There are several methods to calculate expatriate salaries during international relocation services. One of the most common, albeit often the most costly, is the home-based method.
This method looks at the cost-of-living at the expatriate employee's home base, and calculates the salary based on those figures. This may result in an expatriate being paid more than his local counterparts, but is a fair arrangement to employees, especially for short-term assignments.
International Relocation Expenses to Cut
Even if you use a home-based system for calculating salaries, there are other ways you can reduce international relocation expenses.
- Reduce the location allowance by taking into account “hardship” in the home location, as well reduce or eliminate the hardship allowance or any transferee bonuses
- Select a lower level of subsidy for the Cost of Living Allowance
- Use more conservative housing standards to determine host housing subsidies
- Let the employee contribute to home housing costs
- Reduce or eliminate familiarization trips, language lessons and other benefits, or find lower cost ways to offer these services
Reduce International Relocation Expenses with a Host-Based Salary System
With most international relocations, U.S.-headquartered companies can save money by using a host-based system to calculate salaries, where employees are paid based on the cost-of-living and average salaries in the host country.
Cut Costs with Trainees
Twenty-three percent of companies expect an increase in the number of trainee or developmental assignments overseas, according to a white paper released by Worldwide ERC. Many of these employees are willing to accept a reduced salary or relocation package in exchange for the experience of an international assignment.
This is good news, since 44% of the companies surveyed are looking to adopt a “low-cost alternative package” in order to cut international relocation expenses.