Expat Contract Negotiation


What kinds of benefits should an expat contract include?
 

Salary Cost of Living | Accommodation | Visas | Schooling | Healthcare | Car | Taxes | Hardship Flights | Repatriation


Bangkok in Thailand is popular with expats, Photo by Nik CyclistThings have changed since the global recession, with international markets stabilising to differing extents. Asia, in particular, has enjoyed a robust recovery and continues to attract expatriates from all over. According to HSBC's Expat Survey for 2013, Thailand has become the most cost-effective place to live in the world, while Indonesia and Vietnam enjoyed high rankings for the career opportunites they present expats. Asia's recovery and the wealth of the Arab Emirates means that a large portion of Western expats continue to flock eastwards.

There are still challenges, however. Many businesses are still less likely to offer expatriates luxury contracts, continuing the cautious stance made necessary by the financial crisis. While there certainly are still lucrative opportunities for expats, there is also a move in many countries towards hiring homegrown talent. This means that expats need to be better than the competition and, in some cases, willing to compromise on their demands. That said, there are still important features in an expat's contract that should be inflexible.
 
When it’s your turn to negotiate a contract, you need to be prepared and informed about what you want. The key is choosing which battles to fight and making sure that you win them while conceding on features that are less important to you.

The best time to negotiate with a prospective employer is after receiving a concrete offer, but before the contract has been signed. Once you've put pen to paper, improving your conditions is unlikely, but getting too pushy too early can jeopardise getting an offer in the first place.
 

Base salary - foreign service premiums

Contract negotiations always begin by determining remuneration, a subject complex enough to warrant a specialist field such as salary benchmarking. This benefits both parties, ensuring that employees receive fair market-related salaries, and helps businesses to come up with packages that can attract and retain talented employees.

This doesn't make negotiating less important, but it does help with the most important part of negotiations – having as much information as possible. You should know what to ask for and be able to back up your requests. Log into expat chat rooms and bulletin boards, ask around, and get as much concrete information on what someone in your profession should expect in the country you're interested in. It is also crucial to factor in your new destination's cost of living; it's the only way you’ll know what an offer is really worth.
 

Cost of living

The cost of living in your destination could be used as justification for a higher base salary. The most expensive cost for expats is often housing. In Dubai, for example, housing is the single largest contributor to living costs, while most other things are fairly inexpensive. On the other hand, if an employer is already paying for your housing, your new destination's higher cost of living might not be reflected in a salary increase. 

Before you start negotiating, make sure you've already researched what the most expensive things your wages will have to cover are, and back that up by quoting prices. The numbers employers use to determine cost of living are often inaccurate, so having your own figures is always a good idea. Visit the cost of living section relevant to you on Expat Arrivals, search the web and consult the Mercer Cost of Living survey.

Housing and accommodation

Accommodation costs are perhaps the largest variable in negotiating a contract. This is a large amount of money that companies often don't pay for their local employees, and they may be reluctant to include it as part of your relocation perks. Its significance changes greatly, however, depending on your destination. Some expats in India find that they can't even afford housing similar to what they had in their home country. In a less expensive city, housing may be overlooked to negotiate for other benefits or a higher salary.

Expats are usually afforded luxury housing when it is included as a benefit in their contract. It can either be included as an amount of money to be spent on accommodation each month or, less frequently, provides accommodation in a luxury apartment, compound or villa already owned or rented by the company.

Work and residency visas

Expats shouldn't have to worry about negotiating or paying for their work or residency permit. In most cases, the company has to justify your employment and submit the relevant paperwork to the authorities. Companies who regularly hire expats are generally accustomed to the procedures and you'll often only need to follow directions. Work permit and visa fees aren't usually much of an expense for an employer and they should cover them. 
 

Schooling and education

Costs are high in Australia, but it continues to be popular. Photo by Gordon Milligan Companies that relocate employees are obligated to look after their families as well. This largely means covering or contributing to tuition costs at international schools. Whether you're going to South Africa or Australia, the cost of international schooling is high all over the world – anything from 10,000 to 60,000 USD a year. If it isn't included as part of a relocation package, this can take a significant bite out of your salary. It is also a new cost for expats whose children go to good public schools for free in their home country.

It's also worth noting that the best schools have long waiting lists and it's nearly impossible to find a place in them when you first arrive in a country. Some large companies with a continued presence in a foreign city do, however, have reserved spots at international schools for the children of their employees. Guaranteeing your child's place on the enrolment list can be as important as having the company pay for tuition.

Adult classes such as language lessons or acculturation classes are also sometimes provided for by employers. Negotiating for these can be worthwhile to help you and your family adapt to your new surroundings.

Healthcare

Many countries don't have adequate public health facilities and private care is usually expensive, which means that comprehensive medical insurance is essential for expats. Companies should always provide this for their foreign employees and their families.

It's important to remember that insurance policies differ and have multiple levels of premiums and co-pays. Discuss what happens in an emergency and whether the initial payment for treatment is out-of-pocket and then reimbursed, or immediately covered. Also make sure that evacuations are covered, whether for natural disasters or medical emergencies.
 

Car allowance

Few contracts will include the provision of a motor vehicle but it's often appropriate and necessary to negotiate for the cost of a driver. In some so-called third world countries, driving yourself around is perilous and having a driver is essential. You should also consider that having a four-wheel drive vehicle may be necessary to cope with terrible road conditions and off-road terrains.
 

Taxes

Expats often move to Qatar for the tax benefits, Photo by Joi ItoFiling taxes in two countries is often expensive and very complex, which is why many expats head to countries with favourable tax laws such as Qatar and Hong Kong.

Some countries tax expats on their worldwide income, while others only tax them on their earnings from inside the country. In some cases, double taxation avoidance agreements (DTA) protect expatriates from being taxed twice but not everyone will have a treaty with your home country. To avoid complications, companies often pay for an expat's tax by directly deducting it from their salary, whether locally or also in the employee's home country. If an expat's salary is double-taxed or the foreign country's tax is greater, they may also be entitled to compensation from their employers.

You may be able save on tax with strategic vacations and timing the dates of your contract. For example, if your one-year contract begins six months before the end of the tax year and ends six months later, you may fall into a lower tax bracket based on only half of your annual wage. Often countries will also only tax expatriates after they've spent a certain number of consecutive days in the country in one year. 

Tax status is further complicated for expats seeking residency or on a temporary visa. A tax planner won't always be covered by your contract but, if you're filing taxes in two countries, you'll probably save money and effort.

Hardship allowance

In addition to their standard salary, many relocated expats receive a hardship allowance. This is increasingly uncommon and largely restricted to specific industries but it could still be used as a negotiating chip. “Hardship” is difficult to define but it's fairly obvious that it could be applicable in destinations such as Nigeria, Afghanistan and Iraq. Factors such as pollution, restriction of freedoms, crime and danger all contribute to determining the level of hardship an expat has to face.
 

Return flights and vacations

Flights to and from your home country are expected. Extended contracts should also include flights home for the holidays, usually one return ticket for the whole family per year. Sometimes the employee initially pays and is then reimbursed by the company. Several extra days of vacation are also commonly given to accommodate time spent flying. Companies may also include paid-for company trips to other countries that aren't included as vacation time.
 

Repatriation and length of stay

At some point you will want to return home. Negotiate for the costs of this process to be covered and, crucially, lock-down the precise length of your overseas assignment. This is a grey area in contracts that employers often exploit later on to leverage more work or less pay from expat employees. Your contract should include a clause about compensation should the assignment run over – make sure it's there, and read it carefully. 
 

In conclusion

Getting the most out of an expat contract

Expats that bring more information to the negotiating table are much more likely to walk away with expatriation extras. The best advice is to research the destination well and predict what costs you could incur. Always ask for the benefits you want, as companies often won't include everything they're willing to offer unless you bring them up at the negotiation table.

*Updated November 2013
 

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