An Employer’s Guide to Expatriate Benefits & Compensation | IRIS FMP (2024)

Posted on 8 February 2022 by IRIS FMP

When a first-time, or returning, expat is sent internationally to complete an assignment, there are questions that may seem difficult to answer. An employer might be questioned about the competitiveness of what’s on offer, or whether it’s even attractive enough for employees.

Consider, for example, the following:

• Are your benefits benchmarked competitively?
• Should salary and compensation reflect the host country’s expectations?

When growing companies send staff abroad on international assignments, a level of negotiation is often needed when it comes to agreeing compensation and benefits. It’s important that employees are properly incentivized and rewarded, however such arrangements also must make financial sense for the company.

Read on to find out about best practices and what might be expected when it comes to expatriate benefits and compensation.

Agreeing Expatriate Benefits and Compensation

Usually, when a business decides to expand internationally, it’s useful to expatriate existing employees to ‘set up shop’ or establish a business in a foreign market. This is because these employees will already be familiar with the way the company works, as well as its ethos and goals.

When approaching staff for an international assignment, business leaders need to ensure they properly incentivise the move for the best outcomes. Whilst some employees may look upon expatriation favourably, others may have reservations unless the offer is attractive enough. This is especially so if the employee(s) have dependants and other commitments outside of work, such as schooling considerations or are anxious about housing opportunities.

Employers should consider the following allowances when it comes to international relocation:

• Housing opportunities
• Education opportunities
• Driving and transport options
• Travel practicalities and expenses

In either case, it’s important for employers to understand that the opportunity to move and work abroad is a substantial one for any employee.

To properly incentives and benchmark employee relocation, careful consideration should be given to expatriate benefits and compensation. Business leaders need to offer an appropriate salary, cover the costs of relocation, and include various other employee benefits in an expat package (including any tax complications).

Importantly, any agreements should be made in negotiation between employee and employer.

Finding the Right Expatriate Benefits

While a competitive salary and the cost of relocation should be simple enough to determine, expatriate benefits can be somewhat more complicated to agree on and arrange. This is partially because expatriate benefits will need to be flexible enough to work compliantly and competitively in different locations across the globe.

Compliance should prioritize which benefits are offered in the first instance. A host country may have different employment laws from the location where a business is headquartered, so benefits will need to carefully negotiate both compliance and employee expectations.

Certain employee benefits may not always work as expatriate benefits. Examples of this include:

• A company car

This would only be useful if the expatriated employee is confidence enough – and legally able – to drive in their new country. Where this is not the case, access to a personal driver, or public transport passes may be more useful.

• Private healthcare

In the US, many companies offer access to private healthcare as an employee benefit. In many European countries, however, this is not worthwhile because all residents have access to public healthcare, which is of high quality.

Other expatriate benefits are, on the other hand, considered more desirable. Those include:

• Overtime pay

Where in the US many states do not require employers to offer staff overtime pay, in other countries this may be expected, or even lawfully compulsory.

• Language classes

If employees are being expatriated to a country where they do not speak the language, offering access to language classes as a benefit can help them to properly integrate into society.

Expectations Among Expat Communities

There are many parts of the world in which expatriated employees are more common, and often communities around expat lifestyles start to develop here. Exposure to these communities could be valuable, as employees become less isolated in their new roles and have local reassurance from a similar type of worker.

But benchmarking benefits and compensation is critical in ensuring that these remain competitive and that employees are satisfied.

Common Places for Expat Assignments

The following is a list of the biggest expat communities across the world, according to International Money Transfer.

1. Dubai
2. Toronto, Canada
3. Chiang Mai, Thailand
4. Brussels, Belgium
5. Sydney, Australia
6. Berlin, Germany
7. Los Angeles, USA
8. Singapore
9. London, UK
10. Amsterdam, The Netherlands

When a business expands into one of these areas, it can be beneficial for company representatives to do their homework. It’s advisable to research the types of expatriate benefits that other companies are offering their staff. In addition to relocation costs, any of the following could be common expatriate benefits in these locations:

• Housing
• Transport
• Education for dependants
• Healthcare and dental
• Language classes
• Cultural training
• Health & fitness memberships
• Electronic devices (mobile phone, laptop, etc)
• Regular bonus

In addition to finding out which types of expatriate benefits are often seen in the new location; business leaders also need to make sure they are fully compliant with the employment law in that location. When it comes to benefits, there are some which may be legally compulsory – such as overtime pay – and others which may need to be reported to the local tax jurisdiction.

Achieving Compliance

The most reliable way for a business to ensure they achieve compliance with HR and payroll law in a new location is to procure the services of an experienced team. The experts at IRIS FMP have experience in navigating employment legislation all over the world, and we know how to make sure your company operates well within the law.

The two main considerations regarding compliance when it comes to expatriate benefits are:

• Offering lawfully compulsory benefits
• Reporting benefits to the tax jurisdiction

Offering Lawfully Compliant Benefits

All over the world there are different employee benefits that must be offered by companies operating in certain countries. Getting familiar with employment law in a country where you intend to expand your business is vital but can seem like a daunting undertaking. See our individual in-country guides as a starting point.

Compulsory benefits that may need to be offered, in spite of what is usually offered in the company’s origin country, include:

• Overtime pay
• Holiday leave and pay for a specific number of days
• Sick leave and pay for a specific number of days
• Parental leave and pay for a specific number of days
• Time off to take care of parents or dependants

Reporting Benefitsto the Tax Jurisdiction

Employment law in different countries may also stipulate that some expatriate benefits need to be reported for tax purposes. The reason for this is because employees and/or employers may need to pay tax on these benefits.

Examples of this include in the UK, where the following benefits need to bereported to HMRC:

• Health insurance
• Childcare
• Company cars

And in the US, where the following need to be included on employees’ annual W–2 Wage and Tax Statement:

• Car allowance
• Education allowance
• Host country housing costs
• Utility bills

Payroll teams in expanding companies need to keep track of all expatriate benefits issued, and determine when and if they should be reported, and to whom.

Offering the right expatriate benefits and compensation to staff on international assignments is an important part of ensuring business expansion is successful. The reason for this is because only with appropriate expat packages will employees feel valued and fully supported. Employees who feel like this will then feel more inclined to deliver their best work, allowing the new company branch to thrive.

For all the advice you need regarding expatriate benefits and compensation, and supporting staff on international assignments, get in touch with IRIS FMP.