Employees transferring to the UK from overseas have typically seen packages reduce over the past few years, but senior staff may require greater incentives to move, says Vicki Taylor.
Packages for most employees transferring to the UK from other territories have typically been reduced in recent years. But senior staff can still command a substantial package.
While junior employees may be willing to move to the UK for a few months or years to further their careers, senior staff are unlikely to move for this reason alone. So motivating them to uproot spouses, children and elderly parents requires extra incentives.
Yvonne Sonsino, a principal at Mercer Human Resource Consulting, says: “At the high-end, it still remains difficult to move people who don’t necessarily need the experience. They are already in senior roles [so] there is a need to tempt them away.”
Mima Hillier, managing director at international relocation company TTH Relocation, agrees benefits are usually better for senior employees, but believes that, for all levels of the workforce, the “high life of [being an] expat has gone”.
Regardless of an employee’s seniority, one benefit that has been scaled back is housing allowances. Hillier explains that one organisation she has worked with recently cut its housing allowance for senior managers transferring to London from overseas from £1,500 a week to £900.
Senior employees who are seconded are likely to be career expatriates that have moved around for years and may no longer have a base in their home country. This means that each time they move they are relocating with everything they own and are likely to expect high levels of remuneration for the upheaval. In addition, career expatriates will have seen the benefits that are on offer in other countries and may have greater expectations. “The higher [up the organisation] you are, the more often you have to move. The more you have moved around, particularly if you have ever worked in America before coming to Europe, your expectations are just so high. In America there is now a trend to provide eldercare, [so] relocation companies even in Europe now have to look for old people’s homes if [expatriates] are taking [elderly relatives] with them,” explains Hillier.
Other benefits employees might expect to be provided with when moving overseas include time to find a new home in their new country before relocating, private healthcare for themselves and their families, and help with finding suitable schools for their children. Senior members of staff might receive between three and five days to search for a property, while more junior staff members are likely to just have two. Many companies have tried to cut back on school fees. However, children of employees who have moved around a lot are likely to be enrolled in the international baccalaureate system and will need to be sent to a fee-paying international school rather than be enrolled in the UK state system.
Senior staff are also usually offered access to a chauffeur for themselves and their families, while help with setting up things like bank accounts is generally appreciated by staff at all levels.
Jonathan Williams, director, international premier banking at Barclays Wealth, says: “In the first two or three months of secondment [employees] are very time poor. They want to concentrate on acclimatising to the new country and the last thing they want to deal with is something as dull as a bank account.”
High-net worth staff may also appreciate being pointed in the right direction for mortgage advice. “”A good proportion will rent on a short-term basis for three-to-six months and then buy. They will want [the property] for living and investment so they will retain that property when they go home in two or three years’ time,”” he adds.
Transferring employees at the top-end of the organisational scale will probably also expect to receive help with tax planning. Suzanne Stubbings, a partner at Xpatria, which provides tax advice to expats, says: “It is important to get it right because if you don’t [the employee] and the company can end up paying [out] a lot of [unexpected] money. Often [transferring staff] are very familiar with tax systems and financial systems in their own country, but [these systems can] vary around the world.”
In general, if employees are coming to the UK for a period of less than six months and the UK has an agreement with the country they are coming from, they may be able to avoid paying tax and national insurance in the UK completely. However, they should not assume this is the case. Stubbings says that, employers and employees will often presume that where staff are still paying tax in their home country, they are not liable for tax in the UK. “”It is very rare you end up paying tax twice. Normally you can offset the two, but it is important that you get the tax paid in the right amount in the right country,”” she adds.
To avoid unexpected bills, many companies will pay for transferring staff to take tax advice. Paul Randall, partner and head of the equity incentives team at international law firm Ashurst, says employers will either provide unlimited access to their advisers or offer a set amount of cash for staff to spend on advice. Either way, he believes making some provision is necessary. “It is important [that these] people are given access to good advice on tax matters. From a practical point of view, when you are moving to an unfamiliar and new cultural environment [and] you are trying to settle in a family, the last thing you want [to be doing] on top of all that is trying to figure out how to deal with the local revenue authorities.”
Organisations should also take care to ensure senior staff members are not adversely affected in other ways by their move to the UK. In particular, employers should look closely at share schemes and other risks employees could be exposed to such as foreign exchange rates.
When it comes to share schemes, employers should look at when an employee is treated as leaving their employment. The scheme rules could state that when staff move from one part of a group of companies to another they are treated as leaving its employment and could therefore lose the rights they have acquired.
To solve this, employees who frequently move around can be put into a phantom share plan. This is where a cash bonus is paid out rather than shares, but the amount awarded is calculated by tracking the performance of actual company shares.
To help employees earning high salaries, many organisations also split their pay between bank accounts in their host and home countries. This helps to avoid potential losses if the exchange rate is not favourable when the individual moves back home.
Pensions and benefits such as income protection can also need special attention where higher earners are concerned. Nick Oram, a senior consultant at HSBC Actuaries and Consultants, says that income protection typically has a free cover limit where, for example, employees earning up to £25,000 a year would be able to claim up to £90,000 a year in the event that they were no longer able to work. Higher earners may be eligible for an increased level of income protection under their company’s policy. Above the free cover limit, insurers will request a report from the employee’s doctor, but staff arriving in the UK are unlikely to have immediate access to a GP. To counter this, employers should plan ahead of transferring employees’ arrival around the benefits they are going to provide and the information required. “I have seen plenty of situations where [benefits are] the last thing that is thought about,” adds Oram.
It is also vital that insurance companies are advised of any changes to an employee’s position after they arrive in the UK. “If [an employee is] subject to a high level of benefits if they were to die or become seriously ill or disabled, what you wouldn’t want is a situation where it became difficult with the claim because the insurer was unaware that the employee who had come to the UK had been seconded somewhere else,”Oram says.
Pensions can also be affected when staff transfer from one country to another. The easiest provision for employees who move around a lot can be a group personal plan or a stakeholder pension that can continue to receive contributions if the member moves elsewhere.
However, Paul McGlone, a principal at Aon Consulting, believes decisions should be made on a case-by-case basis and often employees will want to have an input into what proportion of their salary is directed where. “Exec remuneration is never about offering a package and hoping it is attractive to people. It is about sitting down and discussing with them and saying ‘what sort of package do you want’? Within the constraints of how much money the company is willing to spend, [the employee] should almost be able to create their own package.”
McGlone explains that one individual he advises has an agreement with HM Revenue & Customs to only pay tax on 60% of his income because of the amount of time he spends working in the UK. McGlone adds that paying into a pension scheme in this instance to gain 40% tax relief is not necessarily the most sensible option as the employee is already effectively receiving 40% tax relief on their earnings.
However, not all benefits on offer will be taken up by senior staff who are accustomed to moving around. English lessons and inter-cultural training, for example, are often provided but may not always be utilised by employees.
When it comes to senior staff members, the key seems to be making their new lives in the UK as easy as possible. It is also worth remembering that those already at the height of their career may not be moving countries for the additional experience so will expect a package that reflects the sacrifices they are making.
- High-earning expats are likely to be able to command a more significant benefits package than less experienced staff who may value the opportunity to further their careers.
- Staff who have moved between several countries and have experienced benefits on offer in different locations will have higher expectations.
- Don’t assume high earners will be clued up on their tax position. Most employers pay for tax advice to avoid the organisation and the individual receiving unexpected tax bills.
- Share schemes can be tricky to administer for employees who move around frequently. This can be combated by setting up phantom schemes that do not require actual shares to be issued.
- Pensions are a complicated benefit and what is most appropriate will usually depend on an individual’s circumstances.
Case study: Standard Chartered Bank
Standard Chartered Bank operates in 56 countries and has 58,000 employees worldwide. Staff are encouraged to take international assignments and there are currently around 35 in-bound assignees working in the UK. Manissa Patel, head of international mobility, explains that because overseas assignments are such a normal occurrence, it does not have to provide vastly different benefits to senior staff to encourage them to move.
“We don’t have the same challenges that many other organisations do because being internationally mobile is such a normal day-to-day part of life [here],” she says.
The company provides employees with the help of a home search agent and a housing allowance, which increases in line with seniority. Education support for children is also provided to all transferring employees. Apart from this, employees receive the same benefits as staff in the host country and will generally stay in their home country’s pension scheme if the law allows it. It is also company policy to make employees’ take home pay tax neutral. “[Take] someone in the UK who earns £100,000. Typically, they will pay 40% tax so the amount that they get in their pocket is £60,000 after tax. We send them to China, where the tax rate is 45%, and we say ‘you will continue to get the same salary [after tax] that you would have done had you been at home’,” says Patel.
The bank’s policies seem to work. After all, Patel adds expats have rarely complained that the benefits are not sufficient for their needs.