The goal of an expat package is to take into consideration the challenges that an expat and their family would have moving to a foreign country and trying to ensure a smooth transition. Many expat assignments fail because of the difficult time the spouse/family had with country integration. Whereas the expat themselves will have more of a structured work life with co-workers and can more easily make friends, it can be more challenging for the spouse who doesn’t have that automatic community.
There are many different versions of an expat package but it typically falls into three categories. Short-term (1-2 years), long-term (3-5 years) and permanent. An expat package could include any of the following:
- Housing stipend. Here is the schedule of housing allowance that USAID provides to their expats. Depending on your Group, you could receive anywhere from $54K – $79K for housing. I’m not sure what is typical for private multinational firms. It could be anywhere from zero to fully covered. In third world countries, housing typically tends to be extraordinarily expensive because of low inventory of western type homes in the market and additional security measurements. All of these are taken into consideration for a housing stipend.
- Auto stipend. Auto stipends vary and depend on various factors. In countries where security may be a concern, some multinational firms will employ cars and drivers or even armored cars for their executives. Auto stipends could even come with the role itself and not be associated with a package.
- Tax services and income equalization. The United States (and Eritrea) are the only countries in the world that require their citizens who live and work outside the US to file foreign earned income taxes. Based on tax treaties with other countries, the US does not require citizens to pay income tax up to a certain amount. Please refer to this link for the most up to date income exclusion. Thereafter, you are taxed in both the US and your host country. There are various tax credits that can be taken that would most likely require an accountant. This is also where it’s necessary for the corporation to gross up your income so that you are not being double taxed in both countries. Request accounting services if you can. CPA services for this type of filing can turn out to be very costly.
- Cost of living adjustment. The cost of living allowance (COLA) is used to ensure that if you move to a country with a higher cost of living, that you are not living below your current standard of living. For example, the COLA that USAID provides to diplomats who move to London is 60%. That means that on top of your salary, you would receive an additional (typically monthly) allowance of +60%.
- Moving services. Moving services from the home country to the host country include movement of furniture and household goods. In the case of moving from a country that has 110V to 220V, an electrical allowance is provided to re-purchase electronics.
- Annual trip back to home country. A yearly trip back to the home country can be included in expat packages and paid by the corporation. Sometimes expats are given a budget to travel back where others can just travel back every year regardless of cost.
- Spousal career support. In many international assignments, the spouse has had to quit their job. Corporations are realizing the importance of providing proper career spousal support. In the case of London, although it may seem like it would be easy to get another job, I’ve read that it is actually more difficult than one thinks. Skill sets are defined differently and they try to hire their own citizens.
- Education allowance for children. Depending on the country and their public school, an education allowance is provided for children to attend international schools. This typically happens in countries where the local school is not sufficient and the only option is private school.
- Payoff of leases. If you are leasing a car, companies may pay the balance or early termination fees associated with the car or any other type of lease contract you may have.
- Early Cancellation fees. Companies may offer a set amount for early cancellation fees usually associated with mobile phone, internet, TV, or other utility contracts.
- Temporary Housing. There is a time between when you move out of your old home and before you move into your new home, both in your home country and your new destination. Companies may offer to pay for housing (either a corporate apartment or hotel) on both ends of the move.
- Rental Car and Gas. Similar to temporary housing, you may need a vehicle after you have gotten rid of your old one but not before you have moved and once you arrive in your new location.
- Meal Stipend. Again, this is for the time during the transition where you will not be able to make your own food in your own home and need to eat out.
- Set relocation allowance. The company may also offer a lump sum to take care of all the miscellaneous expenses. Remember this is taxable.
- Transportation to your new home country. If you are flying, typically the company will pay for the airfare. If you are driving, they will give you an allowance based on mileage or a lump sum.
- Repatriation package. If this is a short term move where you plan on going back to your home country, make sure there is a repatriation package as well. You want to have this negotiated at them same time as your relocation package.
- Salary Equalization. If you are being paid in your home country’s currency and living in another country, salary equalization is important if there ends up being significant fluctations in currency. This means that if your cost of living goes up due to exchange rates, the company will “equalize” your pay so that you are not paying more for the same standard of living.
- Healthcare. Depending on where you live, private healthcare may be necessary. Make sure you have a good understanding of what your healthcare benefits look like.
- Visas. Make sure your company is taking care of all the necessary visa paperwork needed for you to work and your family to live in that country. This can be quite costly and confusing doing it on your own. Most multinationals hire outside firms to navigate the process.
All expat packages are different depending on the position, length of time, and company.