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Local Plus Packages in Asia
- 1. INTERNATIONAL HR JOURNAL
FALL 2009
8
© 2008 Thomson Reuters/West. This publication was created to provide you with accurate and authoritative informa-
tion concerning the subject matter covered; however, this publication was not necessarily prepared by persons licensed
to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice
and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you
should seek the services of a competent attorney or other professional. For authorization to photocopy, please contact
the Copyright Clearance Center at 222 Rosewood Drive, Danvers, MA 01923, USA (978) 750-8400; fax (978) 646-
8600 or West’s Copyright Services at 610 Opperman Drive, Eagan, MN 55123, fax (651) 687-7551. Please outline the
specific material involved, the number of copies you wish to distribute and the purpose or format of the use.
Local-Plus Packages
for Expatriates in Asia:
a Viable Alternative
Phil Stanley
PHIL STANLEY, managing director for
ORC Worldwide’s Asia-Pacific region, is
based in Singapore.
specialist skills. There is a growing
trend, however, toward partial
expatriate or local packages for
locally-hired expatriates (or ex-
patriates hired from overseas but
directly for employment in the
host country, not transferees from
an existing employer). Under so-
called “local plus” packages, the
employer pays expatriates accord-
ing to the salary levels, structure,
and administrative guidelines of
the host location, plus providing
additional expatriate-type benefits
(e.g., housing, dependent educa-
tion, transportation).
Organizations in all three Asian
locations are increasingly explor-
ing the use of “local plus” terms
and conditions for many of their
expatriates, although they are
more common in Singapore and
Hong Kong than mainland China.
(See Chart 1, “When Local-Plus
Packages Are Provided.”) Here’s
a look at how and why they work
better in some locations than oth-
ers, based on participant respon-
dents to two recent ORC World-
wide surveys: Local-Plus Packages
in Hong Kong and Singapore and
Survey on Local-Plus Packages for
Expatriates in China.
OBSTACLES TO LOCAL PLUS
China poses several challenges
to a pure local approach to com-
pensating expatriates due to a
combination of high taxes; low
salaries; inability for foreigners to
participate in social, housing, and
medical schemes; and other fac-
tors. Therefore, some employers
(43%) are considering the use of
local-plus packages. The rest pay
foreigners on a full or modified
expatriate pay package. While
the idea of a local-plus approach
in China is popular, in actual-
ity, it is still very much a work-
in-progress for most companies.
Employers determine much of
what they offer on a case-by-case
basis, so that local-plus packages
are often merely a repackaging of
many standard expatriate assign-
ment elements.
The use of a local-plus ap-
proach varies in Hong Kong and
Singapore. Half the companies
operating in Hong Kong use it for
certain situations, compared with
Asia is filled with expanding
markets that offer financial op-
portunities—and challenges—for
international investors. China,
for example, has the world’s fast-
est growing economy, but its
domestic labor market is unable
to meet the demand for certain
skilled professional and manage-
rial positions. Hong Kong and
Singapore have lofty population
growth plans in place: Singapore
hopes to increase its population
from 4.6 to 6.5 million by 2027;
Hong Kong from 7 to 10 million.
Consequently, companies are
turning to foreigners to help fill
positions and meet growth goals,
while simultaneously looking for
alternatives to the costly tradi-
tional expatriate assignment pack-
age, particularly in this period of
economic uncertainty.
In Asia, employers usually of-
fer full expatriate packages to staff
who are transferred internation-
ally or foreign talents who have
- 2. INTERNATIONAL HR JOURNAL
FALL 2009
9
© 2008 Thomson Reuters/West. This publication was created to provide you with accurate and authoritative informa-
tion concerning the subject matter covered; however, this publication was not necessarily prepared by persons licensed
to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice
and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you
should seek the services of a competent attorney or other professional. For authorization to photocopy, please contact
the Copyright Clearance Center at 222 Rosewood Drive, Danvers, MA 01923, USA (978) 750-8400; fax (978) 646-
8600 or West’s Copyright Services at 610 Opperman Drive, Eagan, MN 55123, fax (651) 687-7551. Please outline the
specific material involved, the number of copies you wish to distribute and the purpose or format of the use.
Local-Plus Packages for Expatriates in Asia: a Viable Alternative
cash rather than a benefit-
in-kind. In Hong Kong, cash
allowances for housing (as
in mainland China) receive
the same tax concessions as a
benefit-in-kind if structured
as a “rental reimbursement.”
zz Although Hong Kong’s resi-
dential real estate is more
than twice as expensive as
Singapore’s, 78.3% in Hong
Kong phase-out the hous-
ing support, compared with
52.6% in Singapore. The
typical phase-out is a gradu-
ated step-down over three-
to-five years.
DEPENDENT EDUCATION NOT
CONSISTENT
For expatriates in China on a
local-plus package, just over 73%
of companies provide some form
of dependent education assistance
for registration, tuition, and fees
at international schools. Some
companies (20%) cover boarding
school if the host-location schools
are inadequate or international
schools unavailable. While most
companies (60%) provide assis-
tance throughout the employ-
ment period, 40% phase out the
benefit over two-to-seven years.
Practice is mixed in Singapore
and Hong Kong: 54% in Singa-
pore and 64.7% in Hong Kong
do not contribute toward educa-
zz 7% pay entirely in a third
currency.
HOUSING ASSISTANCE IS
OFTEN CASH
In China, 87% offer some form of
housing aid, with the level of as-
sistance evenly mixed as to those
who cover the full cost of hous-
ing and those who provide partial
support. This support often takes
the form of a cash allowance to
avoid the additional administra-
tion of company-provided hous-
ing, particularly in China, since
cash allowances for housing re-
ceive the same tax concessions as
a benefit-in-kind if structured as a
rental reimbursement. For three-
quarters of companies, the hous-
ing allowance is approximately
25-50% lower than that offered
under a full expatriate package for
limited-duration assignments.
In Hong Kong, 82.4%, and
in Singapore, 87.5%, offer some
form of assistance, with the lev-
el evenly mixed as to those who
cover the full cost of housing and
those who provide partial sup-
port. In addition:
zz In both locations, the most
common form is a cash al-
lowance. In Singapore, the
employee is responsible for
absorbing the less-favorable
tax treatment of receiving
two-thirds in Singapore. One
reason for the difference may be
that companies in Hong Kong
are more likely to offer a pure
local package to non-seconded
employees due to the location’s
higher salaries and lower taxes.
BASE SALARY
DETERMINATION VARIES
Employers in China employ a
variety of methods to determine
base salaries for their expatriates on
local-plus packages. Forty percent
base it on the local salary structure;
the others determine salary levels
on a case-by-case basis or apply
another approach (e.g., a special
salary structure for China-based
local-plus employees, an Asia-Pa-
cific regional structure).
Hong Kong shows a higher
prevalence of using the local pay
structure without adjustments, as
compared with Singapore, where
companies are more likely to pro-
tect current or previous net pay.
In Hong Kong, total cash com-
pensation tends to be higher than
in Singapore for comparable jobs,
especially at the upper echelons,
but effective income tax rates
are lower in Hong Kong. These
factors may explain why slotting
international employees directly
into the local pay system is more
prevalent in Hong Kong.
PAY DELIVERY
Although the approach is coined
as local-plus by survey partici-
pants, employers in China do not
always deliver remuneration en-
tirely in local currency (CNY):
zz About half deliver the pay
entirely in CNY.
zz 40% split pay between CNYs
and another currency.
CHART 1
When Local-Plus Packages Are Provided
Circumstance China Hong Kong Singapore
Permanent transfer 86.7 % 62.5 % 75.0 %
Local/direct hire expatriate 86.7 81.3 79.2
Localizing assignee 80.0 75.0 83.3
Temporary assignee 26.7 25.0 16.7
Source: ORC Worldwide 2008 surveys, Local-Plus Packages in Hong Kong and
Singapore and Survey on Local-Plus Packages for Expatriates in China
- 3. INTERNATIONAL HR JOURNAL
FALL 2009
10
© 2008 Thomson Reuters/West. This publication was created to provide you with accurate and authoritative informa-
tion concerning the subject matter covered; however, this publication was not necessarily prepared by persons licensed
to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice
and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you
should seek the services of a competent attorney or other professional. For authorization to photocopy, please contact
the Copyright Clearance Center at 222 Rosewood Drive, Danvers, MA 01923, USA (978) 750-8400; fax (978) 646-
8600 or West’s Copyright Services at 610 Opperman Drive, Eagan, MN 55123, fax (651) 687-7551. Please outline the
specific material involved, the number of copies you wish to distribute and the purpose or format of the use.
Local-Plus Packages for Expatriates in Asia: a Viable Alternative
tively new, with low contri-
bution levels.
HOME LEAVE UNEXPECTED
When extending a local-plus
package to expatriates in China,
the assumption is that the desig-
nated “home” is now China. Al-
though one might think that the
provision of home leave for such
expatriates would no longer be of-
fered, approximately 44% of com-
panies still offer home leave for
local-plus packages—perhaps as
an incentive since many still con-
sider China a “hardship location.”
In addition, since foreigners are
taxed on worldwide income after
five years of continuous residence
in China, home leaves can create
a break in residency. (Employers
do not generally offer home leave
to local-plus expatriates in Singa-
pore and Hong Kong.)
TRANSPORTATION
ASSISTANCE VARIES
Just over half of the respondents
provide a company car or allow-
ance in their local-plus package in
China, and 50% do so at the same
level offered under a full expatriate
package. For those that peg it to
the same level, three-quarters also
cover the cost of a car and driver.
In contrast, the overwhelming
majority in Singapore and Hong
Kong only provide a car or al-
lowance in line with that offered
to local-national employees at the
same level in the company.
RELOCATION AID DEPENDS
ON STATUS
Relocation assistance in China of-
ten depends on the nature of the
move. For example, in the case
of assignees localized in China,
employers may cover shipment of
the remaining home-based goods.
as an international plan or in the
home-country plan.
One of the most significant is-
sues in China is the inability of
foreign nationals to participate in
the state-sponsored plan, making
retirement funding a challenge for
foreigners on local or local-plus
packages. Most companies place
the employee in a company-spon-
sored plan, or continue the as-
signee’s participation/enrollment
in a home-country pension plan,
where possible. A handful of com-
panies pay cash-in-lieu of a formal
retirement program, and 13% do
not provide any form of pension
under local-plus terms in China.
For Hong Kong and Singapore
expatriates on local-plus packages,
pension is most often the local gov-
ernment’s pension scheme, or, for
Singapore, cash in lieu or mainte-
nance in the home-country pension
plan for those who do not qualify
for the local scheme. Consider:
zz Singapore’s Central Provi-
dent Fund (CPF) limits
mandatory participation to
foreigners with Singapore
permanent residence (PR)
status. This long-established
fund has generous employee/
employer contributions, so
most companies do not pro-
vide a separate or additional
company pension plan.
zz Hong Kong has a higher in-
cidence of companies pro-
viding a company-sponsored
pension plan for local-plus
employees, likely due to a
higher percentage of com-
panies that provide company
pensions for all staff. Hong
Kong’s Mandatory Provi-
dent Fund (MPF), which is
open to all foreigners work-
ing in Hong Kong, is rela-
tion for expatriate children under
a local-plus package. International
school fees in both locations are
costly, as are the fees associated
with guaranteeing placement in
the most popular international
schools. Perhaps because of the
more permanent nature of expa-
triates on local-plus terms, com-
panies are less willing to con-
tribute towards school expenses,
whereas the overwhelming ma-
jority of companies do so for in-
ternational assignees.
MORE TAX ASSISTANCE IN
CHINA
For China, approximately one-
third offer some form of tax
equalization or subsidy, possibly
compelled to do so as China’s tax
levels are high in comparison with
other popular Asia-Pacific expa-
triate destinations. In addition,
60% offer tax filing assistance, ei-
ther with a one-time briefing in
the first year, or filing tax returns
on behalf of the assignee. Just
under half do not phase out tax
filing assistance during employ-
ment, due to the monthly tax fil-
ing requirements in China being
an undue administrative burden
on the foreign employee.
Slightly more than half in Sin-
gapore offer tax preparation as-
sistance, but only 29.4% in Hong
Kong offer this benefit.
PENSION PROVISION MAY BE
WITH STATE
One of the most often-mentioned
difficulties of international trans-
fers is the treatment of pension.
Typically, employers keep the as-
signee’s pension in the home or
headquarters country to main-
tain continuity upon repatriation.
Sometimes, even when an assign-
ee is localized, the pension stays
- 4. INTERNATIONAL HR JOURNAL
FALL 2009
11
© 2008 Thomson Reuters/West. This publication was created to provide you with accurate and authoritative informa-
tion concerning the subject matter covered; however, this publication was not necessarily prepared by persons licensed
to practice law in a particular jurisdiction. The publisher is not engaged in rendering legal or other professional advice
and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you
should seek the services of a competent attorney or other professional. For authorization to photocopy, please contact
the Copyright Clearance Center at 222 Rosewood Drive, Danvers, MA 01923, USA (978) 750-8400; fax (978) 646-
8600 or West’s Copyright Services at 610 Opperman Drive, Eagan, MN 55123, fax (651) 687-7551. Please outline the
specific material involved, the number of copies you wish to distribute and the purpose or format of the use.
Local-Plus Packages for Expatriates in Asia: a Viable Alternative
education or tax preparation/fil-
ing assistance, and placement in
the local pension plan—with no
additional “plus” elements. Singa-
pore has some variation: the em-
ployer is more likely to pay rent
directly to the landlord, provide
dependent education assistance,
as well as tax preparation help for
the first year, and cash if the em-
ployee is ineligible to participate
in the government pension fund
As companies continue to face
pressure to cut costs wherever
possible, we can expect to see the
use of local-plus packages gaining
even more popularity. The “plus-
es” will no doubt vary based on
the particular relative challenges
that each host country presents. It
should be noted that the local-plus
approach will work well for expa-
triates that self-select, are moving
on a permanent or indefinite ba-
sis, or are already resident in the
host location and are looking to
stay. It may not be appropriate for
employees asked to accept a limit-
ed-term international assignment,
as it may inhibit repatriation or
future mobility to other locations.
n
local healthcare institutions. In
recognition of these challenges,
most companies (93.3%) provide
insurance to cover enhanced care.
Of those providing additional in-
surance, 79% provide coverage to
meet the higher costs for interna-
tional medical centers (e.g., Inter-
national SOS), but 21% only cov-
er costs at VIP/foreigner wards of
Chinese-run hospitals. In addition
to in- and out-patient insurance,
most companies (86%) also pro-
vide medical emergency evacua-
tion coverage. (In contrast, health
care systems are excellent in both
Hong Kong and Singapore.)
LOCAL-PLUS, EXPATRIATE
LIGHT, OTHER?
So what are companies doing? In
China, although everybody talks
about local-plus, it is less com-
mon than in other Asian locations
with a local market for expatri-
ates. Often determined case by
case, compensation is often closer
to an “expatriate light” package.
In Hong Kong, a local-plus pack-
age is likely to provide housing
assistance as a cash allowance,
with no provision for dependent
For foreigners residing outside
of China who accept a contract
in China on local-plus terms,
the shipment policy varies as to
whether the move is permanent
or temporary.
There is a consistent level of
assistance for employees relocated
under local-plus terms to Hong
Kong and Singapore. Typically,
the employer allows a 20- or 40-
foot container plus limited air
shipment for household goods,
a one-time allowance equivalent
to one month’s base salary, home
search assistance, and temporary
housing for 30 days. Less com-
mon relocation assistance includes
language training, spousal assis-
tance, home sale assistance, and
reimbursement for lease cancella-
tion costs or loss on car sale.
MEDICAL ASSISTANCE VITAL
IN CHINA
Medical assistance is an area of
concern for expatriates in China,
as they are not allowed to partici-
pate in the state-sponsored medi-
cal insurance scheme. Exacerbat-
ing the situation is the fact that
quality of care is suspect at many