[23 Jun 2014] According to the latest survey from ECA International, Hong Kong is the fifth most expensive location in the region for expatriate packages. ECA’s latest MyExpatriate Market Pay Survey shows that the value of the overall package for expatriate middle managers in Hong Kong is approximately US$273,000 per year on average.
“An expatriate package usually consists of a cash salary; benefits – such as accommodation, international schools, utilities or cars – and tax,” said Lee Quane, Regional director – Asia, ECA International. “All three components need to be added to get an accurate idea of the overall cost to companies of providing this package.”
Pay packages for expatriates can be designed in a variety of ways. The most common approach when determining compensation levels for executive level staff is still to use the employee’s salary in their home country as the starting point, then adjust for cost of living, any allowances provided by the employer, and tax. In designing expatriate remuneration policies, companies need to take into account whether equity with the expatriate’s home or host country peers is more desirable; salary levels and typical benefits in both the home and host locations; and how generous the business needs to be in order to incentivise talent to accept an international posting in the context of their particular company and industry.
Expatriates packages in tier-1 Chinese cities are more costly than Hong Kong
China ranks fourth highest in the region for total expat packages, overtaking Hong Kong. While cash salaries tend to be similar in tier-1 cities such as Beijing or Shanghai and tier-2 cities such as Chongqing or Xiamen, the same is not true of benefits. Although the cost of providing these is increasing faster in second-tier locations, there is still a significant discrepancy between the benefits received by expatriates in tier-1 cities compared to those in tier-2 locations.
Japan, where both living costs and tax levels are high, remains home to Asia’s highest expatriate packages. On average, a package for an expatriate middle manager there is worth US$379,000. Australia is in the second place, followed by India.
Although expatriate packages are still highest in Japan, the depreciation of the yen over the same period means that expat packages now cost 10% less than last year in US dollar terms. The same trend is the reason that providing benefits to expatriates in Hong Kong and Singapore is now more expensive than it is in Tokyo.
“The currency can have a big impact on overall costs to a company,” said Quane. “Depending on the pay method used and administrative considerations, a company may decide to split pay between the expatriate’s home and host currency, or choose to pay the whole package in just one currency. If a company chooses the latter, it will need to design a policy that can withstand exchange rate fluctuations.”
Source: ECA International
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