Not a Member?  Become One Today!

'Local-Plus Pay' for Expatriates in Asia Gaining Ground
 

By Stephen Miller  8/24/2009

Asia’s expanding markets offer a multitude of financial opportunities—and challenges—for international companies doing business in the region. One such challenge is finding the requisite skills from within the local labor pool to fill positions appropriately and adequately. Thus, many companies look outside the country or region to source candidates. But staffing these open positions with foreign talent can prove to be an expensive proposition, especially if traditional expatriate perquisites are part of the pay plan.

The uncertain economy has employers looking for cost-effective expatriate compensation options. Participants in two surveys by HR consultancy ORC WorldwideLocal-Plus Packages in Hong Kong and Singapore and Survey on Local-Plus Packages for Expatriates in China—report a growing trend toward expatriate “light” or “local-plus” packages.

“These alternative packages often base the assignee’s salary on host-country pay structures,” says Phil Stanley, managing director of ORC Worldwide’s Asia-Pacific region, “but then tack on a few expatriate-type benefits, such as some form of housing assistance and possibly an allowance to partially cover children’s education.”

Country Variations

Employers in different Asian locations address the situation in various ways, depending on the local market and other factors. “For example, while the idea of a local-plus approach in China is popular, and employers are discussing it,” explains Stanley, “in actuality, the concept is still very much a work in progress for most companies. Employers determine much of what they offer on a case-by-case basis. Due to the talent shortages and living challenges in China, we found that most often the local-plus offering is merely a reshuffling of the traditional expatriate assignment package elements.”

When it comes to places like Hong Kong and Singapore, the practice varies. Two-thirds of companies operating in Singapore use local-plus packages for certain situations, compared with half the companies in Hong Kong. “The lower prevalence in Hong Kong may be due to a higher percentage of companies simply offering a pure local package to some expatriates due to higher salary levels and lower tax in Hong Kong,” Stanley says. “When a local-plus package is provided, it is likely to be limited to a local salary and include a cash allowance for housing assistance and placement in the local pension plan—but no other ‘plus’ elements.”

Singapore is a little different, according to Stanley. “There is a higher likelihood that the employer will pay rent directly to the landlord rather than provide a cash housing allowance due to more favorable tax treatment, provide tax preparation help for the first year, cover some dependent education, and provide a cash allowance for pension if the employee is ineligible to participate in the government pension fund,” he says.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Automating Global Pay, Benefits Can't Wait for Better Days, SHRM Online Compensation Discipline, March 2009

Expats Still Essential, but Recession Changes Their Roles, HR News, March 2009

2009 Global Salary Increase Budgets Change Significantly, SHRM Online Compensation Discipline, March 2009

Employers Grapple with Weakening Dollar's Impact on Global Pay SHRM Online Compensation Discipline, September 2008

Flexibility and Customization: A New Paradigm for Global Compensation Systems, SHRM Online Compensation Discipline, April 2008

Quick Links:

SHRM Online Compensation Discipline

SHRM Salary Survey Directory

SHRM Compensation Data Center

Sign up for SHRM’s free Compensation & Benefits e-newsletter

Copyright Image Obtain reuse/copying permission