Japan is home to Asia's highest expatriate packages, according to the latest MyExpatriate Market Pay survey published annually by ECA International.
On average, a package for an expatriate Middle Manager in Japan is worth HK$2,550,000 (US$329,000). The total package has fallen by a significant amount from last year’s total of HK$2,900,000 (US$375,000), with the yen weakening significantly against the US dollar over the past year.
Mainland China has moved up to the 2nd highest in the region having overtaken Hong Kong in 2013. A total package for an expatriate Middle Manager in China is worth over HK$ 2,250,000 (US$290,000), up 5% from last year. China has experienced the largest increase in the region this year.
“Even though total expatriate packages have increased in Mainland China, the average salaries of Middle Managers in Tier 1 cities have actually decreased by nearly 4% over the past year,” said Lee Quane, Regional director – Asia, ECA International. “Not all Chinese cities require such high packages though. The cost of benefits provision in Tier 2 locations is still much lower than in Tier 1 cities and if they, alone, were to be taken into account, China would appear towards the bottom of the regional ranking.”
In third place is India. Hong Kong has the fourth highest expatriate pay packages in the Asia Pacific region. This is up from last year’s fifth position, however, the total cost of an expatriate pay package has fallen by 2% over twelve months. The value of a typical expatriate package for Middle Managers in Hong Kong is now HK$2,070,000 (US$267,000).
“In Hong Kong, the most expensive part of the expatriate package is typically the benefits element: the value of these is the highest in the region,” says Quane.
Quane notes that the cost of providing certain benefits such as housing and education is the most expensive element of the pay package when relocating middle management staff to Hong Kong.
“The limited availability of accommodation for expatriates and international school places there puts pressure on companies who cover these costs. However, these benefits can have a big impact on the attractiveness of the overall package for the assignee, particularly in such a competitive market,” said Quane.
Singapore has the ninth highest expatriate pay packages in the Asia Pacific region. This is down from last year’s seventh position with the cost of an expatriate package having fallen by 8% over twelve months. The value of a typical total expatriate package for Middle Managers in Singapore is now US$239,400.
The gap has widened between the total expatriate packages typically offered in Singapore and Hong Kong, with Hong Kong rising to 4th place in the regional rankings. Although both locations have seen a decrease in the total cost of packages to companies, Singapore’s overall packages have experienced a more notable decline because of the relative strength of the Hong Kong dollar.
“In Singapore, the most expensive part of the expatriate package is typically the benefits element: the value of these is second highest in the region after Hong Kong. The cost of providing certain benefits such as housing and education is the most expensive element of the pay package when relocating middle management staff to Singapore,” said Quane.
Malaysia now has the lowest total expatriate pay package in the regional list – falling two places from last year, now behind Sri Lanka and Pakistan. The average cost of a total expatriate package in Malaysia now lies at just over HK$1,360,000 (US$176,000).
Developing locations not always the cheap option
Low cost of living does not always translate into low expatriate packages. For example, in order to attract talent to some of the cheaper, less developed locations companies often need to provide greater incentives than they do when moving employees elsewhere.
Companies also need to be aware of the tax element of the package. This can considerably increase assignment costs, as in the case of India, where nearly half of the total expatriate package is consumed by tax.
The currency in which salary is delivered will have implications too. For example, if paying in one currency rather than splitting it, International Human Resources teams need to have a policy in place to ensure their employees’ buying power is maintained should currencies fluctuate significantly.
Approach to designing pay packages
International assignment pay packages can be designed in a variety of ways. The most common approach is to use the employee's salary in their home country as the starting point, then adjust for cost of living and any other allowances, and tax. However, increasingly companies operating in the major Asian hubs adopt an approach, particularly for employees sent on a permanent one-way basis, whereby the host country local salary is used as the starting point with or without some additional benefits such as an allowance for accommodation or children’s school fees.
“When choosing an expatriate pay approach it is essential for companies to be clear about the reasons behind the assignment so that their choice reinforces this. This will also help them 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. And of course all this needs to balance against benefits and costs to the business,” said Quane.