Expatriate Pay: U.K. Most Expensive Destination for Expat Assignments

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By Rick Vollmar

May 14—The average annual pay-and-benefit package offered middle managers posted to the U.K. is $430,000, the highest among the 23 countries with cities appearing in the top 40 of the Global Financial Centers Index, according to ECA International, a provider of systems for the management and assignment of international employees. The cost of posting an expatriate to the U.S. ranked ninth in the ECA listing at an average $273,000 a year.

ECA's MyExpatriate Market Pay Survey is conducted annually and examines benefits, allowances, salary calculation methods and the tax treatment of compensation and benefits.

Factors

“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,” ECA's manager of remuneration services Mark Harrison was quoted in a May 13 press release. “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 U.K. 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 U.K.”

“In the U.S., the most costly element of the package is benefits provision, while the base net cash salary is low relative to many other countries in the list,” Harrison said. “For example, that part of the package is lower than it is for China and Brazil. In order to incentivize employees to accept an assignment to these countries, companies will often grant additional allowances on top of the base salary that aren’t necessary when sending staff to the U.S.”

Alternatives

According to ECA, the most common approach to structuring an expatriate compensation package is to adjust an employee's home-country salary for differences in the cost of living, although employers are now more frequently choosing to take the host country local salary as the starting point, particularly when relocating employees to a host country with similar or higher pay levels and economic development compared to the home country.

“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 said. “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.”

To contact the reporter on this story: rvollmar@bna.com

More than 320 companies took part in ECA's 2015 survey, accounting together for over 10,000 international assignees in 167 countries. Data were collected in the second half of 2014.

Additional information is available at www.eca-international.com or from Josephine Woolley at josephine.woolley@eca-international.com. Additional information on the Global Financial Centres Index is available at http://www.zyen.com/research/gfci.html.