Valuing Quality of Life When Negotiating Your Relocation Package – Can Money Buy Happiness?

It can be exciting to get the news that you’ve been offered an overseas assignment. In most cases you are being singled out for your exceptional contributions and being given a great opportunity to advance your career. Your family may be excited too. Living in a different country, experiencing a different culture and seeing things that you have only known from pictures, is a great opportunity for many people. Still, there are bound to be concerns.

When uprooting your daily lives and venturing across oceans, timezones and cultures, the adjustment may leave you disoriented and maybe a little disillusioned. Knowing as much as possible about what to expect in your new home will help a lot. Among the many questions you will need to answer, one of the most important is how much will everything cost?

Cost of Living Calculators

Comparing many basic day to day items like a tube of toothpaste, milk, a dinner out, the price of a movie or leasing a car, may be fairly simple. There are some surprises though. In some expat destinations, certain goods and services can cost considerably more than you might expect. Taxes on things like gas, cigarettes, alcohol, and imported goods may be in place to fund government programs like health care, public transit systems and communications infrastructure.

Hardship Premium

To some, the word “hardship” conjures up images of polar explorers or early settlers heading west in their covered wagons. In the world of corporate relocation, “hardship” covers a host of factors such as the availability of certain goods and services, political and social freedoms, language barriers, health care, pollution and infrastructure. While not as dramatic as surviving on the frozen tundra, hardship factors can play a significant role in your overseas experience.

Corporate relocation packages typically try to provide an incentive to relocate to less desirable destinations by offering a hardship premium. Hardship can mean different things to different people and depending on what you consider a hardship, the premium that your company offers you may be a pleasant perk or fall woefully short of compensating for the stress and unhappiness you will experience during your assignment.

Researching the factors that you are likely to consider to be a hardship, will make you better prepared to weigh the offer and address your quality of life needs before you accept.

Asia-Pacific – Comparing a Move to Two Popular Destinations

Using a Salary Purchasing Power Parity (SPPP) calculator we are able to compare a move from New York City to two of the most popular Asia-Pacific destinations. The report acquired allows you to accurately project the salary required for the new location.

For these two case studies we have used an employee earning $100,000, who is married and has one child, transferring from New York City to Shanghai or Sydney.

Case Study #1: New York to Shanghai

With an expat community estimated at 220,000, Shanghai, China’s largest city, is a top destination for foreign workers. The booming economy has provided huge opportunities for companies worldwide to participate in the rapid economic rise and modernization of this nation of more than 1.3 billion people.

The Overall Cost of Living Index +1.89% (+$1,890.00)

The cost of living in Shanghai is therefore only slightly higher than NYC.

Transportation -14.44%

Things like taxi fares, are significantly less in Shanghai than NYC. A 25 mile ride from Pudong International Airport to downtown Shanghai will cost you a little less than $30, while the shorter 15 miles from JFK to Manhattan will set you back $45. If you choose the bus or subway, the single ride ticket in Shanghai will cost about 45 cents compared to $2.50 in NYC.

Restaurants Meals Out and Hotels -14.50%

Eating out is also a great bargain, and if you are a big foodie who enjoys variety then Shanghai may be the place for you. If you frequent the local favorite noodle houses, you may pay less than $2 for a meal.

Education +20.76%

Education can be a big expense because language barriers often preclude attending public school. Although many expats recommend public school for the first few years for the opportunity to gain Mandarin fluency and the unique cultural experience, the vast majority of expat children in Shanghai attend international schools. International school fees range from $12,000 to more than $30,000 per year.

Hardship Premium +20% (+$20,000.00)

The cultural and language differences can be a hardship for many people relocating to Shanghai. Mandarin is considered one of the hardest languages in the world to master because of it’s tonal nature. Each word has multiple meanings depending on the combination of tones.

Problems with air pollution and food safety are also often sited as concerns for many expats. Restrictive government regulations in areas like media, can also create a hardship for some people.

Case Study #2: New York to Sydney

Hardship Premium 0%

With a laid back lifestyle, warm weather and one of the highest standards of living in the World, Sydney is a favorite spot for many expats. With more than half of Australia’s major companies headquartered in Sydney, there is no lack of opportunity.

Overall Cost of Living Index +18.12% (+$18,120.00)

Although it seems to have everything going for it, Sydney also regularly ranks as one of the most expensive places to live.

Communication +84%

In Australia the cost of cell phone service and Internet service may come as a shock to an American used to paying as little as $70 per month for unlimited nationwide calls, texting, and wireless Internet. Australian wireless Internet plans typically have monthly data caps of 5-15 gigabytes with some of the highest per gigabyte overage charges of any developed country. Depending on your typical phone or Internet usage you may pay several hundreds of dollars more per month.

Alcohol & Tobacco +34.5%
Clothing +68.4%
Groceries +15.58%
Recreation & Culture +29.17%
Restaurants Meals Out and Hotels +25.00%
Transport +35.78%

Because of it’s size, remote location and relatively small population (about the same number of people live on the entire continent of Australia as live in Shanghai), Australia has some of the highest prices for consumer goods and groceries of any developed country. In addition to the high cost of shipping imported goods, the government imposes tariffs to encourage local industries such as banana growers and car manufacturers. The flip side of the high cost of maintaining these domestic industries was that Australia remained relatively unaffected during the worldwide economic crisis of 2008.

Apples and Oranges

When looking at a possible overseas posting it’s important to understand that each one is different and that what may seem like heaven on earth to one person may be unbearable for another. Having access to detailed information, like the SPPP report will help you negotiate a well structured package of benefits for your move. Knowing what things you value most for your quality of life and what to expect when you get there will also go a long way in easing the stress.