The UK has the highest expatriate packages among top financial hub countries 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 cost to companies of a typical total expatriate pay package for middle managers in the UK is around US$430,000 per year on average.
When considering expatriate package costs, companies need to factor in three main elements: the cash salary, benefits – such as accommodation, international schools, utilities or cars – and tax.
“Depending on how the 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 Singapore. However, while the tax component of the package is small in Hong Kong and Singapore it has a huge impact on overall costs when relocating someone to the UK.”
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.
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. However, a growing number of companies are choosing an approach whereby host country local salary is used as the starting point with or without some additional benefits. This is more common when relocating employees between countries with similar or higher pay levels and economic development.
“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.
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.
For the purposes of comparison this press release is based on the 23 countries which have cities appearing in the top 40 of The Global Financial Centres Index (GFCI) 16. 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 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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