1. Breaking Down Borders
Doing business in Australia
Ben Walsh, Melbourne
Michael Hill, Melbourne
Georgina Harley, Sydney www.mercer.com

2. Today’s speakers
Ben Walsh Michael Hill Georgina Harley
Partner & Asia Pacific Partner, Mergers & Principal, Information
Regional Market Acquisition, Australia and Product Services, Australia
Development Leader New Zealand and New Zealand
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3. Topics of discussion
1  Setting the scene
2  Governance: Key employment considerations
3  Moving critical staff into Australia
4  Ensuring the success of your expansion
5  Conclusion and Q&A
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4. Setting the scene
Australia

5. Setting the scene - The Australian story
 Over the past 5 years inward FDI has increased on average 5.8% p.a.
 Democratic and politically stable
 Strong economic growth, combined with low inflation, provides a stable
economic environment for business….for 6 of the last 8 years Australia’s
economy has been found to be the most resilient in the world1
 Business friendly regulatory environment with favourable concessions such as
GST subsidies
 Robust banking sector; among the strongest in the world.
 Commodities rich in resources and land
 Australia is on the doorstep of one of the fastest growing regions
 But, presents challenges regarding labour demand and supply
1. Source: Ibid
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6. Strong and stable economic growth
Annual gross domestic product
Annual GDP Trend
6.0
Global Financial Crisis
5.0
4.0
3.0
2.0
1.0
0.0
Dot-com crash
-1.0
Mar-91
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Sep-91
Sep-92
Sep-93
Sep-94
Sep-95
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Percentage
Change
Annual Population Movement Annual Net Overseas Migration
Annual Natural Increase
500
Quarterly Population Change (x1000)
450
400
350
300
250
200
150
100
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Introduction of $1k “Baby Bonus” Increased to $4k
Based on Australian Bureau of Statistics data
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7. Governance: key employment considerations

8. Summary of Australian employment issues
A few things to key in mind…
LABOUR LAWS
 Severance payments  Transmission of business
 Restructuring costs  Union negotiations, if any
TOTAL REWARDS
 Reward harmonization  Executive remuneration and retention
 At-risk compensation  Work lifestyle
RETIREMENT (PENSIONS)
 Compliance with statutory requirements
 Superannuation plan and projected costs/ liabilities
HEALTH & BENEFITS
 Limited employer-sponsored healthcare plans
 Scope of benefits and employee choice
 Benefits harmonization/ integration on providers/ administration, if any
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9. Navigating the Australian labor law landscape
Employment contracts:
 Common contracts for most managerial/ professional staff.
 Non-managerial employees are covered by employment conditions in the form of a Collective
Enterprise/ Bargaining Agreement.
 The Fair Work (FW) Act 2009 regulates industrial and employment law in respect to all companies
across Australia.
10 National employment standards :
These standards provide a minimum set of entitlements for employees, including:
 Maximum weekly hours
 Entitlement to request flexible working arrangements
 Parental leave and related entitlements
 Annual leave (four weeks or 20 business days per year)
 Personal/carer’s leave and compassionate leave
 Community service leave
 Long service leave
 Public holidays
 Notice of termination and redundancy pay
 Provision of a Fair Work Information Statement
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10. Navigating the Australian labor law landscape
 Collective agreements: unions or employee groups may wish to enter into a collective
agreement with their employer. Good Faith Bargaining applies to all employers
 Unfair dismissals: broad protection for employees in organisations with greater than
15 employees
 Transfer of business: Changes to employment arrangements
 Adverse action: Increased monitoring of employers
 Sham contracting: multi-factor test for contractor relationships and monitoring of
contractor arrangements
 Redundancy and severance: An employee’s entitlement to severance benefits is
based on their length of service. Typical severance benefits are based on ordinary
time-rate and years of service. Notice periods also apply.
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11. Key issues
 Unionisation: Representation is common for “blue collar” roles (generally paid wages
as opposed to salaries), and more common for some industries (eg. manufacturing,
health, retail, education etc.)
 Diversity: Equal employment opportunity, equal pay for equal work and female
representation in executive and board roles are current hot topics. Listed companies
with >100 employees are now required to include in their annual reports how they are
tracking against their policies on attracting and retaining women.
 Executive pay and benefits: Under the Corporations Act, shareholders can now make
a non-binding vote on Executive Pay proposals.
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12. Approach to ‘Total Rewards’
 Common use of a ‘Total Rewards’ approach: recognises the ‘employee value
proposition’ and includes employment cost (fixed and variable pay plus benefits),
careers & development and work lifestyle
 Pay levels: can be determined through job sizing or market pricing approaches, or
based on classification structures based on job size that are linked to market practice
(eg. specific industry pay practices)
 Performance reward orientation: private sector and listed companies place a greater
emphasis on variable reward and performance-based pay:
– Executive and senior management roles tend to be measured on organizational
and individual performance
Common for Top executives
– Professional roles tend to be measured on individual and/or team performance
 Use of short-term incentives: common for executives, senior management, and
professional roles and are based on individual and organizational performance
 Use of long-term incentives: common for executives, particularly for listed companies
and can include complex arrangements linked to key organizational measures
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13. Approach to retirement
 Statutory/Government provisions: All employers must provide retirement benefits to
employees - 9% mandatory contribution to Superannuation Guarantee (SG – which will
gradually increase to 12% by 1 July 2019. Means tested age pension at basic level.
 Prevalence of defined benefit plans: Defined benefit funds or defined benefit
guarantees are still present. Majority of DB plans are closed to new employees.
 Prevalence of defined contributions plans: Likely to be universal covering at least
some employees in every company.
 Pre-funding requirements: None.
 Employee contributions to defined benefit: Typically 5% of salary, with additional
voluntary contributions possible.
 Employee contributions to defined contribution: Generally not required; voluntary
contributions are possible.
 Non-discrimination tests: Unlikely to be an issue in DC plans. DB plans most likely
have addressed this in the past.
 Prevalence of executive plans: If DB plan, common to have higher benefit level.
Uncommon in DC due to concessional tax limits on contributions.
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14. Approach to health & benefits
 Statutory/government sponsored programs: Universal Government sponsored
Medicare program; statutory Worker’s Compensation (mandatory employer benefits)
 Most common benefits provided by employer:
- Death & Total Permanent Disability Insurance
- Salary Continuance Insurance (disability income benefit) – prevalence for both
high, often through superannuation fund
- Private Health Insurance
-Higher prevalence in high-tech and mining/resources sectors. Low prevalence
in market overall.
-Fringe benefits tax main deterrent in provision of employer subsidised medical
cover
-Community rated (not risk rated). Cannot be placed in a multinational pool.
 Employee choice / Flex : Not common due to Fringe benefits tax
 Retiree medical benefits: Provided by government program – Medicare.
 Wellness programs: over 50% of employers offer some form of wellness
program/initiatives.
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15. Moving critical staff to Australia

16. Moving critical staff to Australia
Australia in the top 25 destination countries for expatriates
1. United States 14. Brazil
2. China (mainland) 15. Mexico
3. United Kingdom 16. Belgium
4. Germany 17. United Arab Emirates
5. Singapore 18. Canada
6. Japan 19. South Korea
7. Hong Kong 20. Taiwan
8. France 21. Malaysia
9. Switzerland 22. Russia
10. India 23. Italy
11. Thailand 24. Spain
12. Australia 25. Indonesia
13. Netherlands
Source: 2010 Mercer/ORC Worldwide International Compensation Services
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17. Moving critical staff to Australia
The cost and quality of living in Sydney is similar to Singapore…
Cost of Living - Base City Singapore
140
118
120
96 96 98 100
100 94
89
86
76 77 77 78 79
Ranking
80 70
67 67 68
60
Quality of Living - Base City Singapore
40
20 Sydney 103
Wellington 102
Base City Singapore 100
0
Shanghai
Sydney
Hanoi
Hong Kong
Seoul
98
Wellington
Kuala Lumpur
Taipei
Tokyo
Dhaka
Mumbai
Bangkok
Manila
Beijing
Jakarta
Tokyo
Base city Singapore
Colombo
Hong Kong 92
Kuala Lumpur 87
Seoul 85
Taipei 84
Shanghai 79
Source: Mercer Cost of Living Calculator, Mar 2010 Bangkok 72
Beijing 72
Manila 68
Jakarta 63
Colombo 62
Mumbai 62
60
Hanoi
Islamabad 50
0 20 40 60 80 100 120
Rank
Source: Mercer Quality of Living Calculator, Mar 2010
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18. Moving critical staff to Australia
…as are actual pay levels
Financial Controller Benchmark Job
Avg Annual Total Fixed Cash Remuneration (US$)
250,000
200,000
150,000
100,000
50,000
0
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19. Moving critical staff to Australia
However, Australia has one of the highest effective income tax rates…
30
Effective Income Tax Rates
Controller Benchmark Job, Family Size of 4
25
20
% of Income
15
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20. Moving critical staff to Australia
…and a relatively small, but highly skilled labour force
 Workforce demographic profile
– Highly skilled
– Highly educated
– Diverse & multilingual
– Multi-generational
 Labour force
– Relatively small labour force (11.5M)
– low participation rate (65.8%)
– low unemployment of (4.9%)
 Skills shortage (job vacancy rate is increasing)
– The domestic labour market will remain tight as long as the investment
boom gathers momentum, particularly within the resources sector
– Attraction and retention of key talent is a major focus and requires deep
understanding of workforce
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21. Moving critical staff to Australia
What’s the trend with expatriate remuneration packages?
Model 1: ‘Traditional expat Model 2: ‘Localized’
package / balance sheet’ packages
Base salary & bonus of the home Australian market rate (including
country superannuation, bonus, other
benefits)
+ cost of living allowance
+ mobility premium (depending on Possible “plus” components
policy) + housing assistance at lesser benefit
+ housing benefit + relocation allowance
+ tax equalization
+ dependents’ education
+ annual home leave
+ relocation allowances
Items that are not typically made available as part of the remuneration
package however are worth considering in order to be competitive include:
 house hold storage
 support for dual-income families
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22. Moving critical staff to Australia
Items to consider when developing a staff mobility plan
 What is the nature of the transfer?
– Limited term secondment
– Indefinite/permanent relocation
 Visa requirements (457)
– Employer responsibilities
– Market rate clause
 High income tax rates
– Highest top marginal tax bracket (similar to China)
– Gross salaries alone shouldn’t be compared when offering a localized package
– Traditional packages require tax equalisation; localized packages may require
delivering equivalent net compensation
 Pension arrangements
– Mandatory contribution
 Health insurance
– Employer must provide private health insurance for all sponsored temporary workers
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23. Ensuring the success of your expansion

24. What’s driving this activity
Common deal drivers in Australia
Deal Value & Volume 2006-10YTD Deal Drivers in Australia
 Resurgence in M&A activity, following
Mil.USD # of Deals Australia’s quick recovery from the global
financial crisis.
250,000 800
700
 2010 deal volume in Australia for 2011 are
200,000 anticipated to exceed 08, 09 expectations.
600
500  Major transactions as a result of industry
150,000
consolidation in the financial, resources
400
and consumer staples sectors.
100,000 300
200  Continued interest from Asian-based
50,000 investors in Australia’s resources sector.
100
- -  Some of the key sectors that have been
active include Resources and Financial
2006 2007 2008 2009 2010-
Services.
YTD
Notes: Deal Volume chart includes deals with unannounced deal values, which may not be reflected in the Deal Value chart; Data only for deals with at least 30% stake;
Deals denote either target/seller OR bidder (as opposed to target/seller AND bidder) within each specified geography; by announcement date;
2010 YTD refers to 1 Jan 2010 – 30 Jun 2010.
Source: MergerMarket; Mercer Analysis
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25. Indicative characteristics of Australian national culture
Individualism -
Collectivism
Collective Individual
Power Distance –
dealing with
authority Small Large
Time orientation
Short-term Long-term
Femininity-
Masculinity
Collaborative Competition
& Consensus & Strength
Uncertainty
Avoidance
Uncertainty is Uncertainty is
a given avoided
Source: Hofstede, R. M. (2001). Culture's Consequences: Comparing Values, Behaviours, Institutions and Organizations Across Nations, Thousand
Oaks, California: Sage Publications.
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26. Acquiring in Australia: Deal-specific HR actions
 Build the HR Transition Plan
– Collect and review input documents such as sales and purchase agreement, due diligence
report, transition services agreements, any integration planning already undertaken, business
structure of the Australian operation
– Identify specific HR issues that need to be considered unique to Australia
 Conduct rapid due diligence on HR matters to supplement the commercial due diligence. This will
* be key to building a comprehensive HR transition plan.
 Employee Transfer (if required)
– Design transition process
* – Clarify legal obligations contained in employment contracts and industrial awards
– Draft offer / transfer letters (if required)
– Manage the transition process
 Industrial relations
 Rewards and Benefits
– Policy and remuneration philosophy harmonisation
– Executive benefits
– LTI, STI and stock
 Retention of key staff
* – Identify key staff segments: executives, business-critical roles, high-potentials
– Develop retention strategies as appropriate
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27. Acquiring in Australia: Deal-specific HR actions
 Performance management harmonisation – including systems
– Business performance goals cascaded to individuals
 Cultural integration
* – Induction
– Working for a US/ European/ Asian company
– Expectations
– Leadership team defining culture recognising company values
 HR policies harmonisation
 Payroll and related processes
– Including data migration
 HR staffing
– During the integration
– Ongoing operations
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28. Conclusion

29. In summary
 Australia has a strong and resilient economy, and has been an active market
for M&A, with a number of recent deals in the resource, technology and
services sectors
 Balancing supply and demand is a critical business issue
 Keeping pace with minimum statutory requirements from a people perspective
will not differentiate you in a competitive labor demand market place
 Organizations continue to review and invest in their:
– Total Rewards philosophy
– Compelling employee value proposition
 Attention to communication, engagement and culture is critical for success.
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30. Questions & answers
Click on the question mark to submit a question
 Please use the Q&A panel on the bottom right hand of your screen to
type your question
 To ask a question while in full screen mode, click on the question mark
button on the floating panel at the bottom right hand side of your
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 If there is not enough time to answer your question during the Q&A
period, we will send you’re an answer by email.
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31. For more information on regional strategies, risks and opportunities
Visit our Breaking Down Borders website to
access articles, points of view, podcasts and
more information on investing in Australia.
www.mercer.com/breakingdownborders
Access recordings of past webcasts on:
– Doing business in India
– Doing business in Japan
– Doing business in China
– Doing business in Korea
– Doing business in Indonesia
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32. Speaker contacts details
Ben Walsh Michael Hill Georgina Harley
Partner & Asia Pacific Partner, Mergers & Principal, Information Product
Regional Market Acquisition, Australia and Services, Australia and New
Development Leader New Zealand Zealand
ben.walsh@mercer.com michael.f.hill@mercer.com georgina.harley@mercer.com
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33. www.mercer.com