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Expat pay package: Which country is most expensive for employers?


August 12, 2016
 

The United Kingdom has the highest expat package costs when compared with other global financial hub nations.

According to findings from the ECA International ‘My Expatriate Market Pay Report’, the average cost of an expat pay package for middle managers in the UK equates to more than $390 000 a year.

Mark Harrison, Manager of Remuneration Services at ECA International, said: "The total cost of expatriate packages in the UK, in US dollars, has fallen by nine per cent 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 £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.”

The survey found that while salaries were high in countries such as Qatar, the UAE and Saudi Arabia, as they have no personal income tax they came close to the bottom of the cost rankings.
 
According to the report, when considering the cost of an expat package, companies need to factor in three main elements: the employee’s salary, benefits such as accommodation, international healthcare, schools, utilities and tax.
 
"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." Harrison said.

Expatriate Package Cost – Top 10 Countries:

  1. United Kingdom – $390,189
  2. Japan – $328,793
  3. China – $290,254
  4. Hong Kong – $267,003
  5. Turkey – $266,298
  6. Australia – $264,963
  7. Argentina – $255,648
  8. France – $255,288
  9. United States of America – $252,903
  10. Switzerland – $246,971
"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," Harrison explained. "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," he added.

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