Expatriation bonus: Calculation of expatriation allowances

expatriation bonusGoing to work abroad was long considered an effort that deserved to be compensated. Living abroad is now a necessary step to access interesting positions and live an enriching international experience. In France, companies facilitate these more numerous departures by offering an Expatriation bonus and various indemnities. But how are they calculated?

The mobility or expatriation bonus: a bonus that is not compulsory but supervised

The expatriation contract is based on an annual French base salary to which are added the expatriation bonus, various other bonuses, and benefits in kind.

The expatriation allowance allows a total or partial exemption from remuneration in connection with these missions abroad. It corresponds to a sum of money paid by an employer to an expatriate employee abroad, in addition to his salary. This bonus, therefore, aims to compensate for the difficulties and inconveniences encountered by the employee in his personal life during his time spent abroad. This bonus mainly concerns the seconded employee called to temporarily carry out a mission abroad and not the person who is hired abroad in the form of a local contract.

You should know that the expatriation allowance is not provided for by the Labor Code. It is therefore not compulsory and only constitutes additional remuneration when one has to work abroad. In fact, it is a positive incentive for the employee to go and work abroad. This expatriation allowance is generally offered and discussed in the context of employee/employer negotiations. This premium is established to the point of becoming a use but is not legally due by the employer. The amount and the rules for calculating the expatriation allowance are therefore very variable. Depending on the company, it may be provided for by the collective agreement or by the custom in the company. Only company policy and negotiation have the force of law.

The expatriation bonus is generally calculated from a percentage of the reference salary (gross or net depending on the company). It is generally between 5 and 20% of the latter. This percentage depends on the country concerned (political situation, dangerousness, climate, hygiene and sanitary conditions, state of infrastructure, etc.). It can in certain cases compensate for the loss of salary of the spouse if he cannot work in the host country. EI is granted less and less (if not at all) in the context of internal expatriation in the European Union.

Other types of expatriation bonuses

There are other forms of expatriation bonuses, often offered in the form of a package by companies wishing to send employees on a mission abroad. These bonuses are calculated in two ways, either as a percentage of the net or gross salary or as a fixed amount. These include:

– The mobility bonus which corresponds to a lump sum paid at the start and at the end of the assignment.

– The COLA (Cost Of Living Allowance) or premium for the cost of living which, like the expatriation allowance, makes it possible to compensate for a differential in the cost of living between the host country and that of origin. An index is applied to the employee’s net salary. Among these indices we will mention:

– The Home-Based index, used for short-term expatriations or for countries where the culture is diametrically different from the country of origin. This is the standard expatriate remuneration system.
– The Host Based index, used for long-term expatriations in countries that are geographically or culturally close. The employee’s pay will be calculated according to a “country of origin anchorage”.

– The adapted expenditure index takes into account the different types of consumption, the place of expatriation, and the place of origin.

– The installation premium or curtain premium to compensate for the inevitable small expenses. This bonus amounts to a maximum of one or two months’ salary.

Note: Expatriation premiums and / or expatriation allowances as well as benefits in kind are generally taxable. Depending on the company, they can be paid at the start, at the end of the mission or throughout the duration of the expatriation. The choice is not innocent precisely because of the resulting tax consequences.

Benefits in kind

Some companies are setting up systems to encourage departure by guaranteeing candidates the same purchasing power while covering part of the costs associated with international mobility. This is the case in particular:

– Professional costs: hotel, transport, restaurant, etc.
– Costs linked to the move
– Costs linked to housing: official accommodation made available to you by the company or assistance for the payment of rent
– Vehicle: vehicle function or help with car rental, maintenance, and fuel costs.
– Covering of tuition fees: Fully or partially covered by the company.

Expatriation is now part of the life of companies and that of their employees. The calculation of expatriation bonuses is a complex system and the nature of the bonuses allocated often varies between companies. However, they remain a major asset in negotiation before departure.