The UK has the highest expatriate packages among top financial hub countries according to ECA International, global provider of knowledge, information and technology for the international management and assignment of employees. According to their annual market pay survey, the cost to companies of a typical expatriate’s total pay package for middle managers in the UK is around $430,000 per year on average.
Mark Harrison, Manager of Remuneration Services at ECA International, said:
“When considering expatriate package costs, companies need to factor in three main elements: the cash salary, benefits – such as accommodation, international schools, utilities or cars – and tax. Depending on how the package is put together, the cost of providing benefits can be considerable even dwarfing the cash salary element. This is the case for the UK as well as Hong Kong and Singapore. However, while the tax component of the package is small in Hong Kong and Singapore it has a huge impact on overall costs when relocating someone to the UK.”
To assist companies with benchmarking their packages against the market when relocating their staff, ECA conducts an annual market pay survey of pay levels for expatriates around the world, including benefits, allowances, salary calculation methods and tax treatment. The results enable companies to benchmark their expatriates’ actual salaries against the market. More than 320 companies took part in the MyExpatriate Market Pay Survey covering 167 countries and over 10,000 international assignees.
International assignment pay packages can be designed in a variety of ways. The most common approach is to use the employee’s salary in their home country as the starting point, then adjust for cost of living and any other allowances, and tax. However, a growing number of companies are choosing an approach whereby host country local salary is used as the starting point with or without some additional benefits. This is more common when relocating employees between countries with similar or higher pay levels and economic development. Harrison continues:
“When choosing an expatriate pay approach it is essential for companies to be clear about the reasons behind the assignment so that their choice reinforces this. This will also help them to decide whether they wish to create equity among home or host country peers – something that has become even more complex as companies manage increasingly diverse nationalities in and out of different markets. And of course all this needs to balance against benefits and costs to the business.”
The currency in which salary is delivered will have implications too. For example, if paying in one currency rather than splitting it, IHR need to have a policy in place to ensure their employees’ buying power is maintained should currencies fluctuate significantly.
David Remedios has been Head of Consultancy at ECA International since 2007 and will be chairing ProGlobal 2015, Symposium’s seventh annual expatriate management and global mobility forum, with HRreview as media partner. As well as discussing in-depth the issues surrounding expatriate salaries, benefits and tax arrangements, the conference will cover all aspects of assignment management from setting policies and overcoming challenges in emerging markets all the way through to repatriation and retention.
Symposium’s head of conference production, Hayley Griffin, told HRreview:
“We are really looking forward to having David chair ProGlobal this year and we thank ECA International for all their support. The event will be ideal for all global mobility, international HR, reward, relocation or global talent professionals seeking to improve the success of their companies international assignments and will be a forum for delegates to tap into the knowledge of organisations such as ECA International”