The UK has overtaken Japan as the most expensive location to send expatriates, with the average expat pay package rising by £44,688 to £311,240 according to new research.
The report surveys the cost of benefits, salaries and tax treatments in countries around the world in order to assist companies with benchmarking their expatriate packages when relocating staff. Benefits include the allowance to cover essential costs such as accommodation, international school fees, utilities or cars.
The average package for a mid-level expat worker in the UK is now £311,240, up 17% from last year. Cash salaries make up less than 1% of the increase (£160), as the cost of staff benefits in the UK has caused the majority of the hike.
“The value of an average pay package for an expat in the UK saw a huge increase in 2018,” said Oliver Browne, Remuneration Manager at ECA International, who carried out the research. “The rise of £44,688 was primarily down to a major jump in the cost of benefits that companies provided their overseas workers with, such as rental costs and international school fees. As the cost of expat-standard housing and rental prices increased throughout the UK, the value of benefits provided by a company to cover these costs therefore rose significantly by £23,881 on average.”
Swiss salaries highest in Europe
After the UK, Switzerland is the second most expensive country in Europe for expat pay packages costing companies an average of £178,260. However, a large part of this is made up of the highest average cash salary in Europe; £66,940 versus £55,948 in the UK.
Browne said: “Swiss salaries are consistently towards the higher end of the scale but so are everyday costs in most Swiss cities. Despite the higher prices, high salaries in the country mean locals are still well-off compared to their European counterparts. Furthermore, because of low taxes and a smaller value of benefits needing to be provided by a company, it is still comparatively cheaper to send expat workers to Switzerland compared to the UK.”
Republic of Ireland enters top 20 most expensive
Elsewhere, the Republic of Ireland saw a jump in the rankings and entered the top 20 most expensive locations to send expatriate workers.
“Similar to the trend we saw in the UK, benefits costs have increased notably due to the rise in accommodation and rental fees. Expats in Ireland are more expensive for companies despite average net salaries for expatriates actually dropping by 2% (€965) since last year. This was more than offset by an average rise of 14% (€8,820) in the cost of benefit provisions that companies had to provide their overseas staff,” Browne explained.
ECA’s recent rental accommodation report revealed that rent in Dublin entered the top five most expensive in Europe for the first time, averaging €3,406pm for a mid-range, three-bedroom apartment.
Best salaries in the Middle East
Browne explained: “The Middle East has always offered extremely high salaries to overseas workers, and 2018 was no different. However, the benefits offered in these nations are not among the most costly for an employer, and the average value of benefits offered actually dropped in both locations last year, while the lack of any personal tax means that the overall package works out to be a lot lower when benefits and tax are both taken into account.”
Tax reforms cause expat pay costs to drop in US
The average pay package in the United States has dropped by USD 4 445 to an overall total of USD 250 028 (£184, 493), but this is due to a major decrease in personal tax requirements as salaries and benefits both increased.
“Major tax reforms, effective from 1 January 2018, meant that personal tax rates dropped significantly for many people working in the United States, especially for those on a higher income as many expats are,” said Browne. “The personal tax rate has dropped by 14% on average, while the average expat net salary increased only slightly, by less than £1,000, meaning many companies will have found it a lot cheaper to relocate staff to the US last year.”
Pay packages improve in China
The pay and benefits package of an expat living and working in China saw a significant rebound last year, after falling in 2017. The average package is now valued at CNY 1 971 894 (£228,896), an increase of 3% in the local currency, pushing China up to third in the rankings after dropping in 2017.
Browne said “Expats in China have seen a rebound after a bad year in 2017 that saw the value of the average package drop in all areas. The Chinese yuan experienced a better year in 2018 and due to a stronger economy and currency, the pay package for overseas workers in Chinese locations has now improved accordingly.”