Expatriate Allowances Explained...Finally
Are you thinking about going on an expat assignment and wondering about the expat allowances and extra compensation? What are they? Who are they for? When are they paid? We’ll answer all these questions and more in today’s blog.
Disclaimer - we are American expats so this is obviously from an American point of view. And Andrew works for a large multinational corporation. So allowances could/will probably be different from each company. Be sure to check with your HR department for a full list and explanation.
We’ve been expats for 6.5 years and I’ve worked in global HR at a large company where part of my job was knowing about the allowances and why the expats receive them. Soo today we want to pass some of our knowledge to you!
Before you keep reading...we also have a YouTube Channel where we released a video on this same topic.
Watch it here -->
Let’s jump in!
Salary Uplift/Premium or Foreign Service Premium
This is the big one! And most common among companies. This is a percentage of your salary that will be paid in each paycheck. The amount will depend on where you’re going - how much of a hardship location it is.
Take a look at the chart below to get an idea of the difference in locations:
You can clearly see the differences in the premium amounts depending on where your overseas assignment is. The harder the country is to adjust to, the more money you will receive from your company.
And premium is usually tax protected for the employee since it is a true financial incentive for accepting an overseas assignment.
Spousal Allowance
This one definitely varies by company but this is a payment the company gives you yearly to recognize that your spouse has to leave his or her job to join you on overseas assignment. It is not meant to replace their salary (it’s too small!) but it is meant to help your spouse with career related things. This can include the cost of keeping up with certifications, new training, job searching in your new country, etc. This allowance is typically anywhere from $5,000 - $15,000 each year.
Cost of Living Allowance
This is a payment your company will give you in each pay period to help alleviate the higher cost of living in your new country. They recognize the goods you’ll buy like groceries, household utilities, clothes, etc. will be more expensive than you were used to in your home country. They don’t want this to be a reason you don’t accept an overseas job so they provide you a supplement for the increased cost of living. But if you go to a country with a lower cost of living, don’t expect the allowance!
Vacation Allowance/Days
Living overseas can be difficult and your company knows this. So they want you to go on vacations to recharge and come back ready to work. They don’t want money or days to be a hindrance for this so it’s common to receive a vacation allowance and even extra vacation days.
In the US, we received 2 weeks of vacation and overseas we have 5 weeks. You can see there’s a big difference!
Local Holidays
While you’re living overseas, you won’t get the same holidays as back home. So we don’t receive July 4th or Thanksgiving off. But, we have noticed that, at least in Angola and Argentina, they have more public holidays than the US has. So we had 10 public holidays in the US but here in Argentina it’s about 17 holidays. That’s an extra week and a half off work!
Housing Allowance
Are you going to have to find your own housing while living overseas? Then your company will probably provide you with an allowance to help cover your housing costs. It’s not necessarily an allowance you should be profiting from though. Your company wants you to find safe and comparable housing to where you were living in your home country. For example, you may receive $5k/month as your allowance and then you are responsible for going out and securing an apartment on your own. You can spend the entire $5k and rent a nice place. Or you can spend $2k and pocket the rest.
Educational Costs
Are you worried about your kids' education while you’re on your expat assignment? Well, you probably don’t need to. Most companies hold spots in the top international schools globally to have room for their international employees' children to attend. And they will likely pay for it all too.
Going to a country where you don’t approve of the schools? That’s fine. There’s usually a boarding school allowance you can choose in lieu of your children attending the local international school. This option isn’t common for Americans but I’ve seen a lot of Europeans overseas take advantage of this. And their children will come stay with them on their school breaks.
Have a college aged young adult in the house? There are still some perks for them too, like paid airfare from their University to your expat location twice a year to visit you.
Language Learning
This one gets overlooked a lot but I think it’s important to mention. Language lessons can get expensive but normally your company will reimburse you or pay your class fees. They want you to assimilate and feel at home in your new country and learning the local language is the best way to do that. So be sure to take advantage because learning some of the local language is super important for a successful assignment. I talk more about this in my What to Do When Expat Life Gets Hard and Tips for Expatriate Women blogs.
This covers most of the allowances and extra compensation you will earn while on expatriate assignment. As you can see most companies really try to take the financial risk out of your decision when trying to decide whether or not to accept an overseas offer. And honestly, there is a lot of financial upside. If you have any specific questions, let us know down in the comments.
If you’re going on an expat assignment soon, check out my blog posts on What to Do When Expat Life Gets Hard and Tips for Expatriate Women. These are full of tips for having a successful and fun expat assignment.
