As I pass myself off for an expatriate blogger, I guess I should at least occasionally post entries that fellow expatriates could use as empirical advice.
This lengthy entry concerns relocation package negotiation.
Actually, I am hardly qualified to say anything about the negotiation itself. Primarily, because I did a less-than-impressive job negotiating my package. But if I can impart a single advice on you, it would be this:
You only get a good deal if your company wants you to relocate more than you appear to want it yourself.
You see, I never made it a secret that I wanted to move to Europe. I was so eager on a couple of occasions to put myself in front of opportunities that it became a weakness during my actual negotiations. I had “But you want it!” (with an implication that I needed to sacrifice certain desires in order to make it happen) thrown at me on many occasions.
I could counter with “Yes, I want it, but only if the situation is perfect”, but, instead, I kept thinking that I’d regret it for the rest of my life if I walked away from the opportunity. As a result, I agreed to a reduced package so as to “make it work”.
Hence, take this to heart. If you are at best lukewarm to the idea of relocation, you have nothing to worry about. But if you are excited about immersing yourself in a different world and a different culture, be very careful to keep your excitement in check. And don’t set yourself up to want to avoid disappointment at not being able to close the deal…
And if you happen to initiate the process yourself by saying “I want to relocate” and you end up with the best possible terms from your company, I congratulate you on your choice of employer.
Don’t get me wrong – I got decent terms. My occasional doubts regarding this move all stem from mundane, practical things that I find inconvenient or irritating. Overall, I am very happy at being able to fulfill my lifelong desire to experience the Old World firsthand. I just can’t get around the fact that I did make some sacrifices to make the move happen, and I most likely would now be financially better off, had I walked away from the deal altogether…
On to the specifics.
First of all, there are two main types of relocation packages. An expatriate package would have you stay on the US payroll and receive your compensation in dollars. A local package means that you become a local employee in your host country and are paid in local currency.
I do not possess sufficient knowledge of taxation implications to intelligently compare the two types, but it is safe to assume that the expatriate scheme is more lucrative. Despite that it leaves you exposed to currency exchange fluctuations and often carries continuous inconvenience of converting dollars into local currency (to say nothing of doing mental arithmetic every time you spend money, which will drive you insane in short order), it also implies a variety of cost-of-living adjustments that effectively remove certain sizeable expenses from your daily existence. The local package – which is what I have (or, rather, had) – is very often “bare bones”.
A couple of things, such as packing and shipment expenses and reconnaissance trips are a given. You want professional movers to pack your stuff, deal with shipping, customs and such, and then bring all of your belongings in and even unpack some of them on the other end. Sure, these guys will break a thing or five (we actually did not have anything of value damaged, but I’ve heard stories), but some damage is unavoidable regardless of who handles the goods. I certainly found that I cannot wrap fragile objects into big bundles of paper – which makes them protected rather well – with the same speed and agility, not to mention the end result, as the movers. In any case, this is one of the biggest one-time expenses related to relocation, and your employer is not going to short-change you on that.
The same goes for house hunting trips, although you may need to work at getting more than one. The trip expenses are usually covered for the relocating person and spouse, and should adhere to corporate travel expense guidelines, meaning that there is a hotel rate cap and a per diem meal cap, as well as “preferred” airlines and hotels, but even in this day and age of tight budgets, I find the allowance more than adequate.
Now, we spent only two days looking at houses, and made our choice on the third day. Some people may not find anything suitable during a week-long trip to heretofore unfamiliar place. This is where it is very much worth it to negotiate either an expressed second journey or an overall expense cap for reconnaissance trips that would allow for an additional journey, if needed. It was one thing that I actually did manage to get in my package – but mainly because corporate policy dictated a certain calculation of airfare costs, while Natasha and I were not above looking for and finding a bargain fare. I demanded that all language itemizing house hunting expenses was removed from the agreement, save the notion of the overall cap and the requirement to follow corporate travel guidelines, leaving me enough room to fit in a comfortable second expedition. Alas, we did not need it, saving company some money, as if that counts for anything…
While you are house hunting, you need professional help. A psychiatrist would be nice in this situation, but all you get is a realtor who pompously calls herself relocation adviser. Treat her as a glorified chauffeur or truly lean on her for help and advice, the bottom line is you will inescapably suffer some form of culture shock on your first house hunting expedition in a foreign land and you will certainly need a local guide. Your company will happily provide you with one; after all, these agents’ fees constitute a rather small portion of the overall package. The agreement normally provides for a limited number of days to have the services of such person, so if you have an inkling that you’d need more than a week, make sure you work it into the package.
Temporary housing is another indispensable item (although I literally used one single night out of 3-month-long allowance). There are two parts to it, one in your home country and one in your host country.
First, you most likely will not get on the plane immediately after the movers have left your house with all the stuff, even though the place may be uninhabitable. Therefore, you may need some temporary accommodations at home. They are normally capped at a couple of weeks and require no negotiation.
Second, keep in mind that a transatlantic sea shipment takes at least 4 weeks to reach destination. Even if you have secured your permanent accommodations in your host country by the time you ship your stuff, you will still be without your things for a while. There are other likely scenarios, such as not finding a suitable permanent housing ahead of the move, or finding one but not being able to move in until some later date. That makes temporary accommodations in the host country a much more important matter. You will likely be offered a 60-day temporary stay in some corporate housing. That sounds like a lot, but is in fact severely inadequate if permanent home remains to be identified and secured. If you are in that situation, believe me that you will be hard-pressed to sort it out quickly upon landing in the host country for good. Things will keep coming up, your mobility will be limited at first – and you will be even pickier than before. If you have any inclination that you may find it hard to come by suitable permanent residence, work out a longer temporary housing allowance. This is one item that may be met with resistance on the side of your employer, as the expense is often considerable.
As an aside, don’t underestimate the power of the internet. You are unlikely to actually find your permanent digs online, but you simply must take a look around on the web, not only ahead of your house hunting trip, but even earlier, ahead of finalizing your relocation agreement. What you will see online may give you an idea – from all the various perspectives of cost, size, amenities, location, aesthetics – of how easy your expectations might translate into finding something suitable. If most of what you see looks unlikely to tickle your fancy, think longer temporary housing allowance.
I was offered insignificant temporary storage allowance as well, and I could not figure out a way to use it anyhow. If you want to keep some stuff home until your repatriation, you may need long-term storage, and you may be able to negotiate the cost of it to be included in the package. But unless your package includes cost-of-living allowances, your company is unlikely to sign up for other perpetual costs, however small.
Make sure that you get a relocation allowance. That is cash payable to you to offset out-of-pocket initial costs (for instance, security deposit for your rented place, or purchases of electrics, electronics, furniture, etc.) The amount is normally defined as the twelfth of your salary. When I got my allowance paid out, it turned out to be capped at a round number below what I was due. I had to refute the explanation that a standard limit was in play by pointing out the specific clause in my agreement. Remaining portion was soon remitted.
However, I got paid in dollars and into my US bank account. You are likely to need money in your host country, not at home, and you will certainly lose money on currency conversion regardless of whether you decide to wire it over to your overseas bank account or use credit cards against the allowance amount. I would have preferred that my relocation allowance – which was agreed to in sterling terms – was remitted directly into my new UK account. Too bad I did not think about it in advance, giving useless Weichert Relocation (which handles relocation “management” for my employer) a chance to screw me over. I conservatively lost £500 on double conversion of the allowance amount. It may make sense for you to get the payment mode in writing. This option, however, may not be available in expatriate packages, which are usually entirely in dollar terms.
Finally, the last component of the package that is absolutely inherent is the one-way ticket. One per each family member, and again, within corporate travel guidelines. My kids immensely enjoyed business-class travel…
Now, we get to things that are discretionary. I use the term very loosely here. You would be a fool to turn any of these down if they were available to you. The discretion is entirely that of your employer’s. As it stands, the above-mentioned ratio of I-want-to-go vs we-want-you-to-go and the availability of expatriate or local deal drive the negotiating effort required to affect said employer’s discretion.
The biggest singular expense in everybody’s life is housing. The weakness of the dollar and the likelihood of you relocating to a major metropolitan area both suggest that your housing expense will be greater in dollar terms than your american mortgage or rent. If you are on the expatriate package, you are likely to be offered an allowance to pay for your living expenses (beyond temporary housing). Having this allowance cannot be overestimated, and if you are paid in dollars, unless you are also getting an extraordinary salary increase, is quite essential. Without such “free accommodations”, you would not only suffer from cost of living discrepancy, but currency exchange markups on your rent payments would easily cost you a few grand a year.
If you are offered a local package, I am sorry to say that you are most probably out of luck. Perpetual allowances, such as this, are pretty much impossible to obtain, subject to how much your company wants you there. “If you are a local employee, then you are no different from any other employee at this location, and we don’t pay for everybody’s living expenses, do we?” is the rebuttal you are likely to receive, and it is unfortunately most logical. Your best recourse is to focus on securing an increase in salary (local terms) that will be sufficient to cover the residence cost discrepancy. More on salary later on.
Further allowances for professional help, although discretionary, are easy to come by, not least because the associated expense is minuscule compared with other items. We already discussed house hunting assistance. There will also be a one-time legal/immigration help, which liberally includes the cost of passport renewals and work visas, if necessary.
One year of professional help with taxes is commonplace. If you have a trusted tax adviser at home, who is capable and willing to deal with foreign tax laws, you may not even need this allowance. I strongly advise you to retain such an adviser if you have a chance, because you are unlikely to get more than a boiler-plate assistance through the tax-assistance benefit. The people at PwC that I spoke to thus far are very nice, but I do not get a feeling that they will spend more than the absolute minimum of effort on my tax returns. However, if you do not have a close relationship that you can rely upon for tax return purposes, you might as well hold out for more than one year of this allowance (which is not too hard to obtain even under the local scheme, due to inconsequential amount of the expense compared to the rest of items).
Finally, you should ask for an educational consultant allowance, relevant only if you have school-age kids. It costs a pittance compared with other expenses, but you wouldn’t want it coming out of your pocket anyway. While you definitely should make every effort to become familiar with school system in your host country yourself, having someone to discuss options with and do some legwork for you is quite useful.
This leads us to school fees. You may aim for your children to go to an American school (my thoughts on this can be found here), which are obscenely expensive (a well-known American school in St Johns Wood area costs £19,000 a year – yep, you read it right!). You may be dissatisfied with the level of education obtainable in a state educational facility (need to be careful with terminology here; I wanted to use the term public school, but in England that normally means fee-paying). You may simply be unable to get a place at a state school, and find yourself stranded between a choice of keeping your kid out of school altogether or applying for an independent – in US-speak, private – one. Whatever the circumstances are, a private school will set you back upwards of £8K a year. Per child.
If your kids are in public schools in the States, then schooling expense has a clear “in addition to else” connotation to it, even if you want to be honest and count your outrageous property taxes as an effective tuition. You should certainly attempt to negotiate an allowance. As with the living expense, you are unlikely to get it if you are local, and I actually dropped it from my list myself to make my demands more amenable to the management, even though Becky now goes to a quite expensive private all-girls institution. Not sure about expatriate package, unless you are a diplomat, in which case you get it pretty much automatically.
Assistance with the sale of your property – in other words, an arranged sale at the fair market price to a broker company that will then be selling the property on its own, – is definitely worth inquiring about, as keeping your US property may become a huge financial drain. You may be lucky and own a house or an apartment in a hot area, or selling at the height of the market, or even keeping the property and renting it out. None of that applied to us. We never wanted to rent out. Our house was in a nice suburban area, but such areas rarely deserve a “prime location” label. And we were extremely unlucky timing-wise, with the market peaking a year before and then perpetually sliding afterwards, leaving us with literally no buyers and a dozen properties to compete with in our own subdivision alone. So, for four months, we kept paying our mortgage in the States while fully residing – and paying rent – in the UK. Plus, we had to burden my parents with “maintenance” of the empty house, until it was finally sold.
I did not get any assistance from my employer with the sale of the house. I had no recourse in the matter either, except walking out on the deal once I learned that I did not qualify for this type of relocation benefit (something about having to be virtually at the pinnacle of the food chain to be eligible). I find it hard to imagine that anyone would make this particular line item a make-or-break condition, but your employer may simply have more flexible rules.
And if you manage to get this type of assistance, the biggest benefit is simply a longer and healthier life for you and yours, as you end up selling your property without losing your sanity which is unavoidable when dealing with unscrupulous agents and ridiculous buyers from afar.
If you are leasing a car in the States, you cannot take it with you overseas, and getting out of a lease can be quite expensive. Your only reasonable course of action is to find someone to assume the lease from you, which is done quite easily these days with the help of the web, but is still a laborious exercise (some leasing companies are better than others, but it would never occur to you to initially select a car on the basis of how easy it is to get out of a lease, would it?). Instead, you should be able to work out the cost of early lease termination to be covered by your employer. After all, it is at their whim that you should relocate and thus become liable for early termination charges. But again, in my case, it was primarily my own whim, and I dropped this demand in the spirit of “making a sacrifice”. Thankfully, I managed to transfer my lease to another person (which is a story that I may develop in another post).
There may be other obligations (cell phone contracts, for instance, or pre-booked vacations that become impracticable to take while in the middle of relocating) that can generate termination charges or involve non-refundable deposits, and you should ask to be reimbursed for them. You are likely to be told that this is what the relocation allowance, discussed earlier, should cover. If you accede to that, then, depending on your circumstances, you may end up spending a considerable chunk of your relocation money on something that has nothing to do with relocation, per se. Decide for yourself whether this item is worth taking a stand on. I pragmatically figured that our obligations were insignificant, and dropped this demand as well, furthering my stance of being willing to make sacrifices; Natasha managed to resolve the only problematic issue with our mobile phone provider, by chancing upon a reasonable customer service manager who accepted transfer letter as the proof of a “legitimate” reason to terminate the contract (the money we saved on this is not something I would lose sleep over either way).
If your relocation is viewed as a temporary assignment, – which very nearly translates into an expatriate package, – you also should be able to negotiate the cost of trips home for yourself and your family. Annually, to the very least, although I frequently hear of semi-annual allowance. Even the cheapest transatlantic round trip for a family of four costs no less than $1500. You’d be quite well off if you could pass that cost onto your employer, since – keep reminding them! – it is their idea to separate you from your relatives and friends for quite a long time. As this is another one of those recurring expenses that do not exist as a normal employee benefit, you are unlikely to get much traction in arguing for this if you are on a local package.
When all is said and done, tax considerations may be of import, as many countries tax relocation packages as benefits. Depending on the country, the tax burden can reach exorbitant amounts. Have it put in writing that taxes will be the responsibility of your employer. Curiously, in my case, this was very easily achievable.
If there is even a 0.001% chance of you wanting to relocate back home in the future, you would be well served to insist on provisions for repatriation assistance. An expatriate package will have that as a given, while a local package will put some comparatively short time limit on the availability of such assistance. But even if you are dead set on spending the rest of your life in the country you are moving to, you cannot go wrong with having a security blanket of your employer agreeing to pay for your repatriation if things change. The reasonable terms include, at a minimum, the cost of household goods shipment and storage and the cost of final travel, available throughout your continuous employment with the company, and automatic in case you lose your job involuntarily. I was exceedingly cavalier about our prospects of making Europe our permanent home during the negotiations, and did not insist on this. It caused me considerable anxiety and a separate round of negotiations later on. [note: The above paragraph was added to the article in April of 2009.]
And, finally, of course, there is your salary. You should definitely approach the conversation about your salary at your new position in the context of overall relocation package. If certain recurring expenses – school fees or home trips, for instance, – are unavailable, then you may need to take a firmer stand on getting paid more, and vice versa.
The important thing is to get a proper picture of what your expenses at your new country are going to look like, what portion of your income you can expect to give up to the taxman, what relocation benefits might help you, whether your annual bonus – if you have one – can be counted (or desired) to cover certain discretionary expenses, and so on. You should arrive at some sort of an absolute minimum salary that would allow you to maintain an expected level of comfort without dipping into your savings. If you are then offered more than that, all the power to you, but if not, then you know what to dance from. I am happy to say that this is practically the only negotiating point on which I did reasonably well, having been offered a salary barely above my absolute minimum, and then improving on that.
So, there you have it: A primer on relocation package. It took me a while to put it together, but hopefully, someone somewhere will find it useful.
Disclaimer: This article draws from my personal experience and contains references to common practices regulated by individual corporate policies as well as federal and state laws. The article cannot be construed as providing legal advice, nor as a recommendation or endorsement of any particular legal understanding, and you should instead regard this article as the expression of personal opinion only.