Expat Package 101

Experiencing life abroad can be one of the best decisions you’ll make for your personal development. It offers a deeper perspective on diversity, exposing you to different cultures and practices. A study published in the Journal of Personality and Social Psychology suggests that long-term stay in a foreign country can result in improved extraversion and better social interactions.

Living abroad as an expat has its challenges. The preparations start with understanding your expat employment contract: How do you know if you have a reasonable offer? Will your compensation be enough to sustain your stay abroad? Here are some points you should consider:

What type of contract do I have?

A local-local expat contract is extended to foreigners who apply for jobs in a local employer abroad. You’ll receive the same remuneration given to local employees. It doesn’t recognise the fact that you’ve moved abroad. Thus, there are no perks similar to those offered under a local-to-expat contract. If you’re handed a local-to-expat contract, your being an expat worker is compensated by a higher salary, more holidays and a cover of the relocation costs and sometimes some other benefits.

The short-term expat contract usually includes a higher salary, accommodation allowance, travel allowance, paid leave entitlement and others. This package is good for six months or less.

The largest package is the long-term assignment contract which typically includes all those offered under the short-term contract and more. It includes children’s school fees, car plan and housing allowance. If you have the long-term expat contract, you have a good starting point to negotiate the level of compensation and benefits offered by the company policy.

Lump Sum Policies

Lump sum policies are often known as a holdall policy. That means that you as an assignee would be allowed to use your package allowance or compensation as you would like. There are no solid packages such as a specific amount just for housing, just for cost of living, and just for transport. As tempting as this might sound, it is a very complicated policy and it is usually offered as a one-off payment under a very short assignment.

What you want to look for in a lump sum policy is a clear computation of the Cost of Living allowance and how it is computed specifically if it takes the Cost of Living index of your country of residence into account. Read more about Lump sum policies and how it affects your contract payments in this link.

Expatriate Policy Contract

The common expat policy contract includes a salary including all kinds of allowance, tax agreements, and all currency related computations. It also generally includes relocation compensation, housing, and other types of benefits that can come depending on your specific type of assignment and where you will be assigned to.

It’s highly recommended that you research on the cost of living, medical expenses and other costs of working in your host country. You should also consider public safety and health as these factors will influence your means of transportation and choice of neighbourhood.

If your company is sending you abroad for a project, you should know what happens when it expires. Will you go back to your post prior the foreign assignment? Or, will your position be filled once you accept the expat contract? Discuss this well with your employer.

What law governs my expat contract?

The laws governing your expat contract are usually the laws in your home country.

One of the exemptions is when you’re employed by a foreign embassy, which is an extension of that country’s territory. Employees in US embassies abroad are protected under US laws. The jurisdiction and law are essential when executing certain provisions in the contract such as dispute resolution. If you’re in doubt, don’t indulge in guessing game. Consult a lawyer.

How much income tax should I pay?

Tax is an intricate subject. There shouldn’t be a margin of error. Given your status, make sure that your contract includes tax consulting services and make sure it is specified for what service. You may be obliged to report your worldwide income and be subject to double taxation such as in the case of US taxpayers. You can also inquire about tax incentives extended to expat workers or those working in special economic zones. Most company will have a contract with one of the Big four companies to cover the tax matters of their global mobile workforce.

Expat living is a growing trend among millennials, or those born between the 1980s and the early 2000s. This young and mobile generation is said to be changing the way businesses operate. Before joining the wave of global citizens, take efforts to fully understand your contract and other expat-related matters.