Responding to the Israel-Iran crisis: Implications for location allowances

The Middle East remains at the centre of global attention following the recent escalation of hostilities between Iran and Israel. A massive exchange of airstrikes, missile and drone attacks inflicted devastating damage on both sides. The subsequent bombing of Iran’s nuclear facilities by the United States added to the sense of a situation spiralling dangerously out of control, one which could potentially engulf the wider region.

Then, suddenly, a US-brokered ceasefire was announced which, at the time of writing, appears to be holding. However, the truce remains fragile, and with reports of the US strikes having caused less damage to Iran’s nuclear capability than expected, the threat of the situation re-escalating persists.

Duty of care

Amid ongoing turmoil, companies with international assignees in affected locations are confronted with the critical task of evacuating their staff. Many organisations have already withdrawn non-essential employees from Iran and Israel, as well as the families of essential staff who must remain on the ground. Despite the ceasefire declaration there is little sign yet of staff returning.

As part of their duty of care, organisations are responsible for safeguarding their employees’ well-being. It is therefore imperative to have a clear, comprehensive evacuation plan in place to ensure that all personnel can be relocated from danger swiftly and safely.

An effective crisis management plan, key points:

1. Pre-arrange contracts with trusted evacuation and medical service providers.
2. Conduct regular crisis drills and deliver training on emergency protocols.
3. Establish a clear escalation framework with designated decision-makers for each threat level.
4. Continuously monitor local risks and issue timely alerts to staff.
5. Prioritise evacuation based on vulnerability and operational necessity.
6. Coordinate closely with embassies and local authorities throughout the crisis.
7. Provide post-evacuation support, including medical care and counselling.

The safety and security of staff must always remain the top priority for global mobility teams. However, during times of crisis, a common question arises: “Will location allowances be increased?” While financial compensation cannot solve every challenge - and practical support is often far more valuable in emergency situations - it is entirely understandable for assignees to seek reassurance that they will be fairly compensated for the additional hardships they may be encounter.

The impact on location allowances

ECA’s location ratings systematically factor in the presence of war and the risks it poses to expatriates, with the presence of military conflict comprising a significant component of the Socio-Political Tensions assessment. Following the October 7th attacks in 2023 the rating for Israeli locations was raised to its maximum level, and a similar adjustment was made for Iran after the escalation in October 2024, when an Iranian missile attack on Israel was countered with massive airstrikes.

These increases were implemented not only to reflect the severity of those events but also to acknowledge the heightened potential for further incidents, especially with clashes between Israeli forces and Iranian proxies having intensified across multiple fronts since October 2023. As a result, recommended location allowances for many expatriates in these two countries increased accordingly. Indeed, many now receive a location allowance of 30% for Tehran, the maximum allowance available in ECA’s standard recommendations.

Example impact on location allowances before the current escalation:

Year	Event	Sao Paulo to Jerusalem	Sao Paulo to Tehran
2022	Pre-escalation	15%	25%
2023	October 7th attacks on Israel	20%	25%
2024	Missile and airstrike exchange	20%	30%

Of course, once an element of the scoring reaches its maximum ceiling, it cannot be increased further. Therefore, those anticipating higher location allowances due to the recent escalation may find their expectations unmet. However, any crisis - whether natural or man-made - can directly or indirectly affect other elements of the scoring. For example, it was not only the presence of the conflict itself that led to significant increases in location allowances for many expatriates in Israel in 2023. The suspension of international flights contributed to a higher External Isolation score, while the Health score was also raised to reflect the impact of the crisis on assignees’ mental wellbeing.

Military conflict can impact on a number of scoring factors:

Out-of-cycle assessments

ECA reviews all location ratings annually, with updated data published in mid-November. In times of crisis, conditions can change rapidly, so it is prudent to take a longer-term perspective rather than immediately reacting and adjusting the ratings outside the regular review cycle. Nevertheless, if a crisis erupts, which is likely to persist, ECA will consider an interim update - and given the severity of events in Iran and Israel, we have re-assessed the location ratings for cities in both countries.

Some aspects of the scoring for each location have increased as a result of these interim analyses, but as we have seen, the scores were already elevated owing to the potential for such an escalation. Therefore, the impact is not as pronounced as some might expect. Still, some expatriates would indeed see an increase in their location allowance depending on their home location. For those using ECA’s new “host-based” scoring approach Israeli locations retain the same location allowance, but Tehran now moves into the top band with a recommended allowance of 30%.

To apply or not to apply?

Rather than applying higher allowances now (where applicable) companies may prefer to see how the situation in Israel and Iran progresses, perhaps even waiting to see the results of the scheduled Location Ratings update in November. Most companies would typically wait to be sure that the crisis will continue before making any changes. After all, crisis situations can abate as quickly as they arise, the tenuous ceasefire now in place highlighting the merit of this approach. Additionally, once a higher location allowance is paid out it can be difficult to reduce - particularly if assignees perceive that little has improved. Equally, the situation could deteriorate further, requiring further changes.

However, other companies may want to go ahead and apply these out-of-cycle increases, especially if there are staff still on the ground facing deteriorating living conditions. Whether you reference ECA’s “relative” method or the new “host-based” approach when determining location allowances, contact your ECA client services representative to determine if your assignees in Israel or Iran would now qualify for an increased allowance.

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