When it comes to international assignments, relocation policy is not just a ‘one-size-fits-all’ affair. Expatriate compensation packages vary enormously, both between and even within global companies, depending on your circumstances, country of origin and your intended destination.
But while different contract types and conditions offer flexibility to cater to specific individual needs within the various policies in use, there are also plenty of potential pitfalls to consider too. So what are the main areas that you need to understand when negotiating your expat assignment contract?
1. Understanding Expat Assignment Contract Types:
There are now a number of different types of contracts being used by the HR and relocation companies to manage your assignment. The two most common are local (including local plus) and international.
Local means that you will be governed by the employment pay and conditions of the host country, and aims to ensure parity among employees within a specific location for the duration of your contract.
What to look out for:
While local salaries can mean a increase in income in more expensive regions, there may be a decrease in less expensive locations. Bear in mind that your salary is made up of more than just the money that reaches your bank account: consider how your benefits, (health coverage, pension contributions, share schemes, family support), household income and vacation entitlement are affected.
It’s also a good idea to see how well supported your partner and family are – will there be language and cultural training, will they be able to work, attend a school with a recognised and transferable curriculum / examination policy, for instance? While most issues can be successfully addressed, you need to know who will be responsible for both establishing and paying for any support you and your family might need.
Understand the local tax, benefits, employment and residency rules – working for a local company may mean you don’t have access to the legal help and social support services you would expect in your home location.
Local plus (also known as local-to-expat) provides for additional needs or expenses incurred because of your temporary expat status, such as private health insurance, international school fees and trips home, but won’t necessarily have the full range of benefits of an international assignment contract. They vary hugely between locations and companies, so make sure you understand your own and family’s needs and expectations fully before you start negotiating.
What to look out for:
Check exactly which expenses are covered, as there are likely to be grey areas, especially for health coverage (think maternity care, critical care), schooling and repatriation. You’ll need to understand what happens if the assignment is extended or terminated early, and who is responsible for repatriation costs in each situation.
Expat / International
An international contract means you continue to work under the terms and conditions of your home location, regardless of the salary and benefit entitlements in your host location. As a comparison, European employees on an international assignment in the US would probably be entitled to more annual leave days than their American counterparts, whereas US employees heading to Europe would find the opposite was true. These packages are typically aimed at the longer – term or serial expat who would expect to spend a longer period away from their citizenship country and travel through more than one international location. It provides a measure of continuity and security, and often includes ‘hardship allowances’ in locations considered more challenging.
What to look out for:
While your income may be higher on an international assignment package, often your expenses are higher. Many expats report increased spending and a higher standard of living, but less focus on long term security. Also be aware that being away from your country of citizenship for long periods may affect your rights to benefits and services there – college fees, for instance may be levied at international rates due to your lack of residence in the country. However, you may be eligible for local rates in your host location, so plan accordingly.
2. Key Terms and Conditions: Time frames and Legal Variations
Serial expats out there will be nodding their heads at this one, so for the benefit of those about to launch, here’s why I’m mentioning it. Words like ‘temporary assignment’, ‘two to -five years’ and other such time frames are often guidelines rather than rules, so don’t be fooled. There are various types of contract – some specifying end dates, some ongoing, and some delightfully vague – so before you move on to the nitty – gritty, understand the real terms and conditions of your contract duration – and what happens when it ends.
While we are on the subject of rules and responsibilities within the contract, double check which laws the contract will be written under. Typically, the contract will be written according to the laws of your home country, your host location or the ‘home’ country of your employer. As you have probably guessed, this makes the expatriate employment contract a complicated business, for as the Expat Info Desk so beautifully puts it:
It is clear that even where a contract is robust and watertight in one country, variations in global law can entail that it becomes void and difficult to enforce. In order to adequately negotiate a contract you, or your legal representation, should have a good knowledge of the host country’s statutory law provisions.
3. The Fine Print: Weighing up the Pros and Cons
Once you have established what type of contract you will be working under, you need to understand whether the package provided gives you a comparable current and future standard of living – and if not, whether you are happy with the change.
It is more than just the immediate basic requirements – housing, healthcare, schooling, transportation, financial and legal status – you also need to consider the longer term: school planning, college eligibility and fees, provision for dependents becoming legally adult, access to legal services should you need them, long term medical and social care, financial planning, tax implications and superannuation (company pension plan).
The Free Member Area has an assignment contract checklist for you to download – click here to get access.
Do detailed research in advance with reference to your specific individual and family needs, and if you have a preliminary visit, try and talk to resident expats to get a realistic picture. Ask what the actual cost of living in your host location might be, and what challenges to expect. If you are not sure where to start, check out our Pre-assignment Planning Webinars on the member area.
Don’t assume that the information given by the relocation management company is accurate – they use a generic formula that may have little relevance to your situation and needs. I’ve listed some resources at the bottom to give you a starting point, but don’t forget social media, existing contacts within the company, and communities like Families in Global Transition as a way of connecting with resident expats.
4. How to Ask for What You Need: Negotiating Your Expat Contract
Reminder: I am not a lawyer and have no legal training, so for goodness’ sake, get professional advice. For the full disclaimer, click here.
Here’s the bit that most of us hate – asking for what we want, need or are worth.
So, if you (like me) are one of those people who is incapable of negotiating without turning purple, sweating profusely or burbling incoherently, I have the answer. Devon Smiley.
Devon will be my guest on this week’s webinar on Wednesday, 8th July at 10am PDT (1pm EDT, 6pm BST):
Successful Negotiation: Tips, Tools & Techniques:
How to Ask for What You Need, Want and are Worth, without Breaking a Sweat or Losing your Lunch
In it, we will be tackling the prickly issue of negotiation – whether at work, at home or out in the world. She will be sharing her tools tips and tricks for staying serene, speaking up and getting what you need, without stress.
As an added bonus, we have put together a Simple Guide to Negotiation Success for Expats (and Everyone Else).