This premium paid by the employer is to compensate for the more difficult life conditions in the host country, new work conditions or displacement from the home environment.
This premium is usually calculated as a percentage of the employee’s gross compensation or compensation of reference.
This percentage varies depending on the host location and is calculated depending on a couple factors: danger in the host location, political situation, weather, language, culture, distance from the home country, hygiene and health, facilities (schools, hospitals), etc.
This premium can be paid either as a gross or a net amount depending on the rules applicable in the company and is very rarely applied to assignments within the E.E.E.
This is usually an element of compensation paid at the beginning and end of the assignment in order to motivate the candidate.
It usually is a net premium paid to compensate for the living cost differential between the home and host country.
This differential is applied using an index to apply on the net salary of the employee.
Home based index: It is applied using the consumer habits of the home location. It is often used for short-term assignments or for countries’ where the life style is completely different from that of the home location.
Practical expense index: It is applied using the consumer habits of the home and host location. It can be applied at the human resources’ discretion and represents a particular advantage in the case of successive expatriations because it is the only index that can be reverse or modified.
Host based index: It is applied using the consumer habits of long-term expatriates in the host location. It can be used in case of very long assignments not too far geographically or culturally from the home country.
This premium is usually no more than one or two months of salary, it is usually paid to cover numerous expenses and avoids having to make numerous reimbursements.
All of the premiums can be determined as a percentage of the net or gross salary or as a fixed amount. They can be paid regularly during the entire assignment, at the beginning or at the end of the assignment. The date of payment of these premiums can have a tax impact since, like benefit-in-kinds, most premiums are taxable. Therefore, the employer usually tries to pay those in the country where taxation is lower.
Tax and social security equalization
Social and tax equalization is a “concept” of compensation assuring the employee that during his assignment, he will not pay more or less taxes or social security contributions than he would have if he had remained in the home location.
A tax and social security calculations is done to guarantee the employee a net salary based on the gross compensation of the home country.
In case tax and social security contributions are higher in the host location, the employer agrees to pay the additional cost. The employee is, therefore, not penalized by his assignment.
In case tax and social security contributions are lower in the host location, the employee pays at least what he would have paid if he had remained in the home location. Therefore, the employee does not benefit from the favorable tax or social security scheme.
This is a system guaranteeing equivalent treatment amongst a large population of assignees abroad. Indeed, since tax and social security costs are neutralized, for an employee that would go from a country with a low tax rates (i.e. U.A.E) to a country with high tax rates (i.e. Denmark), taxes stop being a topic of discussion.
Some employers do not apply the social equalization and only apply the tax equalization “concept” but this is usually only applied when the employee is seconded from a social security point of view and therefore remains covered by the home mandatory social security scheme.
Tax and social security protection
Tax and social security protection is a “concept” which guarantees the employee that if tax and social security contributions are higher then the ones, which would have been paid in the home location, the employer agrees to compensate the higher amount. However, in case there is a tax or social security advantage for the employee, the employee benefits from it.
Depending on the country and the length of the assignment, the employer can accept either to move some of the employee’s furniture or house the employee in an apartment or a house that is already furnished and therefore avoid having to pay for the moving of the employee’s furniture.
In case of a move paid by the employer, it is necessary to fix the rules applicable concerning the types of object and furniture to be moved. Since the assignment is normally for a period not exceeding 4 or 5 year, it would appear normal that not all furniture be moved. For this reason, employers usually do not agree to take care of the move of the following objects:
- Art pieces and precious furniture ;
- Vehicles (cars, motorcycles, boats, bikes, etc) especially for the car since one is often provided for in the host location ;
- Electric appliances (i.e. washing or laundry machine, oven, etc) ;
- Large volume of books (or precious books) ;
You also must inform yourself about the types of objects that are forbidden in certain countries. For example, it is forbidden to bring a wine collection to the U.A.E. or certain ideological books in China.
Certain employers will also fix the volumes to move depending on the family size. You will find below a couple of volume references:
- Between 15 and 20 cubic meters for a single person (1/2 room) ;
- Between 20 and 30 cubic meters for a couple without children (2/3 rooms) ;
- Between 30 and 45 cubic meters for a family with two dependent children (3/4 rooms).
You must also try to have a couple different bids from different firms. Indeed, the cost of the move can be multiplied by twice depending on the firm, the type of services and the insurance’s coverage.
It is necessary to choose a moving firm that unites all the conditions necessary for an easy move. Do not forget that the move is an international move, that customs have to be cleared, that formalities differ depending on the country and that the exchange rules can be complex. For this reason, it is preferable to choose firms that have international offices everywhere and a long experience. all these factors also explain why one firm can be used to go in one country and another for another country.
If you do not want the employee to move all of his objects, the alternative is either furniture storage or self-storage. The difference between the two is that furniture storage is taken care of by a professional team for the moving and storing, while for the self-storage, the employee does everything.
In both cases, the volumes stored at the expense of the employer can be identical to those mentioned above. The cost of storage will also differ depending on the volumes and the insurances taken.
However, note that even if the employer decides to go with furniture storage, the employee will need to bring along a certain number of objects on his assignment. Two solutions are therefore possible, either the employer accepts that the weight limit be exceeded at the time of departure (prices differ depending on the airline companies), or the employer plans for a small air fret at the moment of departure (i.e. moving companies can provide you with a bid for these types of fret).
Usually finding an apartment abroad requests some “local” assistance. If you already have a branch in the host location, the local Human Resource Director can provide you with different options available to find an apartment or can take care of it himself. If you do not have a local contact, a good and efficient solution is to call upon a “relocation” company as an intermediary.
Helping firms by assisting them with the installation of new expatriates is the essence of relocation companies. These companies can assist in a number of ways throughout the assignment of the expatriates and particularly at the time the employee is looking to find an apartment (i.e. actual assistance in finding the apartment and all its administrative aspects).
Expatriates tend to want an apartment that is better then the one they had in their home location. These expectations can easily be met in certain countries but will be hard to reach in others. It is therefore the responsibility of the employer to set housing conditions based on the expatriation project and the housing options available in the host country.
What are the criteria when finding an apartment? You can consider the following: life conditions similar to the home location, safe, international school close by, easily accessible transportation, easily accessible hospitals, budget for the apartment, etc.
In countries considered as difficult, it is necessary to consider compound facilities. These are guarded neighborhood where all the commodities are already included (pool, sport facilities, deli store, etc). For example, these compounds are recommended in Nigeria, Saudi Arabia, certain zones hard to access in Asia and Africa, etc. It is necessary to know the living conditions in the host country prior to having the expatriate look for an apartment. It will allow you to make the proper recommendations in terms of “security” for each country. Information can be found on this website of the government
In order to properly determine the budget available for the employee’s housing abroad, it is necessary to find information on the destination city and the neighborhoods where most expatriates like to live. You can find information on the web based real estate agencies. “Cost of living” or “hardship” information can also be found on websites providing benchmarks and statistics depending on the neighborhood where the employee will be living.
In general, we recommend that the budget be clearly defined and communicated to the employee prior to the beginning of his search. The easiest approach is to fix the budget leaving a little extra in case. For example, a budget for an apartment in Barcelona for a family with two dependent children should range between 2,000 and 2,500 euros.
Finally, certain employers decide to also cover utilities (i.e. water, electricity, gas, housing insurance, personal telephone, etc). If your firm wishes to do so, we recommend that a budget be fixed prior to the departure of the employee.
Most expatriates have at their disposal a company car or accompanied transportation depending on the host country.
In general, when the expatriate benefits from a company car, the standards and criteria are the same as those applicable to host local employees.
Before leaving on assignment, it is necessary to determine the need for an international driving permit. You will find all information pertaining to the international work permit in our section called “relocation”.
In certain countries, having expatriates drive cars is not recommended. It is therefore necessary to think of other modes of transportation such as car with a chauffeur for the employee and his family or a chauffeur to be used by multiple expatriates.
In the hardest countries, it is necessary to have a safe and efficient mode of transportation for the employee but also for his family (i.e. grocery shopping, taking children to school, etc). It is essential that the family feels comfortable if the expatriation is to be a success.
Employers that send employees abroad on assignment try, in general and to the best of their abilities, to guarantee the same health coverage and insurance as if the employee had remained in his home country, with often some additional benefits. First, it is necessary to make sure that the insurance or health coverage contract signed by the firm takes care of employees while they are abroad. If not, it is necessary to take on some new insurance coverage contracts. We recommend that the following be taken:
- International sickness coverage (family) ;
- Retirement ;
- Unemployment ;
- Emergency repatriation insurance ;
- Life, handicap and death insurance ;
- Daily indemnities ;
- Traveling insurance.
Without these being an additional cost for you, it may be good to remind the employee that because of his personal situation, additional insurances can be necessary. Comes to our mind:
- Private insurance ;
- Housing insurance in the home country ;
- Student insurance for employees with children remaining in the home country ;
It is also possible depending on the type of package and the budget at your disposal, to plan on providing the employee with additional benefits such as:
- Internet and telephone;
- Sports or social clubs memberships
Children’s scholarship is one of the most important aspects of the family life during an international assignment. Most employers that send employees abroad pay for children’s scholarships from kinder garden all the way through the end of high school.
The employee can choose to have his kids go to school in a local school. If this is the case, it is recommended to be extremely careful to the difference in the school levels between two countries (i.e. second grade in France might not be the equivalent to a second grade in another country).
For this reason, numerous national schools have been created throughout the world and employers recommend their employees to send their children to those schools.
You will below a couple of different national schools internationally:
- French national schools or “agence pour l’enseignement français à l’étranger”. The aefe website
will help you to find French schools and high schools throughout the world ;
- The Council of British International Schools (cobis.org.uk
- German International School are also available in numerous parts of the world.
However, in numerous areas, you will be unable to find a school in your home language. Two solutions will therefore be available:
- Register the children of your employees through a long distance schooling program (i.e. CNED)
- Get into contact with national schools in order to find options and financial assistance to build a new school in the area where your employees go. For example, in France, the point of contact to obtain this type of assistance can be found through the non-religious group “mission laïque” (http://www.mlfmonde.org)
We believe that an expatriation is always better if the family joins the employee. The employee will more easily mingle with the host people if his family joins him in his assignment. For this reason, an increasing number of employers are providing assistance to spouses’ helping them find a training program / a job during the assignment.
This assistance can be provided through:
- Paying a head hunter in the host location for the spouse;
- Agreement between numerous firms that expatriate in the same area to offer some “local” jobs to spouses on a need basis;
- Provide a budget for some competency test followed by an action plan in the host location;
- Provide the budget for the spouse to follow a higher learning degree or long distance schooling.
Intercultural training is essential for firms that expatriate numerous employees for a big project or for the opening of a new entity abroad. Intercultural training allows the employee sent abroad to optimize the chances of exchanging professional contacts while abroad and help him integrate himself to the host local society.
Manage an international team, work with international partners or do business internationally are some of the cultural challenges in an expatriation.
For this purpose, some firms have created intercultural training courses dedicated to answering the questions and needs of individuals or firms. These training courses allow the employee to understand the values, beliefs and habits in the host country allowing them to have the tools necessary to work and be integrated in this international environment.
We recommend that as part of these intercultural training courses, some classes include the spouse and other family members of the family that will join the employee in his assignment.
Prior to the departure of the employee, the employer can organize language courses or even enroll the employee into a language-training program. During the assignment, it is also recommended to provide the family with language courses.
Most employers propose a first trip prior to the begin of the assignment to its expatriates. These trips allow for the employee to have an idea about the place where he will be working, where his family will live, visit schools, hospitals, etc.
It is often after one of these trips that the employee can make a decision about whether or not this assignment abroad will be compatible with his career and personal goals.