The success or failure of an overseas assignment can often be impacted by the quality of the expat package provided to assignees when asked to work overseas.
A competitive compensation package will not only help to attract the best available candidates for the job from within your organisation or when recruiting externally, it will also ensure that your overseas assignees feel fully supported financially throughout the lifecycle of their assignment.
The following guide provides an overview of what employers should be looking to include in a comprehensive expat package to maximise the prospects of a successful assignment outcome for both the assignee and for your business.
What is in an expat package?
The expat package is the combination of basic salary plus benefits in kind offered to a prospective assignee to undertake an overseas assignment. This can be made up of all different types of benefits, from additional living and housing costs to healthcare cover and international schooling fees for dependants.
Traditional expat packages are becoming rare these days, where employers are often able to recruit staff locally, and where unable to source local talent are seeking only single expats to avoid expensive relocation costs for entire families.
However, in circumstances where you need to incentivise a key candidate in your home country, especially for an important long-term assignment, you will need to remunerate accordingly. Below we consider some of the main aspects of a comprehensive expat package, although this list is by no means exhaustive.
The starting point of any expat package is the assignee’s salary. This will depend on the industry, the role and level of responsibility that the assignee will hold.
However their overseas salary should at least match, if not exceed, the typical salary an employee would get paid in their home country for doing the same job.
In some cases, you may be looking to reduce the gross salary to account for generous tax policies in the host destination, although this could negatively impact an assignee’s perception of their value as a prospective assignee.
The individual assignee will still want to feel their sacrifice of working away from home or relocating is being adequately compensated, regardless of any individual gains from the whole travel experience.
Depending on the nature of the host destination, the salary could also include a location or hardship premium for taking the assignment in the first place. This type of additional payment can be commonplace where an assignee is asked to work in a high-risk destination or hostile environment, for example, where living conditions are sub-standard, the climate inhospitable or the infrastructure poor.
Cost of living allowance (COLA)
A cost of living allowance is in addition to an assignee’s salary and is designed to reflect any additional daily expenditure in the host destination. Cost of living adjustments are based on the difference in the cost of necessary goods and services on a day-to-day basis between the host and home locations.
By way of example, where an individual’s net spendable home income is £40,000, ie; what they would be expected to spend to maintain their current standard of living, and it would cost 30% more to live in the host location, the salary would need to be adjusted by an additional £12,000 (30% of £40,000). This may also need to be readjusted throughout the course of the assignment to reflect any fluctuations in currency exchange rates and inflation.
The cost of living allowance is to ensure that an assignee is no better or worse off financially when living overseas at any given time. However, where the host location is less expensive to live, most employers will not require a reduction in salary, thereby effectively increasing the assignee’s standard of living for the duration of the overseas assignment.
For commuter and short-term assignments, assignee relocation costs will not be necessary, but for long-term assignments and permanent relocations these costs should form an integral part of the expat package.
Relocation costs can include removal or storage expenses, depending on whether or not an assignee is looking to have all their furniture and personal belongings shipped overseas. This will also include flights costs for the assignee and any immediate family members relocating with them.
Another important component of relocation is the cost of any home visits throughout the lifecycle of the assignment, and possibly even a pre-assignment trip to enable the assignee and their relatives to familiarise themselves with their foreign surroundings prior to starting their new life overseas.
Housing, either in part or in full, can provide a huge incentive for assignees to relocate.
The cost of housing will be determined by the availability of suitable housing in the host destination, ideally in areas where an assignee can live near other expats and have a relatively short commute to their new workplace, as well as being close to international schools if they are relocating with dependants.
These types of property can often be in high demand so can be more costly than other accommodation in less appealing areas of a host region, but good quality housing in a decent neighbourhood is likely to be high on an assignee’s requirements when moving abroad with their family on a long-term assignment.
For an assignee moving with their family they will need to cover the cost of schooling for any children. As with good housing in expat areas overseas, international schools that offer a high standard of education can be expensive, but may well be a deal breaker for the assignee with dependants.
This can be particularly important if an international school presents the only viable option in the host destination, especially where there would be language or cultural barriers for their children to be schooled locally within a foreign education institution. An international school will also ensure that the assignee’s children can continue with the same curriculum.
The offer of a company car for overseas assignees is less common these days, although you may still want to include a travel allowance to help offset motoring and maintenance expenses or to cover public transport costs.
In some parts of the world, depending on the host destination, it may also be better for an assignee to hire a driver rather than purchase their own car or rely on public transport, where the cost of this will need to be included in the expat package or in some way compensated for where necessary.
The provision of quality healthcare or international health insurance should be a mandatory element of any expat package. As an employer you have a legal duty to ensure the health and safety of your employees, so providing access to proper healthcare is imperative in discharging that duty. It is also an important aspect of showing your employees that you value their health and wellbeing.
Ideally, any healthcare plan should include access to a 24-hour helpline that assignee’s can use to have any medical or security questions answered, or to facilitate the provision of emergency assistance, at a time when an assignee’s usual points of contact would not be available.
The expat package is not just about providing financial incentives for the assignee. A comprehensive package should also include a range of support services that may be offered both prior to deployment and during the lifecycle of the assignment to help the assignee integrate into their host destination.
This could include a pre-deployment programme of cross-cultural training and education for overseas assignees and their families. You may also want to offer intensive language classes to ensure a more positive employee experience and, in turn, a more successful assignment outcome.
The provision of an ongoing benefit and support program while the assignee is overseas could be outsourced to a local specialist who can help novice expats to settle into their new surroundings and signpost them to different services. You should also provide key HR contacts back home to address any personal or professional problems during the course of the assignment.
Often overlooked, the provision of an adequate repatriation package can help you retain key talent within your organisation at the end of an assignment. This should include the assignee’s relocation costs back to their home country. This should also include a suitably senior role to return to home to, or at least the potential for career progression matched to the assignee’s industry experience.
It is important to remember here that expatriates can become an extremely valuable commodity given their overseas experience. To avoid wasted expenditure in an overseas assignment and the potential loss of global talent from within your organisation, you should ensure that your assignee is keen to return home to work for you and the incentives are there to do so.
Expat package essentials
The extent of any expat package will often be determined by the duration of the assignment, the host destination, the assignee profile and their personal family circumstances. Depending on the context, the assignee may also be more or less demanding, while considering the opportunities for career progression that an overseas experience may offer them.
For commuter and short-term assignments, relocation costs will not be needed, while for long-term assignments and permanent relocations, the costs can quickly start to stack up. In most cases, however, prospective assignees may be looking for an expat package that can either offset or completely cover normal living expenses, making the overseas experience financially profitable for them.
For many, especially for veteran assignees and for whom global travel in itself may offer little incentive, a generous expat package may be the price you will have to pay to persuade them to take on new assignments abroad. That said, a cost effective balance must still be struck between adequate compensation for the expat and the likely net revenue this will return for your business.
Explaining the link to assignees between the different elements in the expat package can help to justify the total value of the package, as well as show how one allowance could compensate for another one that is perceived as low by the assignee. In particular, tax considerations should be fully explained in how certain allowances and benefits are delivered, where in some host destinations the provision of benefits in kind can reduce or eliminate the tax liability for assignees, thereby making the overall expat package more attractive.
By articulating a clear Employee Value Proposition (EVP) for assignees, a proposition that is not limited to the allowances and benefits in the remuneration package but can include things like career progression, assignees are more likely to see the true benefits of the expat package on offer.
DavidsonMorris are employer solutions lawyers with specialist experience in global mobility consultancy and supporting businesses with their international workforce needs. For advice and support with developing an expat package solution that suits your requirements and budget while appealing to key talent, speak to us.
Expat package FAQs
What is a full expat benefits package?
There is no definitive list as to what a full expat benefits package should contain where much will depend on the nature of the overseas assignment, the host destination and the assignee’s personal circumstances, including whether the assignee’s family are relocating with them. However, a typical expat package should fully compensate an assignee for working overseas, from cost of living and relocation costs to repatriation costs at the end of the assignment.
What does an expat package include?
An expat package can include a number of different benefits and allowances to compensate an overseas assignee for working abroad. In addition to a salary that at least matches the typical salary an employee would get paid in their home country for doing the same job, the package may include relocation costs, housing costs, healthcare costs, travel costs, schooling costs for dependants and any additional cost of living in the host destination.
What does equalization mean?
In the context of an overseas assignment, equalization refers to the way in which allowances and benefits in kind are delivered to ensure that the assignee is no worse off financially in the host location than their home location. The cost of living allowance is the most obvious example, where a high cost of living allowance in a more expensive host location will ensure the assignee’s purchasing power for goods and services remains broadly the same.
Last updated: 3 March 2020