Expats in Japan and India Are Asia's Highest Paid

Expatriates in India receive the second-highest compensation packages in Asia, according to ECA International.


ECA's latest MyExpatriate Market Pay Survey shows that the overall package for expatriate middle managers in India stands at US$298,489 per year on average.


Japan is still home to Asia's highest expatriate packages. The average total package for an expatriate middle manager in Japan is US$374,000. Cities in Japan have some of the world's highest costs of living, and expatriate salaries there are high because, to attract the right talent, employers need to ensure that an assignee's purchasing power is maintained.


In third place is South Korea, where expatriates receive an average of US$242,213 annually in compensation.


Expatriates in Hong Kong receive the fourth-highest compensation packages in Asia. The overall package for expatriate middle managers in Hong Kong stands at US$231,000 per year on average.


"The big challenge faced by many companies operating globally is the need to strike a balance between attracting the right talent while remaining as cost effective as possible," said Lee Quane, ECA's Regional Director, Asia.


Quane notes that a total package usually comprises three elements: cash salary, benefits and tax. A net-to-net comparison of basic salaries provides an overview of the cash sums received in different markets.


"However, it isn't until the benefits element of the package is taken into account that both HR and the assignee get a fuller picture of how competitive or attractive the package is," adds Quane.


Expatriate salaries are calculated in a number of ways, but most packages will include some sort of benefits package to cover costs such as accommodation, children's education, utilities and cars and these can have a significant impact on the entire package.


In many cases, along with traditional market forces, an expatriate salary will also be affected by factors that typically have no impact on local market rates. These include allowances that compensate for changes in cost of living and for the adjustment that international assignees have to make in living and working in a new location.


Hong Kong vs China
ECA's MyExpatriate Market Pay Survey shows that the cash salary components of total packages both in Hong Kong and mainland China are among the lowest in the region. However, unlike Hong Kong, the benefits component in mainland China is also typically relatively low, even in China's more costly tier-one cities.


"In China, compensation for international assignees tends not to vary much between tier-one and tier-two cities. The cash salary of an employee based in Beijing will often be similar to an expatriate performing the same role in Chendgu," said Quane.


Of the 17 Asian locations analysed, China ranks 14th in terms of total package.


Assignee cash salaries in India see the biggest jump in Asia

Leaving benefits out of the equation, cash salaries for assignees increased by around two percent in Hong Kong in the past year – the lowest rate of increase in Asia.


At the other end of the spectrum, India saw the greatest salary hikes, with average increases of 18 per cent. This was partly the result of the Indian Rupee weakening

considerably against the US dollar and other major currencies. India was followed by Vietnam and Indonesia.


"Fewer incentives are required to send an employee to the SAR than a number of other locations in the region," said Quane. "In addition, local salary levels tend to be very similar to expatriate salaries. As a result, more companies here will use a pay system based on local market levels to which they add benefits rather than the more common approach of using an employee’s home salary as a starting point and then adjusting for cost of living,

tax and other allowances. In contrast, in locations such as Vietnam, Indonesia and India, incentives and high rates of expatriate salary increases reflect companies' growing need to attract talent into these emerging markets."


Tax and social security
Tax and social welfare requirements such as the MPF form the third major component of the assignee package that companies need to consider in evaluating assignee costs and packages.


This component also affects Hong Kong's ranking against other markets in terms of overall packages within Asia.
"When we look at the value of the cash salary and benefits only, Hong Kong ranks second within Asia, but when the gross package including tax is considered, it drops to fourth place. This is due to its comparatively low tax model," said Quane. "In contrast, in India where salary and benefits costs are low compared  to Hong Kong, the high rate of tax means that the total cost to the company ends up being higher in India. In terms of overall package costs India comes second highest within Asia after Japan."


Many companies will apply a tax equalisation approach, to ensure that employees on assignment pay the same amount of tax as they would have in their home country.


"Companies also need to be aware of the tax implications of the benefits they provide, and the ways they provide them, since these can affect their tax liability considerably," added Quane.