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Moving to another country with work can be totally overwhelming and there are myriad things to consider. One of these will be the expatriate package you receive from your company. This is a standard course of action taken by most organisations when they send someone to carry out a role abroad.
The idea is to ensure that the employee is no worse off as a result of their move. This means that they should have the same spending power in their new country and the capacity to save as much money as they did at home.
Some of the destinations where expats are sent to work have a particularly high cost of living and factors such as the cost of moving, school fees for children and flights all need to be factored in. A compensation package should address all of these areas, but it is important to understand what it is you are being offered.
The most common approach
Not every company takes the same approach to expat packages, but the balance sheet system is by far the most widespread implementation method. It is based on the statistical averages established by the consumer expenditure survey to see how families spend their money in the UK.
Twelve categories are taken into consideration for these calculations: food at home; household supplies and services; personal care; clothing; medical care; communications; household furnishings and equipment; domestic help; transport; recreation and entertainment; food away from home; and alcohol and tobacco.
They are then compared with the prices of these items in the destination country by way of the cost of living index. A figure above 100 means that the new country is more expensive than the home nation and one below 100 demonstrates that it is cheaper.
A cost of living allowance will then be allocated based on these calculations. Such payments are usually reviewed every six months in most firms to ensure that they keep pace with inflation and fluctuating exchange rates.
While the balance sheet system is adopted by the majority of firms it is far from universal and your company may opt for a different process. Some of these are simpler and therefore taken on by a number of smaller companies.
A localisation package will mean that your salary is based on those earned by employees in the country you are relocating to. Wages can vary incredibly across different countries, but it is generally supplemented with a cost of living allowance for expats.
Organisations that take this approach usually do so because of simplicity in terms of administration. Be prepared to negotiate your supplement if your employer puts this method forward as its chosen course of action. Otherwise you may not get the best deal possible.
A lump sum
While representing a time consuming process to come to a mutually agreeable amount, the lump sum method is often used for expats expecting a secondment of just one to three years. It is based around the level of salary that the employee is receiving in their home country with a lump sum on top.
This type of package gives you greater flexibility in terms of the areas in which you spend your money, but will almost certainly involve some in-depth negotiations. It is not advisable to agree to a lump sum if your stay is of a longer nature or indeterminable length.
This approach is the rarest of all the options and tends to be only offered to those in senior roles. As well as a lump sum the employee is offered a number of options that will improve their expat experience directly.
These may include a company car or foreign language lessons, which the firm organises and pays for on behalf of the expat. It requires less budgeting, but does mean that a proportion of the money is tied up and cannot be spent elsewhere.
Ensuring you understand
Ask your employer which type of expat package they intend to offer you right from the start. Knowing the name of the method will help you to research what is standard so that you know whether you are getting a good deal.
Think about what is reasonable and speak to other expats doing similar roles in your destination country. Asking about their salary may be considered rude, but enquiring about benefits is a good way to broach the subject. Armed with this information you can then start your negotiations.
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