Japan replaces United Kingdom as most expensive country to send expats

The United Kingdom is no longer the most expensive country of the top-40 financial hubs for expat pay packages.

According to an annual report conducted by global mobility experts ECA International, the UK has fallen to second place behind Japan. The value of a typical pay package for an expat middle manager in the United Kingdom is now US$344 508 – US$39 898 less than last year.

“Over the past few years we have seen a steady drop in pay package values for expat workers in the United Kingdom when compared in US dollars internationally,” said Steven Kilfedder, Production Manager at ECA International. “The fall in the value of the British pound after Brexit has made it cheaper to send staff to the UK from abroad, resulting in Japan replacing the UK as the most expensive location to send staff.”

ECA’s MyExpatriate Market Pay report considers three main elements for analysing the appropriate middle manager pay packet in each country: the cash salary, benefits – to cover the cost of accommodation, international schools, utilities or cars – and tax.

Although dropping to second place, pay packages for expats in the United Kingdom are still costly for foreign companies, largely due to high accommodation costs and taxes. Taxes account for the largest single cost to companies in both Japan and the UK.

Kilfedder said: “The tax element is the most expensive component of an expat package in the UK by a substantial margin. The cost of providing benefits is also considerable, at around double that of the salary element, due to high expat rental accommodation prices in London.”

Due to the dollar performing strongly against the Euro in 2017, most European countries dropped in cost of pay packages compared to the previous year. Sweden and Switzerland have dropped out of the top ten most expensive countries, and the pay package in France has dropped by US$15 478. However, Italy saw the biggest drop in cost of pay packages and is now the cheapest European country of the top 40 financial hubs to send staff.

“The extension of an expat tax concession, part of a series of tax changes designed to make Italy a more favourable destination for investment, has significantly reduced the cost of sending staff to the country,” said Kilfedder.

Asian nations on the whole continue to feature towards the top of the rankings, offering the highest overall packages to foreign workers. After Japan and the UK; India, China and Hong Kong complete the top five respectively.

In the Americas, Argentina has seen a big jump in the average expatriate package. The overall pay package has risen by US$11 256, with most of the increase being seen in the cash salary.

There was little change seen in the Middle East, but expat salaries in the region remain some of the highest in the world – with Saudi Arabia and UAE in first and second place respectively when looking at the annual salary. However as there are no personal income taxes paid in Middle Eastern countries, all three nations continue to require cheaper total pay packages for expatriate staff than the majority of the top 40 financial hubs.

“Middle Eastern nations have offered high wages for expats for a long time now and combined with the 0% tax rates, the Middle East is often considered a lucrative place of work for overseas staff. However, due to the newly-introduced 5% VAT tax rate in the region which will increase the cost of living, we expect to see rises in both the salary and benefits elements of expat pay packages,” Kilfedder concluded.

Ten most expensive cities for companies to send expats

  1. Japan
  2. United Kingdom
  3. India
  4. China
  5. Hong Kong
  6. USA
  7. Australia
  8. Turkey
  9. Argentina
  10. Turkey

Article published 4th June 2018