Expatriate Compensation

Allowances

The addition of allowances is the major difference between domestic relocations and long-term international assignments.

Transferring an employee to another country can be costly. A long-term international assignment normally involves the relocation of a whole or partial household of goods, as well as the employee and family. The employee and family arrive in a country where they are unfamiliar with the culture, language, and customs. They must adapt to new surroundings and form all the connections they need.

We'll now cover the following allowances:

• Relocation
• Housing
• Cost-of-Living
• Education
• Hardship and Danger
• Automobile and Other

This course is not meant to be exhaustive of the costs that are typically incurred in sending an employee to another country. For example, there are a series of costs (such as work permits) that are associated with the international assignee working and living in the host country with their family. There are also special circumstances that are dictated by local customs (such as club memberships).

All of these costs and allowances should be evaluated prior to the assignment in order to gauge the true costs involved.

Relocation Expenses and Allowances

Relocation expenses and allowances may be used to prepare an employee and family for the long-term international assignment. The employee and spouse should have a familiarization trip to evaluate the new location, housing communities, schools, medical facilities, shopping areas, meet with the host country tax accountant, initiate immigration as appropriate, and begin a review of the rental housing market in the new country. A primary goal of the familiarization trip is to ensure the spouse is on board with the relocation as it is critical to the success of the assignment. Frequently, this trip will be broken down into two separate trips—familiarization and house hunting. The house hunting trip is an in-depth visit to select a property, sign a lease, select schools, understand local requirements and customs, address transportation needs, and a host of other things that entail a move to a new country.

A move to a foreign country typically requires shipment of household goods and personal belongings to the new location, storage of household goods and automobiles in the home location, and lease of home country housing or other arrangements including property management. Household goods shipments typically will take 60 to upwards of 120 days depending on the location, so temporary living expenses will also need to be managed.

Temporary living expenses will usually be needed prior to moving into the leased housing and the arrival of household goods from abroad. Throughout the temporary living expenses period, a company may reimburse expenses in a variety of ways by providing:

• the employee and family with a per diem for temporary housing, food, and other miscellaneous expenses
• actual reimbursement of temporary living expenses
• short-term housing and pay a cost-of-living allowance.

A per diem is a very effective way to manage temporary living expenses. ERI's Relocation Assessor® can be used to find per diems for cities around the world. Select the third tab, “Estimated Per Diems,” to view them. You can also go to the U.S. Department of State website to access per diems in foreign countries.

Additional expenses may include language training and a course in the local culture and customs. Some companies will even provide driver training in the new location, and it is highly recommended.

A lump sum relocation allowance can be used to help defray miscellaneous expenses incurred as a result of a long-term international assignment. For example, an expatriate may need to purchase new electrical appliances, electrical converters, furnishings, window coverings, and supplies to set up a new home in the new country.