With the increase in global mobility for workers in an increasingly globalised world, there are many factors which need to be considered in the movement of employees between countries. In many cases, moving a worker from their home to a new assignment location can have negative impacts on lifestyle and quality of living – the solution for addressing these issues is usually a relocation allowance, which is determined by hardship points.
In this article, we’ll break down what this means, how the system works, and some examples of what a hardship allowance may look like for your international relocation to a new assignment location.
What are hardship points?
Hardship points are the metric used to measure the difference between an employee’s current home country and their prospective assignment country which they would be moving to for work. As an objective measurement, there are several factors taken into account to calculate these points, which are given as a score out of 100. On this scale, a higher score is a country which is considered more of a hardship to live in.
For AIRINC, the following factors are measured to calculate a hardship score:
- actual or potential violence
- hostility of local population
- prevalence of disease
- medical facilities and services
- physical environment
- geographic isolation
- cultural or psychological isolation
- shortcomings in educational system
- availability and quality of housing
- communal and recreational facilities
- availability and quality of goods and services
The above points cover several different aspects of how hard adapting to life in a new country would be for the employee. Issues such as healthcare, cultural differences, and housing are covered by the hardship points system and account for physical and mental health of employees.
For a country with high levels of conflict, such as Iraq, a high score would be given to the actual or potential violence category, such as 90 out of 100. For some countries, certain categories of these hardship aspects are likely to change more frequently than others. For example, geographic isolation is unlikely to change in a country and remains stable, but availability and quality of housing or recreational facilities for expats can be built more frequently.
What is a location allowance?
The hardship points are used to then calculate a hardship, or location allowance. This usually takes the form of a premium which is added to an employee’s salary over the course of the assignment. This is calculated using the hardship points to create a percentage bonus which is added to the salary. These bonuses are usually added in 5% increments up to 30% a premium for the most difficult countries to adapt to relative to the assignee’s home country.
Employers will provide a relocation allowance for employees for several reasons. Mainly, they act as incentives to encourage employees to relocate internationally to countries that may be considered less desirable to live in. 54% of employers have said that they use mobility allowances to incentivise moving overseas, potentially with family, for their employees, to make the move more appealing.
Another reason employers will provide a location allowance is as compensation for the potential decline in living conditions which may be found when relocating internationally. As discussed, the aspects (listed above) that are often of worse quality than the assignee’s home country are compensated for with the allowance.
A small amount of employers provide the compensation allowance to cover the cost of the relocation itself. Many companies will provide their employees with a separate bonus package for the costs of the international relocation, so the hardship allowance is often an additional bonus to moving cost bursaries.
Many employers don’t have a minimum term of residency for the mobility allowance. Whether the overseas assignment is short term or long term, employees can expect to see the bonuses of a hardship allowance for the period of their stay in the assigned country.
An example of how points are calculated, and what this means for your pay packet
To explain the system fully, it’s best to work through an example. For an employee who is assigned to work in Cairo, and is moving from London, first the hardship points would need to be calculated. Using stats, on-site research, and expat interviews, companies can calculate an index for each measurement. For example, the crime rate in Cairo is moderate, and so for potential or actual violence the index may measure at 50-60. The healthcare is also of below average quality, and so may receive an index score of 50-60.
All factors listed above would be measured and given their score out of 100 (with higher scores indicating larger discrepancies between the current home country and the target assignment country). For example, Cairo scores 65 on the hardship point system. This is then compared relative to the current home of the employee.
With this score, a hardship allowance is then added to the salary of the employee. As mentioned, location allowances usually max out at 30%. With a score of 65 on the hardship scale, it’s reasonable to assume a 15% allowance would be granted to this employee. An employee making £75,000 salary would then receive the extra 15% in their pay packet – an extra £11,250.
The benefits of being an expat and working abroad
There are many benefits of being an expat and working abroad. As well as the hardship allowance that is granted to you to help make the international relocation easier, there are other bonuses to enjoy when moving abroad.
For many, even though the quality of living is somewhat diminished, it’s a brilliant opportunity to experience a new culture and way of life. For those looking to shake things up, an international relocation for a career-based assignment can provide a boost, with a change of pace, scenery, and culture all leading to a sense of invigoration.
There are also many strong expat communities already existing abroad. Apart from the stable expat communities in popular countries like the UAE, New Zealand and South Africa, there are pockets of British citizens living abroad in most countries. Finding a new community after your relocation can spark a real sense of belonging and is a great benefit to moving abroad. To find out more about relocating to these countries, check out our guides on moving to the UAE, moving to New Zealand and moving to South Africa.
Hardship Points and Relocation
It’s important to give careful consideration to all aspects of your international relocation when you move for work. Whilst some destinations may not be the top of your list for relocation, there are often many benefits to relocating for an assignment. With the hardship points system, you’ll be compensated fairly for the area of the world you have to move to. In many cases, relocating for work is also often a positive change in people’s lives and can bring about interesting opportunities to learn and develop, both within a career and as an individual. Considering your relocation allowance for work can help you to decide whether making the move is the right call, and what’s in it for you when you do.
If you need help with your overseas move for your work assignment, and you’re working with your new hardship allowance to help facilitate this, rest assured that John Mason International can relocate you to anywhere in the world. Working with our friendly team who have plenty of experience, we can help to make your move as smooth as possible. Contact us today for further information on our relocation services.
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