Are Expat Incentive Packages a Thing of the Past?

Are Expat Incentive Packages a Thing of the Past?

A number of years ago, employees moving abroad would typically expect significant perks with their new jobs. Skilled workers moving to locations such as China or the UAE could expect to receive joining bonuses, relocation expenses, salary compensation, medical care, a company car, rent allowances, medical care and in extreme cases even domestic help. Expat incentive packages were common ground and could be worth as much as 40 per cent above the basic pay.

The reason for such extravagant incentive packages was that companies within these locations were in need of  top executives with hard-to-find skills at a time when relocation (to these locations) was seen as a hardship. However, conditions have changed.

Expat incentive packages in the Middle East

Dubai, UAE

In the UAE specifically, there is now a huge pool of talent available and an increasing number of companies are hiring people with local knowledge and experience in the market. Dubai, which has been a very popular destination for expatriates looking for new work and a new way of life, is now seen as a very good place to work and live, removing the need for a hardship package / expat incentive package.

According to panelists at the London Business School seminar, the so-called soft skills, such as cultural awareness, Arabic capabilities and regional understanding are now among the top recruitment criteria for companies in the Middle East who are placing greater value on cultural awareness and regional experience than they did previously. These companies are reducing their reliance on fresh expats coming from far away territories on bigger packages as it is simply not cost effective.

A recent study by Emirates 24/7 found 92 per cent of its survey participants no longer expect payment beyond their monthly allowance salary, which often includes a rent allowance and transport to and from work. In the same survey it was found that 62 per cent of participants received no help with their children’s schooling costs. Only 24 per cent reported that they receive a contribution to these costs and only 13 per cent get the entire school fees paid for.

Expat incentive packages in Asia

Hong Kong, Asia

Companies, especially those in Asia, are constantly trying to get the best balance possible between attracting the right talent to work for them while remaining cost efficient. There are a number of locations within Asia that come with good expatriate incentive packages due to certain factors such as the cost of living, quality of life, hardship of relocation and even extra expenses such as secure living (gated communities) and international schooling. However, it is essential to break-down these packages to understand them better.

According to ECA International, Japan comes in 1st for expatriate packages, India is 2nd, Hong Kong is at 4th, the Philippines is 5th, Thailand 6th and Singapore dropped from 6th to 8th place.

The average total expat package for middle managers in Japan is US $374,000 per year and US $204,000 per year in Singapore. These averages are worked out using 3 key elements: cash salary amount, benefits and tax.

However, it is important to break-down each expatriate incentive package to understand exactly what they consist of. In many cases the expatriate benefits outweigh the actual cash salary, meaning that your take-home net salary could be a lot less than that on offer in a different location. Whilst Hong Kong holds 4th position and Singapore 8th, when the average package is broken down the cash salary element is higher in Singapore. The same is true with India; it drops from 2nd to 5th position and Singapore rises from 8th to 4th position.

Whilst Japan holds the top spot for the best average expat packages, cities in Japan have some of the world’s highest cost of living, which is the major reason for such high expatriate incentive packages. You can find out more about taxation in Japan by reading the ‘Taxation of expatriate employees in Japan’ paper by Grant Thornton.

Gross expatriate salary packages in Asia (US Dollars)

Below is a chart created by ECA International which shows a number of locations in Asia with a breakdown of the average expatriate salary packages / incentive packages in US Dollars.

*Not all benefits values are available for these locations. Chart created by ECA International.

Other locations with expat incentive packages to consider

The trends of expatriate relocation change constantly, and countries within emerging markets, and even those with developed markets, can become a popular choice for those looking to make a career move.

One location on the rise is Lagos, Nigeria. Expats considering a move to Lagos are being offered very large incentive packages (which in the case of Lagos really can be called a hardship package) due to the quality of life, safety and condition of the country. The average expat package is US $123,000 per year (usually between US $100,000 – $200,000) and can be as much as US $450,000 per year for very high-level senior management jobs in the oil sector. These incentives can average 45 per cent above the basic salary.

Final thoughts

Understanding each location that you’re considering a career move to is essential, whilst identifying what is important to you (quality of life or take-home net salary) is paramount. The majority of locations have different taxation factors, average salaries and benefit allowances to consider. Therefore, understanding the packages (breaking them down) and the cost of living within the location will help you to make the right decision for you and any dependants.

ECA International have created a very useful chart listing the 50 most expensive locations in the world for international assignees, which can be viewed here.

If you have been tempted by the lifestyle on offer in the mentioned locations and would like to relocate to one of them then click the button below to sign up to Source some of the best job roles and positions in the UAE and around the world and make your first step into a new career today!

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