What's behind the fall in expat salaries?

by Lucy Hook22 Aug 2016
Recent research showed that expat salaries in Singapore - which are the ninth highest in Asia-Pacific - fell by 8% in 2016 compared to the previous year, to the lowest level in four years.

What are the driving forces behind this fall in renumeration?

There are several contributing factors - the rise of expats employed on host-based permanent contracts, an increasingly diverse workforce, and currency influences - Lee Quane, regional director for Asia at ECA International, told HRD.

In the past, expats sent to work in Asia were likely to do so on an international assignment basis for a specified period, with the intention of eventually being repatriated.

Salaries for these types of contracts were higher - as they were often based on the worker's home country salary, with adjustments for the cost of living, additional allowances and taxation.

Now, as it has become increasingly common for expats to be employed in Singapore on a permanent one-way basis, salaries are likely to be aligned to the local market, meaning the figure is often lower, contributing to an overall decline, Quane said.

The globalisation of the workforce has also had an effect; the increasingly ethnically diverse workforce, in particular those from typically low-income countries, has had a knock-on effect on overall expat salaries, according to Quane.

"Going back 10 or 15 years, the vast majority of expats in Singapore would have been from a high salary location such as Australia, Canada, the USA, Europe and so on," he explained.

What we have seen in the last few years is an increase in the number of workers coming in from traditionally lower-income countries, such as Malaysia, Indonesia, Thailand and China, Quane said.

These candidates will often work for less than a worker from a high-income country - a positive for employers seeking to drive down costs - but this contributes to a lower income for expats as a whole, he explained.

Lastly, currency influence plays a part; as a volatile world market leads to fluctuations in currency rates, this can affect the value of expat salaries.

And for research surveys, salaries are often converted into US dollars for the purpose of analysis, so variations in packages and currency rates can also skew the overall result, Quane said.

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