Japan continues to be the most expensive country in the Asia Pacific region for expatriate packages, followed by Australia and India, according to the latest ECA MyExpatriate Market Pay Survey.
The survey, which is based on information from more than 10,000 employees across 163 countries, compares expatriate packages around the world, including salary, benefits, allowance and tax treatment. The results refer to the pay package for middle managers, and specifically exclude certain one-off allowances, including payments for furniture, disturbance and relocation.
According to the survey, Japan is the most expensive posting in the region, with an average overall package for expatriate middle managers of approximately US$379,000 per year. Australia is in second place, followed by India (3rd), tier-one cities in China (4th), Hong Kong (5th) and Singapore (6th). Some of the lowest salary packages in the region are provided in Malaysia and Pakistan.
A typical expatriate package will consist of a salary, benefits and tax. Possible benefits include accommodation, international school fees and the use of a car. Depending on the package, the cost of the benefits offered by an employer can often be worth more than the cash salary, especially in locations where housing is particularly expensive. For example, if the ECA survey was solely comparing the net cash salary element of expatriate packages, Hong Kong would drop from fifth to 15th in the ranking. Hong Kong rents are now over 50 percent more expensive than Tokyo and around double the cost in Singapore.
“Expatriates often gravitate towards particular areas of cities because of the location of international schools, embassies or social focal points. These tend to be the more expensive, prestigious areas in a city,” said Lee Quane, regional director of ECA International, Asia. “For many companies sending employees on international assignment, financing accommodation can be one of the most significant assignment costs incurred, so companies looking to control costs should consider the issue holistically, taking into account not only the standard of the accommodation they provide, but also its size and location.”
However, the cost of accommodation in a location is not always indicative of the cost of an expatriate package overall. The financial burden on companies can be higher than expected in countries which are typically seen as being more affordable. For example, the Indian cities of New Delhi and Bangalore, which were ranked 43rd and 127th respectively in the ECA global rental costs survey, have recently seen rents pushed down in U.S. dollar terms, yet India was still ranked the third most expensive location in the region for expatriate packages after Japan and Australia.
Furthermore, an employer will often have to offer greater incentives to attract talented employees to locations which may have infrastructure and amenities of a lower standard. Employers may offer a ‘hardship allowance’ to employees moving to such places because of the greater difficulties that they may encounter while in the country. For example, an employer may pay for a car or chauffeur for foreign staff in countries with poor transport networks.
In a similar vein, higher compensation packages are also increasingly being offered in Beijing as it is becoming more difficult to recruit and retain talent due to the worsening air quality. A recent survey by an Asia-focused recruitment firm found that 56 percent of approximately 5,000 interviewees stated that concern for their health is one of the main reasons that they would consider changing jobs.
“Companies are doing what they can, but the reality is that people are leaving… and it’s becoming difficult to attract people”, said Adam Dunnett, Secretary General of the European Chamber of Commerce in China.
As well as a ‘hardship allowance’, many expatriates will also receive a ‘cost of living allowance’ in their package.
ECA’s most recent Cost of Living Survey found that Tokyo, which is the 10th most expensive location for expatriates in the world, is currently Asia’s most expensive location. Tokyo is followed by Beijing in 15th place, Shanghai (18th), Seoul (21st), Hong Kong (28th), Singapore (30th), Guangzhou (38th), and Shenzhen (40th). Living costs for foreign staff are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on expatriate packages.
It is important that companies consider currency rate fluctuations when formulating their expatriate packages, as the currency used to pay the package can have a big impact on the overall financial burden to the company. The impact of currency fluctuations upon the cost of expatriate packages can be seen in the case of Japan, where although packages are still the highest in Asia and have increased by 11 percent year-on-year, the yen has depreciated to an extent that packages now cost 10 percent less than last year in US dollar terms. Companies may decide to either pay the whole package in one currency or to split the pay between the currencies of the home and host countries.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asia@dezshira.com or visit www.dezshira.com.
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