Organizations expanding their operations globally often send employees on temporary assignments to other countries to form strategic alliances, market products and services, and start new ventures. A variety of factors can impact the total cost of supporting international assignees and how their pay plans are designed. Results from a recent Culpepper Pay Practices & Policies Survey highlight allowances, special reimbursements, and premiums used to compensate expatriate employees for leaving their local country to work abroad.

Key Findings

• 90% of companies pay expatriates allowances and special reimbursements to compensate for additional expenses from living and working in a foreign country.

• 48% of companies pay expatriates an additional premium or incentive for international work assignments.

Expatriate Headcount Increases
On average, companies plan to increase their use of expatriate employees by 13% in 2008. Technology companies plan to increase expatriate headcount by 16%, while life science organizations project a decline of 11% (Table 1).

Allowances and Special Reimbursements
In addition to base salaries, most companies compensate expatriates with one or more additional cash allowances and special reimbursements (Table 2). The primary purpose of these allowances and reimbursements is to keep expatriate employees “whole” relative to their home country and prevent their standard of living and purchasing power from declining.

• Relocation allowances are the most common, with 92% of companies providing cash allowances to reimburse expatriates for the cost of relocating.

• Eighty-five percent of companies provide tax protection and equalization programs to reimburse expatriates for higher taxes. 

• Thirty-nine percent of companies provide exchange rate protection programs to reimburse expatriates for negative currency fluctuations. In the United States, the declining value of the dollar against other currencies has led to an increasing number of companies offering exchange rate protection programs to their expatriates. 

Premiums and Incentives Paid to Expatriates
Table 3 highlights three common types of premiums and incentives companies pay to expatriates for accepting temporary assignments in other countries. Nearly 50% of companies reward expatriates with at least one type of premium or incentive payment for international work assignments.

Allowance and Premium Amounts
In addition to the data tables above, we provide a more comprehensive report with additional data tables showing the percent of companies paying specific types of allowances and premiums by company size and industry sector. We also provide information on how much companies typically pay expatriates for different types of allowances and premiums.

The comprehensive version of this report with additional data is available to:

• Participants in 2008 Expatriate Compensation Practices Survey

• Subscribers of Culpepper Pay Practices & Policies Surveys

Definitions

• Cost of Living Allowances
  A cash allowance paid to account for the cost of living differences between home and foreign country.

• Education Allowances for Dependents
  A cash allowance paid to expatriates for the education costs of sending children and dependents to a home-country school.

• Exchange Rate Protection Programs
  A cash reimbursement paid to expatriates for negative currency fluctuations.

• Expatriate
  Expatriates, also known as foreign-service employees and international assignees, are employees with temporary work assignments outside his or her home country. Work assignments can range from a few months to several years.

• Field Allowances
  A cash allowance paid for the additional costs of traveling and working in numerous foreign locations.

• Foreign Service Premiums
  An incentive, typically paid in cash, to compensate employees who accept temporary work assignments to leave their home country and continue employment in another country.

• Hardship/Hazardous Duty Premiums
  A premium, typically paid in cash, to compensate employees for the burden and risk of living and working in foreign countries with unusually stressful or dangerous conditions. Also known as Hardship Differential.

• Housing Allowances
  A cash allowance paid to compensate for housing differences between home and foreign locations.

• Mobility Premiums
  An incentive, typically paid in cash, to compensate expatriate employees when they express a willingness to transfer from one foreign assignment to another.

• Relocation Allowances
  A cash allowance to reimburse employees for the cost of relocating.

• Tax Protection/Equalization Programs
  A cash reimbursement paid to expatriates for additional taxes incurred due to foreign assignments.

Data Source: Culpepper Pay Practices & Policies Survey of 77 organizations.
Survey Dates: March-May 2008

Breakdown by Industry Sector:
Technology 60%, Life Science 17%, Other Sector 23%

Breakdown by Number of Employees:
Up to 100: 12%, 101 to 1000: 32%, 1001 to 5000: 38%, Over 5000: 18%

Breakdown by Corporate Status:
Public 54%, Private 42%, Non-Profit 4%

Breakdown by Country:
United States 83%, Canada 4%, Australia 3%, Taiwan 3%, United Kingdom 3%, Other Countries 4%

Authors:
Leigh Culpepper, CCP, GRP, CBP
Jeremy Greenup, CCP

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