Nov 29, 2010


Add a note hereHousing
Add a note hereHousing allowances, where paid, are sometimes built into the balance sheet method of remuneration but it is more common for them to be treated as separate items. Although there are some employers who provide free accommodation for expatriates up to a certain ceiling, there is now an increase in those who require the employee to make a contribution to housing costs in the form of a 'housing norm deduction'. The level of contribution varies, but is usually around 10-15 per cent of gross notional salary. As this obliges the employee to rent out the home property, the company will usually meet the cost of a property management company to handle home-base rental formalities. The majority of employers strongly recommend that the expatriate retain the home property rather than sell, thus avoiding the risk of re-entering the property market during a boom period. Letting property, of course, is not without risk but this seems to be the preferred practice of a growing number of companies.

Add a note hereUtilities
Add a note hereThe cost of utilities can be exorbitant in certain overseas locations - particularly in hot climates where the electricity bill is distorted by the constant use of air-conditioning. Most companies accept that it is their responsibility to make bottled gas, water, electricity and telephones available to their employees abroad but some exact a contribution from the expatriate - usually no more than 20 per cent - to discourage them from wasting power or making too many extravagant international telephone calls. Other companies put a ceiling on the total cost of reimbursing rental and utility costs.

Add a note herePensions
Add a note hereMany organizations aim - for as long as legally possible - to retain their expatriates in the home country pension scheme, often based on a notional salary, with the rationale that the expatriate is likely to spend his or her retirement in the home country. Once the maximum period of 'temporary absence' is exceeded, organizations typically operate offshore umbrella schemes or provide an overall guarantee of target benefits. Not only is this approach potentially expensive, but it is also based on traditional pension provision in the shape of defined benefit pension schemes and little scope of cross-border transferability of pensions.
Add a note hereBoth these premises are no longer fully applicable in the current environment where defined contribution pension provision is becoming the norm, where - at least within the EU - cross-border pension transferability is eased and where the concept of lifetime employment and the resulting implication of adequate pension provision being the responsibility of a caring employer has largely disappeared. In addition, limitations of tax-approved and therefore tax-favourable pension provision by employees in many countries means that the previous cost advantage for companies to deliver a large part of remunerations as pension is no longer as significant. A model for the future, which should be considered, is therefore to decide on a competitive overall level of remuneration (including the value of pensions) but to deliver this value in a different mix, for example through shorter-term savings vehicles or stock-based reward.

Add a note hereCar
Add a note hereCars are a common prerequisite for expatriate staff of all grades. In many countries, for status or security reasons, a chauffeur/guard is provided by the company in addition to the car. In certain European locations, however, the company car is not as tax-efficient as a benefit as it is in the UK and it is not, therefore, local custom to provide any but the most senior employees with a car - or those whose job demands it, such as salespeople. Sensible multinational companies fall in line with market practice in such territories. Likewise, although expatriates may be entitled to a car in, for instance, Hong Kong or Tokyo, they may elect to waive the benefit on the grounds that driving in such over-populated cities is more difficult and more frustrating than using the public transport system.

Add a note hereEducational Expenses
Add a note hereMost companies will pay for the children of expatriates to be educated in the host country. The cost is rarely as high as subsidizing home country (boarding) school fees. In many overseas territories, there may be a limited choice of foreign language schools. Where the method of instruction is, for instance, American, it may be appropriate for the children of UK expatriates to attend only for primary education, owing to UK university entrance requirements.
Add a note hereMany companies will take the view that it is unreasonable to expect students following one syllabus, such as GCSE, to be interrupted by a transfer to the US curriculum and will assist with UK school fees. The level of assistance varies but is commonly a percentage (such as 75 per cent) of basic boarding and tuition expenses up to a set annual maximum. It is most uncommon for companies to finance 'extras' such as fencing, tap dancing or scuba diving!
Add a note hereSome companies place a financial ceiling on their school fee assistance, while others apply age or year minima and maxima. A few make provisions for kindergarten in the host country. In general, it is fair to say that global policies are a thing of the past. Cost-conscious multinationals are now careful not to pay for UK boarding school fees unnecessarily but aim to take a flexible country-by-country approach, simultaneously assessing the individual requirements of each expatriate family.

Add a note hereHealth Insurance
Add a note hereIt is essential that all overseas personnel are adequately covered for private treatment by health insurance; few countries have national health services as sophisticated or generous as that of the UK. The cost of private medical care in the United States, for instance, is exorbitant and the national provisions are almost non-existent. The major UK schemes such as BUPA and PPP have international plans for which the premium rates will vary, depending on the country assignment and the cost of medical treatment there.

Add a note hereHolidays
Annual Leave
Add a note hereHoliday entitlement is usually in line with or slightly above home country practice, 25 or 30 working days being the norm. Comparatively ungenerous host country practice - such as the standard fortnight in the USA - tends to be overridden. Particularly high hardship regions may encourage companies to allow for holidays in excess of 30 working days.
Public Holidays
Add a note hereHost country practice is usually followed with respect to public holidays although, in non-Christian countries, certain UK public holidays such as Christmas Day and Easter Day may be allowed in addition to the local festivals.
Add a note hereHome Leave
Add a note hereIf a norm had to be quoted, it would probably be a fair generalization to suggest that companies will pay for expatriates and their families to fly back to their home country once per year. However, the variations on this practice are too numerous to mention and are increasing all the time as the issue of home leave becomes more emotive and a matter of as much heated negotiation as the annual pay review.
Add a note hereLocation affects the frequency of home leave; areas of extreme hardship often merit a second home trip, while areas of low hardship, separated from the home country by a prohibitive air fare, such as Australia, might not even qualify for an annual return trip. Indeed, it is quite common for one home trip per tour (usually three years) to be provided from the Antipodes.
Add a note hereMarital status, however, has the most profound effect upon the regularity of home trips. Employees on married accompanied status, particularly those with children, will, as a rule, be provided with the minimum (ie, one return trip per annum). Not surprisingly, single status or married unaccompanied personnel fare rather better. Where companies distinguish between those two latter categories, the single-status staff tend to be provided with one extra trip per year on the grounds that it is cheaper for the employer to pay for two single fares than one family trip. In a company where this distinction is understood by the staff, it acts as an incentive for single-status employees to volunteer themselves for expatriate posts. Married unaccompanied personnel, by contrast, would be likely to benefit from three return trips per annum in an effort, on the part of the employer, to minimize their separation from their families. In addition, employers would typically be very flexible over how travel is arranged, up to the same cost as the agreed package. So the expatriate might be able to exchange one home trip using business class for economy-class tickets for his or her partner/family to visit the host country. In some organizations a maximum travel budget for family visits either way is agreed.


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