This document discusses factors to consider when negotiating an expatriate compensation package. It defines an expatriate as an individual living and working in a country other than their home country, often temporarily. Expatriate compensation packages typically include a base salary, cost-of-living allowance, housing allowance, education allowances for children, relocation assistance, tax equalization payments, and sometimes spouse assistance. When negotiating a package, important factors to consider include the nature of employment (e.g. local contract vs long-term expat package), contract duration and termination notice terms, and what country's laws will govern the contract.

1. Expatriate Compensation
By:
Sonali Srivastava

2. Definition
An individual living in a country other than their
country of citizenship, often temporarily and for
work reasons. An expatriate can also be an
individual who has relinquished citizenship in
their home country to become a citizen of
another. If your employer sends you from your
job in its New York office to work for an
extended period in its London office, once you
are in London, you would be considered an
expatriate or "expat."
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3. In addition to salary, businesses sometimes give
their expatriate employees benefits such as:
• Relocation assistance and
• A housing allowance
For Americans working abroad as expatriates,
complying with United States income tax
regulations is an added challenge and financial
burden because the U.S. taxes its citizens on
income earned abroad.
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4. The major focus of most international
compensation programme is to keep
international employees at a sufficient
financial level during their international
assignments so that they do not lose
ground economically.
Components of an international
compensation package, in addition to the
normal salary and benefits offered in the
home country
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5. 1. Base salary
For expatriates, the term base salary means the
primary component of a package of allowances
which are:
(a) Foreign service premium,
(b) Cost-of-living allowance,
(c) Housing and utility allowance,
(d) Basis for in-service benefits and pension
contributions.
Base salary may be paid in home or local
currency or in some hard currency like pound or
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dollar.

6. 2. Foreign Service inducement/hardship premium
Parent-country nationals often receive a
salary premium as an inducement to
accept a foreign assignment or as
compensation for any hardship caused by
the transfer. Such payments vary
depending upon the assignment, actual
hardship, tax paid to foreign governments
and length of the assignment.
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7. 3. Allowances
Various allowances are paid to expatriates depending upon the
assignment. They include:
(a) The cost-of-living allowance (COLA): It involves a payment to
compensate the differences in expenditures between the home
country and the foreign country.
(b) Housing allowance: Implies that employees should be entitled
to maintain their home-country living standards (or, in some
cases, receive accommodations)
(c) Home leaves and travel allowances: Is given to cover the
expense of trips (usually once in a year) back home. These
trips allow the expatriates the opportunity to renew family and
business ties, thereby helping them to avoid adjustment
problems when they are repatriated.
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8. 4. Education Allowances for Children
Education allowances are given towards
fees for the education of expatriates’
children. Education allowances include
items such as tuition, language class
tuition, books, transportation and uniforms.
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9. 5. Relocation Allowances and Moving
Relocation allowances usually cover
moving, shipping; temporary living
expenses, and down payments or lease-related
charges.
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10. 6. Tax Equalization Payments
Many international compensation plans
attempt to protect the expatriate from
negative tax consequences by using a tax
equalization plan. Under this plan, the
company adjusts an employee’s base
income so that the expatriates will not pay
any more or less tax than if they had
stayed in the home country.
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11. 7. Spouse Assistance
To help guard against or offset income lost
by an expatriate’s spouse as a result of
relocating abroad. Multinationals generally
pay allowances in order to encourage
employees to take up international
assignments.
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12. Expatriate Compensation Packages
Expatriate compensation packages can
vary enormously from company to
company and location to location. When
negotiating an expat contract that is right
for your needs and those of your family, it
is important that you carefully consider
several factors
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13. Factors
1. Nature of the Employment
2. Contract duration and termination notice
3. Governing Law and Jurisdiction
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14. 1. Nature of the Employment
One of the first major considerations of any
expatriate compensation package should
concern the nature of the relationship
between the employee and the employer
and should address what the employment
relationship will constitute. There are
several different types of expatriate
contract and these will determine what the
employment obligations will be
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15. A. Local-to-local: When you are working
abroad for a local employer, you may
receive a local-local contract. You will be
on the same kind of contract as the local
people, which may be better or worse than
you are used to. Your salary will be in line
with that of the local employees, as will the
weekly hours, holiday entitlement and
notice period. You will be expected to pay
local tax and will be obliged to adhere to
all the local policies and plans of the UK
company. There will be no perks for being
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16. B. Local-to-expat: This contract is again for
expats who are working for a local
company abroad. This time however the
contract recognizes that you have moved
abroad and are likely to have been hired
because of your skills and expertise. You
will no doubt be on a higher salary than
the local workers and you will be entitled
to more holidays and possibly less working
hours. It is unlikely that you will receive
any kind of expat package aside from
relocation costs.
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17. C. Expat-to-local: This is for people
working for an international company, but
still on a local contract. Many small
businesses work like this as they cannot
afford the expensive expat packages that
are usually associated with big multi-national
companies. There will not be
much difference to a local contract with a
local company.
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18. D. Long-term expat packages: Most
expats on a long-term contract with large
corporations will find that their expat
package is very generous. Most packages
include a housing allowance, children’s
school fees, travel allowance, good
holiday entitlement and a high salary. It is
these packages that attract so many
expats to move overseas.
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19. E. Short-term expat packages: Similar to
the long-term packages, but usually
without the holiday entitlement and school
fees. These contracts are for people
working abroad on a short contract of six
months or less.
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20. 2. Contract duration and termination notice
There are a number of different types of
expat contract, those with specified end
dates or durations, and those that are
ongoing. In the US there is also a contract
type that is referred to as “employment at
will”. Failure to fully consider the
implications of your contract type could
have serious repercussions.
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21. 3. Governing Law and Jurisdiction
This will usually be the local law in the country you will
be employed in, the law of the home country from
which you relocated or the law of the country in which
your employer is incorporated. There is simply no
such thing as a standard expatriate contract that can
be implemented in any country. The clauses and
inclusions need to be modified according to the law of
the foreign jurisdiction and tailored in such a way that
ensures that any conflict between the law of the host
country and the law of the country of the corporation
or hiring entity do not conflict.
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22. Many companies will include a clause in their
contract that specifies that all local laws be
waived in favor of the law of the employing
country. However, despite this, it is worth noting
that in many countries, especially those within
the EU, this is unenforceable. In addition to this,
although the law varies from country to country,
it is generally accepted that, in the absence of a
clear choice of law in the contract, the
employment agreement will be carried out in
the country within which the employee will carry
out their work.
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23. Thank You
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