doesn't believe that the fat-cat expat cliche will entirely become a thing of the past, either in Prague or elsewhere. In high-level positions such as chief financial officer and financial controller, firms are willing to pay more for familiarity, he said. "A lot of companies want to have people in a foreign branch that they know, that know their procedures -- they know they can trust this person." In his native Netherlands, he points out, 60 percent of expats work in the financial sphere. Language and culture are also, inevitably, important factors in doing business: "It's easier for a company with headquarters in Japan, for instance, to communicate with a Japanese executive." In other cases, a company might want a young recruit with management potential to gain experience in other markets. In such cases, Hoekman says, expats that are earning more than their Czech equivalents "are not just sent to do a job but also for management development." There are usually compelling reasons for paying foreigners more, Hoekman continued. With the average expat contract lasting only three years, there's a degree of instability that requires compensation. "The spouse isn't guaranteed a job," said Hoekman, so the expatriate is often the sole provider for his or her family. A company also often will provide a car, housing and help with costs of daycare and schooling for children. It's unfair to expect an incoming expat to take a cut in salary to match local levels, says Irena Brichta, founder and managing partner of executive search firm Brichta & Partners. "If an expat comes in from, say, Germany and will return there, his remuneration is generally maintained for that reason of returning," she says, "as well as attracting him here for a couple of years in the first place." Endangered species "In terms of quantity, every year there's about 5 or 10 percent fewer expats returning to the job and being replaced by locals," says Hoekman. The increasing sophistication of the Czech work force is the main reason for this decline. "There's a lot less room for expats in the Czech Republic," agrees Patrick Carroll, TMP's business development manager. In his view, the Czech Republic is "a market where people are coming to train up locals for two to three years and then leave." Over the past few years, "the character of the expat has changed," Hoekman says. In the past, the need was for "generalists" -- people who could hit the ground running in an unfamiliar environment and set up operations. Today, with the foundations already laid for most multinational firms, the need is for "specialists." One of the advantages of hiring expatriates in the early years after the 1989 revolution, Carroll thinks, was that they brought a Western perspective that locals at that time didn't possess: "The intangibles didn't have to be drummed into them," he said. "They had the mindset." Today, being a Westerner is no longer an obvious advantage. According to Hoekman, who has lived and worked here for 10 years, "If I applied for a financial job with a multinational, as a foreigner, I wouldn't get more money." 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