A typical international assignment package includes not only base compensation but also a variety of premiums. These incentives can vary greatly depending on your policy and culture, the competitive environment in which your company operates, the level of the employee and the global assignment location.
In general, the assignee’s base pay remains the same as it would have been in the home country, unless he or she is being promoted or taking on new responsibilities. Cost of living and other variables are usually addressed via allowances rather than salary adjustments.
Foreign Service Premiums
Fewer companies are offering a foreign service premium, unless the location is dangerous or particularly undesirable or if the talent needed is unenthusiastic about the move. When a foreign service premium is offered, it is often 10-15% of the employee’s base salary.
For dangerous or less-desirable locations, a hardship bonus of 5-30% of base pay is common. This incentive takes into account factors like violence, disease, education quality, housing and other risks in the destination. These payments are typically tax equalized.
In addition to base pay and any premium pay for the assignment, most companies offer a variety of allowances to help the assignee settle into the host country.
For most employees, the largest allowance they receive is a housing allowance. This allowance can vary considerably, depending on the company’s policy and philosophy and the destination location. Often, it is not possible to precisely duplicate the departure housing type, size and style in the destination, particularly for Americans moving abroad. Instead, the goal is to provide suitable housing within the framework of local norms. Some companies expect and withhold an employee contribution towards host country housing, or they expect the assignees to place their home country property in property management and use the rent received to offset housing costs.
Most companies offer both a transportation and miscellaneous allowance. The transportation allowance is used to offset the cost of either personal or public transportation in the host country. Unless you are providing a company car and driver, a transportation allowance is very important to ensuring your employees are able to navigate their new surroundings.
The miscellaneous allowance is generally paid to employees to help cover any unexpected costs of moving not specifically addressed in your employee relocation benefits package. Most companies pay up to one month’s full salary as a relocation allowance (capped at $10,000) to help employees cover those expenses.
When it differs dramatically from the home location, many companies provide a cost-of-living allowance. This is usually calculated based on a sample market basket of goods (and sometimes, services) to arrive at a differential.
Companies also can expect to pay all schooling costs for the assignees’ children, including tuition, books and fees.
Taking these payments and allowances as a whole, it is easy to see why traditional international assignments are so costly for employers, and why so many employers are keenly interested in less-costly assignment types. But there are situations where only a long-tern traditional assignment will meet the company’s business needs, and in those cases, this is the level of support that is generally expected.