Packages for expats have become less generous in many emerging economies as more senior positions have become localised. If you make a move without paying close attention to your overall financial package, you could find yourself shelling out more than you expect.
Knowing what to ask for — and what you should be able to get — is a critical first step in negotiation.
“If your company could get a local to do the same job more cheaply, they would – they want you because you can get the job done,” said Tim Foulds, a British expat and bureau manager for research company Euromonitor in Sydney.
Assess your offer
How do you know if you’re also being given a good deal, particularly when expat fringe benefits can be worth significantly more than your base salary?
First off, your package offer should include all or most of the basic items: accommodation allowance, relocation costs, healthcare cover, an annual trip home and an education allowance for children.
But seeing those in your offer is just the start. You’ll need to dig in to figure out what they’re really worth.
Start with your accommodation allowance, a core expat perk, as it may not buy you the level of housing you are expecting. In many sectors, particularly banking, expat packages have become less generous since the financial crisis, meaning you’re far less likely to be able to afford a luxury pad in a swanky area of town. Headhunters advise prospective employees to speak to other expats in the city they are being relocated to, before signing their contract. They should be able to give a realistic view on housing costs, where to live and on other typical expat benefits such as healthcare, school fees or trips home.
"To live in an area that feels safe you have to rent larger properties [in Johannesburg] … and for that you have to pay higher rents,” said Victoria Taylor, a senior fashion buyer from London now working in Johannesburg. “But you wouldn't know this exactly when you are negotiating on your salary package."
If you are moving from a home you own, the new company should also be responsible for covering the cost of a management company to handle renting it out and maintaining the property while you are abroad.
Headhunters also say one paid trip home annually for you and your family is typical. Depending on the seniority of the position offered, you can negotiate business or first class flights with your package.
Foulds advises would-be expats to make a realistic calculation of all living costs and to research the local market before agreeing a financial package. Housing costs may be cheaper in the new country, but things like groceries and car fuel may cost four times more than back home. In all cases, knowledge is power.
For shorter working periods abroad, say six months or less, employers will be more likely to pay for everyday costs such as meals and laundry or offer a per diem payment as well, said Lee E Miller, a managing director for NegotiationPlus.com who acts as mediator in relocation packages for globetrotting executives.
James Hertlein, managing partner of the Houston office of global search firm Boyden, said many companies will pay for a house-hunting trip for you and your partner, even to far-flung destinations and “sometimes even before the contract is signed.” Once in situ, you should expect at least one month – and up to three – in paid for temporary accommodation for you to find a permanent residence.
A little sleuthing on your part can uncover various housing perks that are specific to the country where you’ll be living.
“Find out as much as possible about local legislation as possible,” Foulds said. For instance, a friend told Foulds about something called the Living Away from Home Allowance, a little-known Australian perk paid to employees to compensate them for the additional expenses incurred from running a second home. It was originally designed for miners and others who kept a home residence but also had to pay rent in a town near the mines.
It turned out that “expats on temporary visas were also eligible as long as they owned a property in their home country,” Foulds said. The allowance paid about 70% of his rent when he moved to Sydney.
Typical overseas postings include a “foreign service premium,” a temporary hike in your salary for the period while you are away. This takes into account the quality of living in the relocation city and is meant to compensate for the inconvenience of living away from home.
Although these tend to be less generous than they were a decade or more ago, someone making a lateral career move from New York to London should still expect a premium of around 10%, said Hertlein.
For so-called “hardship” locations such as Dhaka in Bangladesh or Caracas in Venezuela, where there could be security concerns or less developed infrastructure, this premium could be as much as 60%, he said. And in more dangerous cities such as Baghdad or even Sao Paolo in Brazil executives should be offered a security allowance, which could include a driver and security personnel and, for senior executives, even include an armoured vehicle.
If you think the premium you’ve been offered isn’t high enough, do your research. Ask other expats and check out the city's ranking in consultant Mercer's quality of living rankings. The lower its position, the larger the premium you should be offered.
You should also receive a monthly currency equalisation payment to offset any risk to your salary. Being paid in US dollars is great, but if the currency is stronger in the country you are heading to, then the company needs to adjust for that in your pay so you aren’t at a loss.
All in the family
If you are moving overseas with a partner or family, expect their relocation and education costs, as well as the fees for an education consultant, to be covered too. Whether or not you get education costs can be a deal-breaker in some countries, particularly China, where private schools fees can run up to $100,000 a year, sometimes more.
Hertlein said a typical school fees allowance per child is around $20,000 per year. Many companies also offer support for spouses or partners, which can include advice on settling in, help in finding a job or in securing a work visa.
“Companies are growing in their recognition of the importance of ensuring the spouse is happy,” as it makes it less likely that an employee will want to return home before their term is up, said Hertlein.
Don’t ignore other benefits such as health club membership, foreign language tuition or tax advice, a potentially highly valuable benefit for managing your financial affairs.
Rates of tax can vary significantly between countries and you may also face compulsory social security contributions to cover the costs of medical care or other public services. Expect your employer to pay for the services of an experienced local tax adviser who can minimise the tax burden and negotiate the local tax code and negotiate double taxation treaties to ensure you don’t pay too much tax.
Know when to ask
Perhaps the most important aspect of negotiating the best expat package you can is to wait for the right time. Don’t begin financial negotiations until you’ve at least been verbally offered a job, Miller said.
Before you make requests, ask other expats in your company about what they were able to negotiate to find out if there have been exceptions or more generous perks in some locales or accommodation categories than others.
These data points can strengthen your position when it’s time to ask for more than what you’ve been offered to go abroad.
But, added Foulds: “When all the negotiating gets tough, just remember you're off to foreign parts to broaden your horizons and have some fun, not just to make as much money as possible.”