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Housing
Typically, a company will provide an international assignee with financial support to maintain a residence in the host country suitable for their position, family size, and lifestyle. The company may pay the actual housing lease, a competitive foreign housing allowance that does not exceed the competitive market or the lease amount, or other appropriate foreign housing support. In turn, the employee may contribute toward paying for housing at a level commensurate with actual home country housing, or some other appropriate home country norm. Ideally, housing should be managed so an expatriate employee does not financially gain or lose as a result of the assignment.
Cost-of-Living Allowances
When establishing cost-of-living allowances, the term "keeping the employee whole" means that while the employee should not financially suffer, the employee should also not receive a windfall. Ideally, the assignment should be cost neutral to the employee.
Bringing a standard of living up to home country norms in a foreign country is usually expensive. The following example of cost-of-living differentials between Chicago and other international cities illustrates some of the differences.
| Cost-of-Living Differentials Between Chicago and Other International Cities | |||
|---|---|---|---|
| Paris, France | +24.2% | Rio De Janeiro, Brazil | -2.5% |
| London, UK | +35.6% | Zurich, Switzerland | +33.7% |
| Brussels, Belgium | +1.3% | Johannesburg, South Africa | -17.9% |
| Tokyo, Japan | +18.1% | Dubai, UAE | +8.7% |
| Bangalore, India | -17.9% | Shanghai, China | +5.6% |
| Singapore, Singapore | +36.9% | Perth, Australia | -4.7% |
|
Data as of April 2026
Data based on: Source: ERI Relocation Assessor |
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Cost of Living
The international assignee is given a cost-of-living allowance so that the family may live as closely as possible to how they would live in the home country.
The cost-of-living allowance is managed as a percentage of the employee’s base pay. The allowance is calculated based upon the difference in cost of living between the host country and the expatriate’s home city, home country, or headquarters, depending upon company policy. It is most common for the cost of living to be managed as a comparison between the host country city and the home country city.
Cost-of-living differentials can be obtained from a number of sources which include:
- ERI's Relocation Assessor
- The U.S. Department of State – Office of Allowances
ERI's Relocation Assessor. ERI's Relocation Assessor allows you to compare living costs between any of over 10,500 cities worldwide, including a two-city comparison or a benchmark listing. The percentage difference can then be applied to the base pay to determine the appropriate allowance.
U.S. Department of State – Office of Allowances. The United States Department of State provides information comparing cost of living between the U.S. and other countries. This information is updated quarterly.
Q: What if the cost of living in the host country is lower than in the home country? Should you do anything about it?
A: When the cost of living is lower in the country to which you are transferring an employee, this effectively gives the employee a pay increase (their money will go farther in the new location). This is great for the transferred employee, but local employees and third country nationals (TCNs) most likely will find the solution to be inequitable, which may cause employee relations issues.
Applying a negative allowance to the expatriate's base pay is a possible solution, but not a recommended one. This obviously isn't a popular thing to do as it can cause reluctance in accepting the foreign assignment, but it may be possible with proper communication and explanation.
Memory Jogger
Keeping an employee "whole" means: