Japan Ranked as Costliest Place in Asia Pacific to Send Employees

by Ray Clancy on May 12, 2015

Japan is the most expensive country in the Asia Pacific region for a company to send a worker abroad due to the cost of housing, education and pay, as well as a host of other factors, research shows.

The country has Asia’s highest expat packages. On average, a package for an expat middle manager there is worth US$375,000. In second place is Australia, followed by India and then mainland China.

movingtojapanIMAGESingapore, where demand for expat middle managers is high, has fallen to seventh place in the annual research report from ECA International. While Malaysia has the second lowest expat packages in the list, one spot below Thailand.

The firm, which provides knowledge, information and technology for the management and assignment of employees around the world, carries out the research on an annual basis and takes into account benefits, allowances, salaries and taxes.

‘The cost of providing certain benefits such as housing and education is the most expensive element of the pay package when relocating staff to Singapore. Remove these and Singapore falls from seventh to 14th in the regional ranking thanks,’ said Lee Quane, regional director –for Asia at ECA International.

Expat packages in Singapore are still lower than in Hong Kong which is ranked fifth. However, with the cost of the package there having dropped slightly while increasing in Singapore, the gap between the two continues to narrow.

‘The rising cost of an expat package in Singapore will make some companies think twice about where they set up in the region. However, the country’s reputation for providing an excellent quality of life is a big plus in terms of motivating employees to accept an assignment there,’ explained Quane.

‘Furthermore, there are ways in which companies can contain costs. Ware see many revising housing allowances down or using an approach based around local salaries topped up with additional benefits rather than using the employee’s salary at home as a starting point,’ he added.

International assignment pay packages can be designed in a variety of ways. The most common approach, both in Singapore and globally, is to use the employee’s salary in their home country as the starting point, then adjust for cost of living and any other allowances, and tax.

However, increasingly companies operating in the major Asian hubs adopt an approach, particularly for employees sent on a permanent one way basis, whereby the host country local salary is used as the starting point with or without some additional benefits such as an allowance for accommodation or children’s school fees.

The research points out that a low cost of living does not always translate into low expat packages. For example, in order to attract talent to some of the cheaper, less developed locations companies often need to provide greater incentives than they do when moving employees elsewhere.

It explains that companies also need to be aware of the tax element of the package. This can considerably increase assignment costs, as in the case of India, where half of the total expatriate package is consumed by tax.

 

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