Singapore has the seventh highest expatriate pay packages in the region according to ECA International, the world’s leading provider of knowledge, information and technology for the management and assignment of employees around the world. This is down from last year’s sixth position despite the cost of a package having risen over twelve months. The value of a typical total expatriate package for Middle Managers in Singapore is US$259,000.
When considering the cost of an expatriate package companies need to factor in three main elements: the cash salary, benefits – such as accommodation, international schools, utilities or cars – and tax. To assist companies relocating staff with benchmarking their packages against the market, ECA conducts its annual MyExpatriate Market Pay Survey of pay levels for expatriates around the world, including benefits, allowances, salary calculation methods and tax treatment.
“The cost of providing certain benefits such as housing and education is the most expensive element of the pay package when relocating staff to Singapore. Remove these and Singapore falls from 7th to 14th in the regional ranking thanks, too, to low tax rates,” said Lee Quane, Regional director – Asia, ECA International.
Expatriate packages in Singapore are still lower than in Hong Kong, ranked 5th. However, with the cost of the package there having dropped slightly while increasing in Singapore, the gap between the two continues to narrow.
“The rising cost of an expatriate package in Singapore will make some companies think twice about where they set up in the region. However, the country’s reputation for providing an excellent quality of life is a big plus in terms of motivating employees to accept an assignment there. Furthermore, there are ways in which companies can contain costs – we see many revising housing allowances down or using an approach based around local salaries topped up with additional benefits rather than using the employee’s salary at home as a starting point,” said Quane.
International assignment pay packages can be designed in a variety of ways. The most common approach, both in Singapore and globally, is to use the employee’s salary in their home country as the starting point, then adjust for cost of living and any other allowances, and tax. However, increasingly companies operating in the major Asian hubs adopt an approach, particularly for employees sent on a permanent one-way basis, whereby the host country local salary is used as the starting point with or without some additional benefits such as an allowance for accommodation or children’s school fees.
“When choosing an expatriate pay approach it is essential for companies to be clear about the reasons behind the assignment so that their choice reinforces this. This will also help them to decide whether they wish to create equity among home or host country peers – something that has become even more complex as companies manage increasingly diverse nationalities in and out of different markets. And of course all this needs to balance against benefits and costs to the business,” said Quane.
Japan, is home to Asia’s highest expatriate packages. On average, a package for an expatriate middle manager there is worth US$375,000.
Mainland China remains 4th highest in the region having overtaken Hong Kong last year. A total package for an expatriate middle manager in China is worth over US$276,000.
“Not all Chinese cities require such high packages, though. The cost of benefits provision in tier-2 locations is still much lower than in tier-1 cities and if they, alone, were to be taken into account, China would appear towards the bottom of the regional ranking above only Malaysia and Pakistan,” said Quane.
Malaysia has the second lowest expatriate packages in the list – one spot below Thailand.
Developing locations not always the cheap option
Low cost of living does not always translate into low expatriate packages. For example, in order to attract talent to some of the cheaper, less developed locations companies often need to provide greater incentives than they do when moving employees elsewhere.
Companies also need to be aware of the tax element of the package. This can considerably increase assignment costs, as in the case of India, where half of the total expatriate package is consumed by tax.
The currency in which salary is delivered will have implications too. For example, if paying in one currency rather than splitting it, IHR need to have a policy in place to ensure their employees’ buying power is maintained should currencies fluctuate significantly.