May 2015 Editorial: Competitive Expat Packages in the Spotlight

A blaring headline in the South China Morning Post this month announced expatriate packages in Hong Kong were lower than those of their counterparts across the border in Mainland China. Compiled by human resources firm ECA International, which specializes in managing international assignees, the survey used data from more than 300 multinational organizations and more than 10,000 staff.

According to the survey, the average middle-manager expatriate package in Hong Kong in 2014 amounted to roughly US$272,000 (HKD$2.1 million), down three percent from the previous year when Mainland Chinese cities first reportedly surpassed Hong Kong. This breakdown includes salary, benefits (including allocation for relocation costs, housing, international schooling, as well as other benefits) and tax allowances.

In order to stay competitive in a global economy, companies must ensure that their expatriate packages in Hong Kong remain on top. According to another popular survey, HSBC’s annual Expat Explorer survey in 2014, the top destinations for higher earning expats (more than USD$250,000 yearly) included China at 29 percent, and Hong Kong at 16 percent.

The renminbi’s strength against the dollar and the gradual increase of benefits such as healthcare in Mainland China mean it is likely that expatriate packages will be increasingly generous as well. In order to entice employees to relocate to Mainland China, companies often include “hardship allowances” to monetarily offset problems such as air pollution. Salaries in Singapore are actually higher than in Hong Kong, but the package overall ends up being lower because of lower housing costs.

American citizens, additionally, bear the burden of paying income tax based on citizenship, rather than residence. While most expatriates pay much lower taxes than those they would pay at home, this has less of an added benefit for American citizens abroad.

Though expats generally report a salary increase from their previous roles before relocating to Hong Kong, with more than half of the surveyed HSBC expatriates associating Hong Kong with higher salaries, there are also many living costs to be factored into the decision.

If housing and education were to be further removed from the package equation, Hong Kong would fall even further to below Singapore, the ECA report said. With cities across the globe vying for top talent, this city must somehow remain in the top echelon of global destinations for expatriates to work.

Housing in Hong Kong is, according to the study, more expensive than it was in their home country for 69 percent of those surveyed. Such costs are offset by lower utilities fares and more flexibility in disposable income spending, but with rent ranging anywhere between 12,000HKD per month for a one-bedroom to 40,000HKD for a modest-sized family apartment, housing stipends are an essential component to the package when initially negotiating.

Comparatively speaking, the expenses incurred for housing in Mainland China is still lower than in Hong Kong. However, housing costs are rising rapidly in top-tier cities in Mainland China, with rent in Beijing and Shanghai in some areas equal to that of those in Hong Kong.

For many expatriates, one of the foremost considerations is the impact upon family members, especially children of schooling age. Increasingly, international school placements are difficult to find in Hong Kong, especially at the high school level. Tuition fees for the most sought-after international schools have risen anywhere from 20,000 to 40,000 HKD in the past five years.

Moreover, with the culture of corporate debentures that aid staff members in securing places for children at school, and more campuses releasing them to raise money for campus expansion plans, the competition will only increase.

With increased focus on retaining the competitiveness of Hong Kong, one of the oft-touted advantages that the city maintains is its human capital and depth of knowledge. In order to retain and attract top talent from abroad, multinational companies must continue to prioritize and incentivize packages with compensation reflective of rising costs.

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