Expat perks put through the wringer

Source : Business Times – 29 Jul 2009

Hard times are hastening the trend towards slimmer packages, but expatriates aren’t fleeing

Expatriate perks are fast disappearing. ‘Localising’ their packages is a trend that started several years ago and has picked up pace in these lean times, executive search consultants say.

But expats here are not about to flee, according to HSBC’s Expat Economics survey, which suggests that most of them still have more disposable income here than they would back home. The credit crunch, therefore, has not led to a rush to book tickets out.

Still, Craig Brewer, manager of banking and financial services at Hudson Global Resources in Singapore, said: ‘There has been a dramatic reduction in the size of expatriate packages in the past four or five years, and it has been across the board.’

The financial crisis has ‘most certainly accentuated this downward trend’, he said, adding that most banks have tried to phase out expat packages, and that only at very senior levels, such as managing director, are generous perks still offered.

This compares with six or seven years back, when an employee transferred to Singapore would almost certainly have received housing and car allowances, children’s school fees and club memberships, Mr Brewer said.

Only 30 per cent of expats here still receive such perks, says Chia Lee Wee, managing director of local executive search firm Whitestone Consulting. ‘Many contract renewals are also being converted into local packages, and allowances now frequently come in a lump sum for them to spend as they choose,’ he said.

Expats certainly need to earn more here, as the local cost of living for them is high. 44 per cent of them here spend more on accommodation than their peers in other countries, and entertainment and healthcare costs in Singapore also exceed the global average, according to the HSBC survey conducted between February and April.

Partly due to currency fluctuations, Singapore rose several ranks to the 10th most expensive city worldwide for expats, according to a cost-of-living survey conducted by HR consultancy Mercer in March. Singapore was also the fifth most expensive city in the Asia-Pacific.

However, even though costs are high and bundled benefits are either going or gone, 91 per cent of the expats here polled by HSBC have not considered returning home amid the downturn – higher than the global average of 85 per cent.

A possible reason is that rents have been easing alongside cuts in housing allowances. Mr Chia estimates that company budgets for housing benefits have shrunk 20 per cent.

The HSBC survey also found that more than 75 per cent of expats have more disposable income here than back home.

This could explain why cutting expat perks has not made it any harder to fill posts.

Singapore’s low tax rate and clean environment are still pull factors, they say.

Also, the vanishing expat pay package is not a phenomenon unique to Singapore. Hong Kong, the other city in this region that has a large number of expats, has seen a similar cutback in expat perks, with banks rolling benefits into basic salaries.

Beacon Executive Search Consultants senior consultant Mark Foo said that in most developed cities, multinational companies are scaling expat packages down to local terms. For example, Singaporeans relocating to cities in China have been affected by this trend too, he said.