This is Evan from Hong Kong, writing on the fly for about 20 minutes, at 2am, after a long day of meetings, late client dinner and before an early flight to Jakarta. We have recently been asked, by both firms and candidates, whether the downturn is changing the landscape of cola / housing / expat allowances (“expat allowance”) in Asia and the Middle East. I have been hit with this question several times this week in meetings and Robert heard it as well two weeks ago in his meetings as well.
So this post will deal with the basic expat allowance rates for associates without children. A follow-up post on Wednesday will deal with school tuition subsidies / reimbursement, expat allowance increases for children, and tax related windfalls (in some markets), as well as some commentary as to whether the current high expat allowances are sustainable for the long-term in Hong Kong and Tokyo, as firms expand in Asia and considering the reality that profit margins can be lower in Asia per billable hour than in US markets.
Please feel free to follow up in comments with any detailed questions on this subject, as we can only go so far in 1000 words here. Many top US and British firms in Asia and the Middle East have routinely asked us to advise them on various details of their expat allowance policy and we have also helped a number of firms draft come up with set expat allowance packages for the first time (rather than continue on case-by-case basis for each new hire). We have the expat allowance numbers for all firms in Asia (but are not going to give out such specific firm information in a public forum).
Hong Kong: The US associate expat allowance for Hong Kong have remained steady, with most top US firms paying in $60,000 to $80,000 range, for associates without children (only three firms are at $80,000 and most are in the 60s). A firm not paying at minimum a $60,000 allowance is simply not paying a competitive rate in the market. However, there are a handful relatively big name US firms that do not provide any expat allowance, or provide very low allowances, in Hong Kong. Such firms are still able to compete for solid candidates in today’s market because the market is flooded with solid candidates, although we find that most of the firms that pay little or no expat allowance are small and not hiring at this time. The majority of the magic circle firms, as well as a handful of other top British firms, pay expat allowances for their US associates in the competitive $60,000 to $80,000 range, with a couple of notable exceptions.
Other cities after the jump.
Singapore: This market’s expat allowance has never been established, unlike in Hong Kong. The allowances here range from non-existent to around $30,000 (for associates without children), with some top US and British firms offering zero. There was a big push earlier this year by some firms to come up with a set number, rather than figure things out on a case by case basis or offer zero. The incentive for this push was due to Singapore firms losing out on candidates to Hong Kong routinely during ’06 and ’07. However, this push fizzled out when the market became flooded with candidates and the number of openings dropped somewhat, due to the global downturn. Singapore housing costs are less than Hong Kong. Further, traditionally, going back decades, Singapore was considered a non-hardship post by companies and firms, whereas other markets in Asia had small expat allowances. While Hong Kong’s allowances skyrocketed during ’06 and ’07, Singapore did not have any set market for allowances to take off from.
Tokyo: The competitive top firms here pay from $90,000 to $130,000 expat allowances to US associates. However, there is a higher percentage of firms in Tokyo well below 90k to 130k than there are firms in Hong Kong well below its 60k to 80k competitive range.
Shanghai and Beijing: These are the markets with the most fluctuation in expat allowances and where we have seen some (a significant minority) firms offer much smaller allowances to new hires than they are paying to current US associates, due to the number of candidates on the market and less jobs available. Before the slowdown, more firms in mainland China were offering expat allowances on case-by-case basis (rather than set number across the board to all US associates) than in Hong Kong, although there was a competitive range of about $35,000 to $60,000 (with one firm offering $80,000 in Beijing). Now we are seeing that range fall to $15,000 to $60,000 in mainland, with a few prestigious names on the low end of that range. Some firms in mainland offer no or very little expat allowance, but most top US firms offer something in the range aforementioned. The trend by some firms has been to simply offer about 20% less than they do in their Hong Kong offices (if applicable), but some firms have offered in mainland same as their HK allowances.
Dubai: This market, like Singapore, simply has not yet established a going expat allowance rate for US associates and firms are typically offering such allowances on case-by-case basis. A typical number at top firms will range from $20,000 to $30,000 and this market may very well settle on this range in the next year. There are two main reasons Dubai has significantly lower expat allowances than similarly expensive Hong Kong: a) Dubai has 0% income tax rate; and b) the global downturn has created an overflow of candidates, similar to Asia. Keep in mind that transactional documents in UAE are drafted, in large part, according to UK style. The British firms strongly prefer UK qualified candidates and some US firms (but not all) also routinely seek UK qualified candidates. Of course, UK persons (as well as any other non-US persons in Dubai) pay 0% total income tax, due to their countries not having world-wide tax system, and thus non-US persons working in Dubai certainly do not need an expat allowance. Therefore, firms have little incentive to pay US associates Hong Kong type allowances (even though housing costs are similar to Hong Kong). Further, US associates abroad, who are US persons for tax purposes, are not liable for US income tax on the first approximately $87,000 of their income each year, so the 0% income tax in Dubai is of course a greater windfall than in Hong Kong or Singapore (where tax rates are a very favorable approximate 16%, but not 0%).
- Expat / COLA Allowances Continue to Rise in HK / China
- TOKYO DRIFT
- Hong Kong / China Lateral State of Market; HK / China Expat Package News
- US Cap Markets Associate Opening (ENGLISH ONLY OK) in Hong Kong, 3rd to 5th Year, at Top US Cap Markets Practice
- KINNEY’S 62 US ASSOCIATE PLACEMENTS IN 2011 THUS FAR IN ASIA / STATE OF MARKET