Hong Kong has the fifth highest expatriate packages in the region after Japan, Australia, India and Mainland China according to ECA International, the world's leading provider of knowledge, information and technology for the management and assignment of employees around the world. The value of a typical total expatriate pay package for middle managers in Hong Kong is around HK$2.1 million (US$272,000) per year on average – slightly down on the previous year and lower than in Shanghai and Beijing.
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.
Schooling, housing a big expense for companies sending staff to Hong Kong
“Hong Kong can be expensive for companies to relocate their staff into – largely due to the cost of providing certain benefits such as housing and education. Remove those and it falls from 5th to just 15th in the regional ranking thanks to low tax rates,” said Lee Quane, Regional director – Asia, ECA International.
“However, Hong Kong is still one of the more attractive locations in the region and this is a big plus in terms of motivating employees to come here. Furthermore, there are ways in which companies can contain costs. We see many revising housing allowances down or using an approach based around local salaries topped up with additional benefits rather than using the employee’s salary at home as a starting point. This has contributed to the value of the total package falling slightly on average since last year.”
International assignment pay packages can be designed in a variety of ways. The most common approach, both in Hong Kong 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.
Beijing, Shanghai more expensive than Hong Kong for expatriate packages
Mainland China overtook Hong Kong last year in the ranking. Although China remains 4th highest in the region again this year, the gap between the two locations has grown. A total package for an expatriate middle manager in Mainland China is worth over HK$2.14 million (US$276,000).
“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 those cities, alone, were to be taken into account, Mainland China would appear towards the bottom of the regional ranking above only Malaysia and Pakistan,” said Quane.
Expatriate packages in Singapore, ranked 7th, are still lower than in Hong Kong. However, with the cost of the package having dropped slightly there while increasing in Singapore, the gap between the two continues to narrow.
Japan, is home to Asia's highest expatriate packages. On average, a package for an expatriate middle manager there is worth HK$2.9 million (US$375,000).
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 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, IHR 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 167 countries and over 10 000 international assignees.
Figures used in this release were collected in the second half of 2014 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 car (2000 cc), depreciated over 5 years.
About ECA International
Recognised since 1971 as a world authority in its field, ECA remains a leader in the provision of knowledge, information and technology to inform, guide and support managers handling compensation and benefits for international workers moving around the world. ECA offers organisations of all sizes an unrivalled portfolio of data, calculation aids, salary management software, reports, guides, surveys and consultancy to help them structure and manage their international rewards programmes for long-term, short-term and permanent moves.
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