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A Survey on Expatriate Compensations and Benefits 1996 done by Foster Higgins, an employee benefits consulting firm, had some information of value to individuals who are, or may be, working overseas. 171 United States and Canadian companies that had expatriate employees responded to the surveys.
Here is some of the highlights we noticed:
Q: Has the number of Expat employees increased?
63% said yes, 10% expect a decline, 60% expect an increase.
Q: Are an Expat's salary and benefits costs higher than those of a local national?
Yes. Average more than two and one half times as high as a local national. The range of differences were 23% in Holland to 283% in Korea.
Q: Has your company adopted a formal policy for uniform treatment of Expats?
Q: What are the goals of the companies Expat compensation program?
85% making the employee whole, 8% rewarding the employee for taking assignment, 3% matching or exceeding competitor benefits.
Q: Does your company pay an allowance to Expats if the cost of goods and services is higher in the host countries than in the home country?
93% yes. The amount of the allowance is based on the difference between the cost of a market basket of standard goods and services in the host country and the same market basket purchase in the home country. The allowance is typically adjusted when exchange rates change significantly.
Q: What is the average allowance for cost of living adjustments?
24% of salary.
Q: Does the allowance for cost of living adjustments vary from country to country?
Yes. Allowance are paid on percentages based on salary.
Japan 50% Belgium 24% Hong Kong 29% Germany 24% Mexico 27% France 22% Singapore 25% United Kingdom 22% Holland 20% Australia 10%
Q: Does your company provide other types of special allowances?
Yes - 93% housing allowances 76% educational allowances for children 58% hardship allowances, conditions uncomfortable or dangerous 8% reward for taking assignment.
Q: How is your company controlling Expat costs?
Make sure benefits are not excessively rich. Be sure assignment fulfills a clear set of business objectives. Use of destination pricing when Expats are paid as citizens of the host country, with special allowances or tax protection. 11% of surveys use destination pricing and 25% said they may use destination pricing in the future.
Q: Does your firm out-source benefits?
8% now does, and 32% may consider outsourcing in the future. Use of totalization agreements to reduce or control social security costs. Assignments under five years, will use the US Social Security system, when host country has a totalization agreement with the US. Many firms are requiring Expats with assignment for more than five years participate in the social security program of the host country.
You can order the full report for $50.00 US, Contact
Terese Nehrbauer at (212) 574-7719.
Plan for cost of living differences
A good book that can help you compare the cost of living between locations is "Places Rated Almanac". This can give you ideas of what problem areas you might encounter. It includes housing costs, groceries, utilities, transportation, health care, clothing, entertainment and local taxes. The book is oriented to the United States, great if you are moving back to the United States. It has good ideas to start your basic research for overseas assignment or a change of duty station.
Some Internet sites that can save you money
Shareware.com -- Free software and newsletter. [http://www.shareware.com]
Four11.com -- Free information of phone numbers in US, Canada, Mexico. Other countries are being added.
Kallback Service -- A way to cut the your cost of access to the US telephone system. This is the same service Filetax uses to provide free fax and calls from your host country direct to our office. Our staff use the full service when they travel to save on hotel calls and high host country international phone rates.
Faxaway -- Internet to fax service for delivery in the US, you can send a free fax. Always check telephone rates, they are constantly changing. Filetax gets a free fax when you try this service and we use it for faxing to selected countries, where Faxaway is cheaper than a US based telephone call.
Shoestring travel -- Reduced rates for traveling . Travel expenses are often a high budget item for Expats with families. This is one way to help plan home leave and children's visits.
Amazon.com -- Inexpensive books from a super bookstore, more than a million titles at 10% to 30% off list prices. You can order on screen and pay by credit card. We suggest you email first to be sure they can ship to your host country. They even a service to tell you about newly published books categorized by subject. [http://www.amazon.com ]
Check out the Air Courier Travel site for ways to reduce the cost of traveling home. If you have older children always ask if they can be couriers. Travel as a courier is not for everyone but it can offer more trips home at a lower cost. [http://www.courier.org ]
Mailing costs and improved service is available to Expats that have or can obtain access to US Armed Forces Post Office on military bases around the world. Postage is the same as if it was sent in the United States. All mail is transported by the military to the US mainland for connection to US Post Office.
Express mail from the US Post Office is the best
document shipping value, Filetax has found for overnight mail to host countries.
(Let Filetax know if your family or company finds a better rate to your
host country.) International Priority mail form the United States is also
a good value. You will need to check with the USPO to see if your host
country is covered by these services.
1996 Income Tax Changes
Some of the tax changes that affect Expats are: US citizens or long-term resident aliens who terminate U.S. residency are subject to special taxes, unless it can be shown that the was no tax avoidance motive.
Individual giving up US citizenship or residency with intent to avoid US estate taxes continue to be liable for US estate taxes for ten years. A detailed statement of net worth must be filed with the US State Department at the time citizenship is relinquished.
US citizen who receives more than $10,000 in "foreign gifts", not including qualified tuition or medical payments, during the tax year, must file a report with the Internal Revenue Service. Failure to file subjects the taxpayer to penalties of 5% per month not to exceed 25%, applies to payments after August 20, 1996.
The Secretary of the Treasury is authorized to study how US citizens and permanent residents of the US residing outside the US have complied with the provisions of the Internal Revenue Code and recommend measures for improving compliance.
Editorial comment: how long do you think it will take the Internal Revenue Service to figure out that a tax compliance certificate (sailing permit) from the Internal Revenue Service could be required when a passport is renewed? Within ten years all Expats would have to file or not renew passports! Then the Internal Revenue Service can work towards exchange of information between countries. That is a very big dream at Internal Revenue Service headquarters, and a dream that will stay for a long time. The taxpayer bill of rights prevents other U.S. agencies from accessing Internal Revenue Service files.
Taxpayer identification numbers are now available form the Internal Revenue Service. Form W-7(click to download a PDF file) is used to get a tax number, looks like a social security number, for alien individuals. This TIN is used in banking, business and investments. Documentation must be provided when the form is filed. You need to read the instructions before you mail this form.
Bits and Pieces
Earn extra income if you live in, Barrow-in-Furness, England; Genoa, Italy; Guangzhou, China; Lagos, Nigeria; Kuwait City, Kuwait; Tais, Saudi Arabia; Naduynm Bandung and Jakarta, Indonesia. Associates are paid part time to research local costs. Contact Runzheimer International, Runzheimer Park, Rochester, WI, 53167; Fax 414-767-2413.
Cost of driving, according to Consumer Reports Travel Letter can vary with a wide range of gas prices. Mexico averages $1.29, US averages $1.30, Japan averages $3.85, Netherlands average $4.66 per gallon. Not on the www, snail mail to 101 Truman Avenue, Yonkers, N.Y. 10703
If you can not get insurance for your computer, used outside the United States try Safeware 800-848-3469. Safeware has been insuring just computer for years. If have not insured the computer you travel with you know you should. Laptop computers are one of the items most often stolen when people travel.
We have a new tax tip each week. Information you can use in your tax planning.