Once again, the United Kingdom has the highest global expatriate packages among the top 40 financial hub countries*. 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. The cost to companies of a typical total expatriate pay package for Middle Managers in the UK is around USD 390 000 per year on average.
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.
The total cost of expatriate packages in the UK, in US dollars, has fallen by 9% in the past year. This is mainly due to a weakened pound against the US dollar making the UK comparatively cheaper. But typical middle manager expatriate salaries also fell in local currency, down GBP 1 500 in the past year. Depending on how a 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 the United States. However, while the tax component of the package is small in Hong Kong it has a huge impact on overall costs when relocating someone to the UK.
Countries like Qatar, United Arab Emirates and Saudi Arabia with no personal income tax are all near the bottom of the ranking, even though salary costs are high by international standards. The highest middle manager expatriate salaries are found in the UAE and Saudi Arabia. However, as the employee pays no tax on their salaries or benefits in these countries the total cost is low by international standards with both sitting in the cheapest four locations in the global rankings.
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.
“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 Harrison.
Japan is home to Asia's highest expatriate packages and the 2nd highest on the global scale. 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 gap has widened between the total expatriate packages typically offered in Singapore and Hong Kong, with Hong Kong rising to 4th place in the global rankings. A typical expatriate package offered in Hong Kong is now USD 267 000. Although both locations have seen a decrease in the total cost of packages to companies, Singapore’s overall packages have experienced a more notable decline because of the relative strength of the Hong Kong dollar.
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. Host-based salaries can include reduced base salaries (average salary down 6% in US dollars from last year), incentives, allowances and retirement plans. The average total expatriate package offered in 2015 is the lowest seen in Singapore in the past four years, now USD 239 400.
Mainland China has moved up to the 3rd highest in the world having overtaken locations such as France and Brazil in the past year. A total package for an expatriate Middle Manager in China is worth over USD 290 000, up 5% in US dollars from last year. China has experienced the largest increase in the Asia Pacific region this year.
“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,” said Lee Quane, Regional director – Asia, ECA International. “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 rankings”.
Australia has the sixth highest expatriate pay packages in the world. This is down from last year’s 4th position with the cost of an expatriate package having fallen by 12% over twelve months when converted to US dollars. This fall is despite modest rises in salary, benefits and tax in the total costs in local currency. The value of a typical total expatriate package for Middle Managers in Australia is now USD 265 000.
Malaysia now has the 3rd lowest (ranked 25th) total expatriate pay package in the global list, 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.
* The list of countries used here is based on countries which have cities appearing in the top 40 of The Global Financial Centres Index (GFCI) 19 – March 2016. The GFCI has been produced since 2007 by commercial think-tank the Z/Yen Group in order to examine the major financial centres globally in terms of competitiveness. It draws on data from the United Nations, World Bank and EIU as well as over 29,000 financial centre assessments from an online questionnaire.
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.
About ECA International
ECA International is the market leading provider of knowledge, information and technology that enables businesses to manage their international reward programmes.
Partnering with thousands of clients on every continent, we provide a fully integrated suite of quality data, specialist software, consultancy and training. Our unparalleled insights guide clients as they mobilise their most valuable resource: people.
We make the complex world of international mobility simple, providing clients with the expertise and support they need to make the right decisions - every time.
ECA International: Mobility solutions for a world that’s constantly moving.
Follow ECA on Twitter: @ECAintl