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Negotiating the Best Expat Package for Your Next International Assignment

By Achim Heuser

Universal Tax
Universal Tax

Summary: If you've been offered an international assignment, this article is a must read. Achim Heuser provides practical advice about negotiating your expat salary, benefits, housing allowance, tax liability, annual leave and more.

One of the most important issues for any expatriate is the assignment contract, especially if it is a first time relocation. The importance of getting everything agreed and settled in advance cannot be overemphasised. Once the contract is signed, it is possibly too late. Here are some suggestions as to the issues that should be covered to ensure that the expatriate as well as the employer is fully aware of what is expected of them.

1. Duration of International Assignment

Whether the expatriate is unaccompanied or relocating with his spouse and/or family, he needs a perspective of the assignment's duration. If this is to be determined by the completion of a specified objective, at least an estimated duration, including a minimum term, should be given. The contract should also specify whether there is a trial period and how long that period lasts.

2. The Assigned Capacity

The contract should specify exactly the duties and give details of the responsibilities and the goals expected to be achieved. How many employees will be reporting to the expatriate? Will the expatriate himself have to report to a superior or even keep the company's Board of Directors informed of his conduct of work?

3. Expat Salary

The contract should at least specify the gross annual salary, any likely or possible bonuses and the salary structure in terms of increases. Is there a corporate policy of annual salary increases for all employees or are these performance based only? In either case the criteria and or performance objectives should be described in detail to avoid misunderstandings. Maybe the net income abroad turns out to be less due to higher tax rates. If so, the salary should be specified as net income to be fully conversant of what will be left. Any possible hardships should be considered as well and possibly included in the salary provisions.

4. Expat Tax Liability

Who will be paying taxes and in which country? Will the expatriate become a fiscal resident of the host country or still be liable for taxes in his home country? Possibly the allowances and payments will be 'grossed up' by the company to cover tax liabilities. Both parties should be aware that benefits (i.e. car, housing, etc.) may be considered as taxable income and take the possible consequences (i.e. higher tax rates) into account.

5. Social Security

What provisions does the company make for pension and protection in the case of unemployment? Will the expatriate still be enrolled in the national social security system while living abroad? Who is in charge to contribute the different social security rates? What health insurance will be provided for the expatriate and will it automatically cover his family? Maybe social security contributions are compulsory in the host country. Even in this case the question arises if contributions in the home country should be made anyhow to keep the expatriate duly protected upon return from the assignment.

6. Moving Cost

The contract must include details of the reimbursement of moving expenses. Will a transportation insurance be granted as well? Who will take care of the necessary customs declaration? For the convenience of the employer it can be agreed that removal expenses will be reimbursed, provided that the amount is eligible from three different and independent offers.

7. Housing and Short Term Housing Allowance

Many details should be considered when it comes to housing abroad. What type of housing will be provided and how long the expatriate and his family will be expected to spend in short term housing should be specified in advance and should be kept in mind by both parties. Who is responsible for finding suitable accommodation? Both sides should bear in mind that the expatriate is expected to become productive as soon as possible after arrival. Time available for house hunting might be limited. If the destination country is not too far from your own, a home search trip could be convenient. Otherwise the employer should consider to reimburse the costs for a real estate agent or relocation service. Short term accommodation and the respective payment conditions should be agreed upon as well. Important details are how much the interim living allowance will be and what period it covers.

8. Transport

Will there be a company car provided for the duration of the assignment? Will this also include personal use? If so, the details should be included in the contract. Who will be responsible for routine maintenance or for all mechanical problems that the vehicle may develop? Maybe the employer or the company abroad has a company car guideline that covers these issues. in this case the contract should refer to this guideline and the guideline should be handed to the expatriate.

9. Tuition fees for International Schools

Many companies provide assistance with tuition fees for expatriate families, as international schools are definitely not cheap. Contracts should include whether this assistance is partial or total reimbursement of fees.

10. Annual Leave and Home Leave

National holidays and annual vacation periods differ from country to country. The expatriate should be able to verify how much annual leave he will receive. Additionally a crucial issue can be how many paid home visits are included during the assignment. How long will the expatriate have to be in his destination country before he can apply for a paid home visit? Are the airline tickets for all accompanying family members paid by the company or will contributions towards part of the cost be expected?

11. Legislation

What is the applicable legislation pertaining to the contract and which courts have jurisdiction for determining any conflict? Different legislations provide different advantages for either or even both parties. Yet, choosing an fairly unknown legislation bears the risk of unpleasant surprises. It is recommended to stick to the known rules of the home country if possible. Yet, some countries do not let the room to choose the legislation. Instead national provisions will apply to the contract. This case requires the employer to provide the expatriate with independent legal assistance in advance of the assignment.

About the Author

Rechtsanwalte Heuser & CollegenRechtsanwalte Heuser & Collegen conducts contract/assignment negotiations and develops negotiation strategies for clients worldwide.

First Published: Jan 04, 2004

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