When it comes to deciding how much to pay expat workers, the mechanics are often complex and convoluted. Do you, for example, use the employees’ salary from their country of origin as a starting point, or the average salary for their position in their adopted country?
Furthermore, once even the base salary has been agreed upon, what else must be added to create a fair and appealing expat package? Considerations can include performance-related bonuses, local living costs such as housing and transportation, inconvenience expenses like relocation costs and so on. Many expat packages also aim to assist with taxation, adding a supplementary sum of money so that the expat worker receives a fair rate of pay even after paying tax.
While calculating expat pay packages may be more of an art than a science, steeped in discussion, comparison and negotiation, a new study by ECA International aims to shed a little light on this fascinating subject.
The study, known as the MyExpatriate Market Pay Survey, aims to look at expat pay packages offered in and around Asia. While not a global study, the research still reveals some fascinating facts about the packages being offered to expats – and where you can expect the highest salary as an expat worker.
The research reveals that the highest packages are being offered to workers arriving in Japan, where the overall value of a middle-manager expat package is equivalent to $379,000 per year on average; an impressive sum for most workers.
That said, it is important to reiterate that this is not simply a cash offer, and much of these packages are designed to make the expat’s life more comfortable, and commensurate with the lifestyle they would have been living back home.
After Japan, the second place in the MyExpatriate survey goes to Australia, which just tips over the $300,000 per year margin. However perhaps most interestingly of all, the third best-paid expats are to be found in India.
The obvious question is why such a developing nation is able and willing to pay the average expat worker a package worth $298,000 a year. And here there are two key answers.
Firstly, the tax burden in India is considerable. Without including this tax in the package, expat workers would receive very little in the form of disposable income. If the tax value alone is removed from the package, then India would drop from number three in the chart, to number eleven. This goes to show just how much tax money must be added to a package to make it attractive to top executives.
The other aspect worthy of consideration are the extra funds required to attract top expat workers to less developed nations. Here the facilities on offer are often below-par with what they are used to. Power cuts, for example, can be more likely, while public transport networks can be less efficient.
As a result it can be necessary to pay expat workers in developed nations more than they would earn in more developed countries simply to tempt top workers toward these rather less developed areas.