Negotiating Expatriate Packages

Lionel Laroche, Ph.D., P.Eng. and Catherine Mercer Bing, MA

 

 

Very few people want extended work abroad just for the experience. However, more global companies than ever now expect their talent pool to have international experience as a prerequisite for promotions into the highest levels of the company. Because companies recognize the reticence of employees to go abroad for "possible future consideration", they usually offer some form of financial incentive to those willing to consider relocation for periods of 2 - 3 years.

Expatriate assignments can challenge both the employee and his/her family. Companies recognize this challenge and compensate their expatriates. Expectations for the expatriate incentive package run very high. Individuals may know of other expatriates (who bought a large house or a nice cottage upon their return from a foreign assignment). We know of a senior technician, who was considering a six-month assignment to Mexico, hoping that he could take early retirement upon his return!

Managing employee expectations is the responsibility of Human Resources professionals. Their responsibility is to balance the genuine need for good salary and benefits for individuals, with the financial needs of the corporations. Their responsibility to the individual and the company means designing expatriate assignments to be win-win situations for the company and the individual, both short-term and long-term. Here are some things to expect from expatriate packages.

Direct Compensation

Salary increases should take into consideration two factors at the same time -- changes in the cost of living and increases due to changes in experience and/or responsibilities - and equitable compensation plans take both aspects into consideration. In the case of expatriate assignments, both changes can be drastic:

Insightful Human Resources professionals plan to give expatriates two separate figures, one for the change in cost of living and one for the change in responsibilities. This simplifies expatriate package negotiations in several respects:

Note that cost of living adjustments should be based on the expatriate life style rather than the life style of locals. For example, expatriates living in some developing countries find that food and lodging is relatively inexpensive, while international telephone charges are very high. Given the amount of money that most expatriates spend on telephone, this may make the new place less affordable after all.

Benefits

Because of their very different situations and needs, the benefits offered to expatriates generally go beyond the benefits offered to other employees. Many companies offer benefits in the areas of taxation, moving, accommodations, visa, immigration, and language training.
Other benefits that are less commonly offered can significantly ease expatriate package negotiations:

One size does not fit all expatriate packages. A young, single engineer who is going to work on an oil extraction platform in Indonesia has very different expectations and needs compared with a senior, married-with-teenage-children manager who is going to start and lead a plant in Spain. A significant degree of flexibility should be provided to both to be able to design packages that suit their own needs within a given budget - just like flexible health benefit plans.

Seeking external advice

In many cases, neither the expatriate nor the HR manager has gone through an expatriate assignment. As a result, their understanding of what the expatriate and his/her family will need in the assigned destination may be significantly off. Seeking informal advice from other expatriates or obtaining formal advice from consulting firms specialized in setting up expatriate packages may help ensure that the most important needs of prospective expatriates are addressed.

References

[1] "Global Relocation Trends: Surveying the State of International Relocations", International HR Journal, Winter 1997.