Archive for category International Cost of Living; International Cost of Living Index
Negotiating an Expatriate Package
Posted by Xpatulator in cost of living, cost of living allowance, cost of living calculator, cost of living comparison, expatriate, expatriate engagement, Expatriate Package, Expatriate Pay, Expatriate Prospects, global, international, International Cost of Living; International Cost of Living Index, Negotiating, world, world cost of living 2010 on June 16, 2010
Although international experience can be helpful for future promotional prospects, companies recognize that employees are cautious about going abroad for “possible future consideration”. Consequently companies usually offer employees financial and non-financial incentives to compensate for the upheaval associated with relocation abroad.
Expatriate assignments can be associated with emotional and physical hardship for the employee and their family. Companies compensate by paying expatriates proportional to the degree of hardship as well as cost of living differentials.
Often expectations for a generous expatriate package run very high, based largely on rumors and urban legend. Individuals may know of expatriates who lived the high life, tax free, and retired early after buying a large house in an exotic location. The reality is a little different for most of us.
Managing these potentially unrealistic expectations is the responsibility of Human Resources and Compensation & Benefits professionals. The challenge is to balance the needs and expectations of employees, with the financial needs of the organization. Satisfying the needs of both the employee and the organization requires designing expatriate assignments to benefit both the organization and the employee.
The amount of salary negotiated should take into consideration a number of factors such as:
• Cost of living difference compared to the assignment location
• Degree of hardship likely to be experienced
• Increased responsibilities such as having less corporate support in remote locations
Negotiating each of the above as separate amounts can simplify an expatriate package negotiation such as:
• Consistency when an organization sends people to different countries with widely different costs of living
• Helps prevent expatriates from feeling demoted upon their return to the home country because their salary was decreased significantly. It is easier to remove the adjustment made for the change in cost of living and hardship if it is separate from the salary.
Cost of living and hardship adjustments should be based on expatriate life style rather than the life style of local people. Expatriates living in some developing countries may find that local food, basic accommodation, and basic healthcare is relatively inexpensive, while maintaining their old lifestyle with imported food, “expatriate” accommodation, private healthcare, and entertainment/recreation is very expensive. The cost of living for local people is not always the same as it is for an expatriate.
The benefits offered to expatriates are most often better than the benefits offered to local employees, with exception perhaps of places such as the Middle East. Many organizations offer benefits such as tax consultation, relocation, accommodation, transport, visa, immigration, and language training.
Additional benefits that may be negotiated include:
• Cross-cultural training to help manage expatriate expectations by learning more about their future colleagues and local culture.
• A pre-assignment visit can help adjust an expatriates expectations versus the experience of other expatriates in that destination.
• Family benefits: Family adjustment and lifestyle issues are one of the causes of an expatriate not completing their assignment:
o Education for the expatriate’s children is often a deal-breaker for the family to accept an assignment.
o Helping the spouse obtain work.
• Career coaching / mentoring for the expatriate during their assignment, particularly during the first and last six months, and after they return to the home office helps ensure retention and helps manage their expectations for subsequent assignments.
• Repatriation training: Expatriate families and employees can benefit from repatriation training to help readjust to living in the home country and returning to the original work environment. This is often overlooked, while all the focus is on assisting the expatriate adjust to the host country.
A flexible approach to negotiating an expatriate package that is a win-win for both the employee and the organization is required. One size does not fit all!. A young, single accountant has very different expectations and needs compared with an older engineer with a family.
Calculating an appropriate salary package taking into account the existing salary, cost of living and hardship differences, as well as accounting for increased responsibilities may help ensure that the most important needs of prospective expatriates are addressed.
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International Cost of Living July 2009
Posted by Xpatulator in International Cost of Living; International Cost of Living Index on July 12, 2009
The most expensive global location to live in, as at July 2009, is still Tokyo Japan, however there have been some significant changes in the last year mainly due to large differences in exchange rates, and more recently, a real drop in prices along with the majority of global locations enjoying their lowest inflation rates in recent times.
Tokyo’s cost of living index only increased by 1.4% from July 2008 to July 2009, but is 16 index points clear of 2nd placed Hong Kong (11th in July 2008). Last year Oslo, Norway, was the 2nd most expensive global location to live, however Oslo’s cost of living relative to the rest of the world has decreased by 27 index points over the past year.
The cost of living indexes are based on pricing the same basket of goods in local currency and comparing them in US Dollars using exchange rates with New York as the base (New York = 100). In most cases the major factor driving the changes has been the weakening of other currencies against the US Dollar. This is the main factor behind Oslo’s drop from 2nd to 13th most expensive global location to live. The Norwegian Kroner has decreased 19% against the US Dollar over the past year. In contrast the Japanese Yen has increased 12.7% against the US Dollar over the past year.
The 5 Most Expensive Global Locations Overall
Joining Tokyo and Hong Kong in the top 5 most expensive global locations are Caracas in Venezuela (up 62 places in the rankings) to 3rd most expensive, followed by Bangui in the Central African Republic, and in 5th place is Geneva in Switzerland, down 2 places from July 2008.
The 5 Biggest jumps
The largest increase in relative cost of living is Harare in Zimbabwe, albeit off a very low base. Harare has been ranked the least expensive global location for several years, mainly due to hyperinflation and a constantly weakening currency. This year Zimbabwe’s cost of living index has jumped 118% and is now ranked 275th most expensive out of 276 global locations. Other large increases in relative cost of living in the past year are Honiara in the Solomon Islands up 37% compared to July 2008, Caracas up 22%, Kigali in Rwanda up 19% while the 5th largest jump belongs to Manama in Bahrain, up 17%.
The 5 Least Expensive Global Locations Overall
The least expensive global location to live in this year is Tianjin in China with a cost of living index of just 30 compared to New York’s index of 100. Harare in Zimbabwe, last years least expensive global location is now 2nd least expensive, followed by Durban in South Africa. Phnom Penh in Cambodia is ranked 4th least expensive followed by Mbabane in Swaziland.
The 5 Biggest drops
The largest decrease in relative cost of living is Nuku’Alofa in Tonga with a decrease of 45%, followed by Brazzaville in the Congo with a decrease of 31%. The Congolese Franc has lost 44% against the US Dollar compared to July 2008. Mbabane in Swaziland had a decrease in relative cost of living of 30%, while Budapest in Hungary decreased 28%. The 5th largest decrease between July 2008 and July 2009 was Guangzhou in China with a decrease of 27% despite the Yuan strengthening slightly against the US Dollar by 1%.
The Details: What Costs the Most Where?
Top 5 Alcohol & Tobacco
Alcoholic beverages such as beer, locally produced spirit, whiskey, and wine as well as tobacco products such as cigarettes are most expensive in Doha in Qatar, followed by Oslo, Manama, Moroni in Comores and South Tarawa in Kiribati. The least expensive place for alcohol & tobacco is Kuwait.
Top 5 Clothing
Clothing and footwear products such as business suits, casual clothing, children’s clothing and footwear, coats and hats, evening wear, shoe repairs, and underwear are most expensive also in Doha, followed by Zagreb in Croatia, Dubai, Beijing and Manama. The least expensive place for clothing is Dhaka in Bangladesh.
Top 5 Communication
Communication costs such as home telephone rental and call charges, internet connection and service provider fees, mobile / cellular phone contract and calls are most expensive in Bissau in Guinea-Bissau, followed by Noumea in New Caledonia, Riga in Latvia, Ouagadougou in Burkina Faso, and Douala in Cameroon. The least expensive place for communication is Conakry in Guinea.
Top 5 Education
Costs such as crèche / pre-school fees, high school / college fees, primary school fees, and tertiary study fees are most expensive in Caracas followed by Luanda in Angola, Brasilia in Brazil, Hamilton in Bermuda and Lagos in Nigeria. The least expensive place for education is Paramaribo in Suriname.
Top 5 Furniture & Appliances
Costs for furniture, household equipment and household appliances such as DVD player, fridge freezer, iron, kettle, toaster, microwave, light bulbs, television, vacuum cleaner, and washing machine are most expensive in Douala, followed by Bamako in Mali, Bangui, Lagos, and Freetown in Sierra Leone. The least expensive place for furniture & appliances is Harare.
Top 5 Groceries
Costs for food, non-alcoholic beverages and cleaning material items such as baby consumables, baked goods, baking, canned foods, cheese, cleaning products, dairy, fresh fruits, fresh vegetables, fruit juices, meat, oil & vinegars, pet food, pre-prepared meals, sauces, seafood, snacks, soft drinks, spices & herbs are most expensive in Tokyo followed by Bangui, Honiara, Copenhagen in Denmark, and Lagos. The least expensive place for groceries is again Harare.
Top 5 Healthcare
Costs for general healthcare, medical and medical insurance such as general practitioner consultation rates, hospital private ward daily rate, non-prescription medicine, and private medical insurance / medical aid contributions are most expensive in Tokyo followed by Hong Kong, Caracas, Luanda and Hamilton in Bermuda. The least expensive place for healthcare is Tianjin.
Top 5 Household
Costs for housing, water, electricity, household gas, household fuels, local rates and residential taxes such as house / flat mortgage, house / flat rental, household electricity consumption, household gas / fuel consumption, household water consumption, and local property rates / taxes / levies are most expensive in Hong Kong followed by Tokyo, Taipei in Taiwan, Dubai, and Luanda. The least expensive place for household costs is Asmara in Eritrea.
Top 5 Personal Care
Costs for personal care products and services such as cosmetics, hair care, moisturizer / sun block, nappies, pain relief tablets, toilet paper, toothpaste, and soap / shampoo / conditioner are most expensive in Banjul in Gambia followed by, Algiers in Algeria, South Tarawa in Kiribati, Moroni in the Comores, and Bratislava in Slovakia. The least expensive place for personal care is Ulaanbaatar in Mongolia.
Top 5 Recreation & Culture
Costs such as books, camera film, cinema ticket, DVD and CD’s, sports goods, sports clubs and theatre tickets are most expensive in Maputo in Mozambique followed by Bangui, Doha, N’Djamena in Chad, and Cotonou in Benin. The least expensive place for recreation & culture is Harare.
Top 5 Restaurants, Meals Out and Hotel
Costs such as business dinner, dinner at a restaurant (non fast food), hotel rates, take away drinks and snacks (fast Food) are most expensive in Dubai followed by Doha, Athens in Greece, Brussels in Belgium and Ljubljana in Slovenia. The least expensive place for restaurants, meals out and hotel is Tianjin.
Top 5 Transport
Costs for public transport, vehicle costs, vehicle fuel, vehicle insurance and vehicle maintenance such as hire purchase / lease of vehicle, petrol / diesel, public transport service maintenance, tires, vehicle Insurance, and vehicle purchase are most expensive in Tbilisi in the Republic of Georgia, followed by Honiara, Dili in Timor-Leste, Douala, and Oslo. The least expensive place for transport is Tianjin.
The Top 5 Best Place to Live
So if you were to relocate anywhere in the world right now, where would you experience the lowest cost of living with the least amount of hardship? Hardship is used as the measure of discomfort a person and their family are likely to experience. Each global location is ranked between 1 which is minimal hardship and 4 which is extreme hardship. Assuming therefore that you would want to live in a minimal hardship location, the location with the lowest cost of living index is Adelaide in Australia. Adelaide is a minimal hardship location and has a cost of living index of 60 compared to New York’s index of 100. The next 6 best places to live on this basis are all in the USA. Memphis Tennessee is 2nd followed by El Paso Texas 3rd, St Louis Missouri 4th, and in 5th is Indianapolis Indiana. The next best non-USA location is Auckland in New Zealand in 8th place.
The detailed cost of living rankings as at July 2009 for each basket group for each of the over 200 global locations can be found at Xpatulator.com.
Steven Coleman runs Xpatulator.com an internet service that provides free cost of living and hardship information for 276 global locations to registered users. The premium content international cost of living calculator and cost of living allowance calculator are used for international cost of living comparison and calculation of cost of living allowance. Follow Steven on twitter steveninseattle.
