Mainland China has the 2nd highest expatriate pay packages in the Asia Pacific region. This was one of the findings of the latest MyExpatriate Market Pay survey published annually by ECA International, the world's leading provider of knowledge, information and software for the management and assignment of employees around the world.
This is up from last year’s fourth position with the cost of an expatriate package having risen by 5% over twelve months. The value of a typical total expatriate package for Middle Managers in Mainland China is now USD 290 000. When taking into consideration China’s Tier 2 cities, this figure drops to USD 231 000.
When considering the cost of an expatriate package companies need to factor in three main elements: the cash salary, benefits – such as accommodation, international schools, utilities or cars – and tax. To assist companies relocating staff with benchmarking their packages against the market, ECA conducts its annual MyExpatriate Market Pay Survey of pay levels for expatriates around the world, including benefits, allowances, salary calculation methods and tax treatment.
Even though total expatriate packages have increased in Mainland China, the average salaries of Middle Managers in Tier 1 cities have actually decreased by nearly 4% over the past year. Not all Chinese cities require such high packages though. The cost of benefits provision in Tier 2 locations is still much lower than in Tier 1 cities and if they, alone, were to be taken into account, China would appear towards the bottom of the regional ranking.
The gap has widened between the total expatriate packages typically offered in Mainland China and Hong Kong, with the total cost of an expatriate pay package in Hong Kong falling by 2% over twelve months. The value of a typical expatriate package for Middle Managers in Hong Kong is now USD 267 000.
International assignment pay packages can be designed in a variety of ways. The most common approach, both in China and globally, 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, increasingly companies operating in the major Asian hubs adopt an approach, particularly for employees sent on a permanent one-way basis, whereby the host country local salary is used as the starting point with or without some additional benefits such as an allowance for accommodation or children’s school fees.
“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,” said Quane.
Japan is home to Asia's highest expatriate packages. On average, a package for an expatriate Middle Manager there is worth USD 329 000. The total package has fallen by a significant amount from last year’s total of USD 375 000, with the yen weakening significantly against the US dollar over the past year.
The situation in Singapore has been changing over the past decade or so, with a greater provision of host-based salary and benefits packages to expatriate staff. They can include reduced base salaries (average salary down 6% from last year), incentives, allowances and retirement plans. In the past 12 months there has been a significant drop of over USD 5 000 in the average salaries for Middle Managers. The average total expatriate package offered in 2015 is the lowest seen in Singapore in the past four years, now USD 239 400.
In Singapore, the most expensive part of the expatriate package is typically the benefits element: the value of these is second highest in the region after Hong Kong. The cost of providing certain benefits such as housing and education is typically the most expensive element of the pay package when relocating middle management staff.
Malaysia now has the lowest total expatriate pay package in the regional list – falling two places from last year, now behind Sri Lanka and Pakistan. The average cost of a total expatriate package in Malaysia now lies at just over USD 176 000.
Developing locations not always the cheap option
Low cost of living does not always translate into low expatriate packages. For example, in order to attract talent to some of the cheaper, less developed locations companies often need to provide greater incentives than they do when moving employees elsewhere.
Companies also need to be aware of the tax element of the package. This can considerably increase assignment costs, as in the case of India, where nearly half of the total expatriate package is consumed by tax.
The currency in which salary is delivered will have implications too. For example, if paying in one currency rather than splitting it, International Human Resources teams need to have a policy in place to ensure their employees’ buying power is maintained should currencies fluctuate significantly.
Notes to Editors
About ECA's MyExpatriate Market Pay Survey
ECA's MyExpatriate Market Pay Survey looks at pay levels for expatriates around the world, including information on benefits, allowances, salary calculation methods and tax treatment.
The results, free to participants, enable companies to benchmark their expatriates' actual salaries against the market. More than 320 companies took part in the survey covering 170 countries and over 10 000 international assignees.
Figures used in this release were collected in the second half of 2015 and refer to a Middle Manager position based on 80 ECA Points. ECA Points is a job evaluation system that measures the influence, scope and responsibilities of a job.
There are a number of ways in which salary packages for expatriates may be calculated. The information provided by participant companies in our survey relates to home and host-based salary systems as well as locally-hired and localised expatriates and expatriates on indefinite contracts.
Certain types of allowances are specifically excluded from the analysis in the reports. These are one-off payments such as allowances for outfit, furniture, disturbance and relocation.
Benefits values are based on standard ECA assumptions* and have been derived from data in ECA's accommodation and benefits reports to provide an estimate of the cost of providing these benefits. The actual costs or allowances paid to cover these benefits vary widely according to each company's policy.
Tax figures used here refer to employee taxes and do not take company contributions into account. For ease of comparison, it is assumed that cash allowances are paid to employees to cover the cost of any benefits provided.
*The accommodation figure is representative of the cost of housing two adults and one child. Utilities covers heat, light, water and telephone charges. Education assumes one child attending a local international school. The car figure covers annual running costs and is based on a standard cars value (2000 cc), depreciated over five years.
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