The United Kingdom is the most expensive destination among the top-40 financial-hub countries for expatriates from foreign companies.
This was one of the findings of the latest MyExpatriate Market Pay survey published annually by my company, ECA International, a leading provider of knowledge, information and software for the management and assignment of employees around the world.
When considering the cost of an expatriate package companies need to factor in three main elements: the cash salary, benefits – such as accommodation, international schools, utilities or cars – and tax. To assist companies relocating staff with benchmarking their packages against the market, ECA conducts its annual MyExpatriate Market Pay Survey of pay levels for expatriates around the world, including benefits, allowances, salary calculation methods and tax treatment.
Over the past couple of years, it has become cheaper in US dollars to send expatriates to the UK due to the pound’s decline in value. The cost of a typical expatriate package for middle managers in the UK is now $384,400.
The total cost of expatriate packages in the UK, in US dollars, has fallen by 11% in the past couple of years. This is mainly due to a weakened pound against the US dollar making the UK comparatively cheaper.
However, the UK still has some of the highest personal tax rates in the world and the second highest cost for typical expatriate benefits.
When choosing an expatriate pay approach, companies need to be clear about the reasons behind the assignment so that their choice reinforces this. This can help organisations 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. This will also need to be balanced against benefits and costs to the business.
Here’s a look at costs globally:
France is sixth in the global rankings this year. The value of a typical expatriate package for middle managers in France is now $264,500. The cost of an expatriate package to foreign companies has fallen in France by 16% in USD terms over the past two years due to the euro declining against the dollar over this period.
Expatriate packages for middle managers in Germany are the lowest out of all ranked European countries. The combination of comparatively low salary, benefits and tax all contribute to Germany ranking 23rd out of the 27 locations included in ECA’s rankings. The total cost of an expatriate package for middle managers in Germany is $202,800 – falling by 15% over the past two years, also due to the euro’s decline against the dollar.
The cost of an expatriate package has increased by 2% in the United States since our last survey, with the US rising in our rankings to eighth place. The value of a typical expatriate package for middle managers is now $257,400.
In the US, the costliest element of the package is the benefits provision, the fifth highest in our global rankings. To incentivize employees to accept an assignment to some countries companies will often grant additional allowances on top of the base salary that aren’t necessary when sending staff to the US. In Hong Kong, for example, dangerous levels of air pollution, combined with high international school fees and accommodation costs, mean that companies have traditionally offered generous expatriate packages to attract highly sought-after talent.
Japan is home to Asia’s most expensive expatriate packages, second only to the UK on a global scale. On average, a package for an expatriate middle manager there is worth 367,500. The total package has risen by a significant amount from last year’s total, by around 12%, with the yen strengthening against the US dollar in the survey period.
Expatriate pay packages in Hong Kong have fallen to a five-year low, falling by 2% since 2012 in USD terms. However, they are still the fifth highest in the rankings this year. The value of a typical expatriate package for middle managers in Hong Kong is around $265,500.
A total package for an expatriate middle manager in China is worth around $282,500 on average. Expatriate packages in China have declined in USD terms from last year’s totals due to the yuan weakening against the dollar over this period.
Countries like Qatar, United Arab Emirates and Saudi Arabia sit near the bottom of the global rankings. Even though the highest global middle manager expatriate salaries are found in Saudi Arabia and the UAE, as the employee pays no tax on their salaries or benefits in these countries, the total cost is low by international standards with both sitting in the cheapest six locations in the global rankings. The values of expatriate packages in these locations are $172,800 and $188,400 respectively. Qatar will cost foreign companies the least out of our ranked locations, at $160,200 per annum.