An expat contract is a binding contract between the company wanting an employee to work abroad in a foreign country and the employee who chooses to do so.
Expat contracts are wildly different from how they used to be. I’m sure you’ve heard the myths of bankers or diplomats venturing into the unknown with a ridiculously generous salary, private driver, amazing car, housing, daily stipend, and school fees for their kids all taken care of. Kinda like a top athlete is paid these days.
In a way, we can look at it as a deal where a company would send someone into the unknown, away from their family and everything they know, so that the top management wouldn’t have to. That person would be their trusted one on the ground with all the adventure it brings. Kinda like the old explorers Tim Cook and James Brooke.
One of the reasons it was so valuable was because globalization isn’t what it is today. Traveling took longer and it wasn’t possible to video call anyone, let alone at a moment’s notice, so every corner of the world felt a lot further away than it does now.
Thanks to the internet, that has largely changed and made many more people interested in going abroad which in turn has driven the packages down. It’s simply a matter of supply and demand. Here’s an overview of the increase in the number of people moving abroad since 1999 based on data from the United Nations.
But not all hope is lost for adventurers who want to explore the world. This shift has allowed for many of us who aren’t from a diplomat’s background or have been groomed for years to play as well. Some of us even use it as leverage to further our careers at an early stage.
The difference between an expat contract and a ‘local’ contract
The difference between a so-called ‘expat’ contract and a ‘local’ contract is usually whether we are hired after having already moved to a foreign country or whether we are being relocated from where we are. Both have its benefits.
Being relocated on an expat contract has the obvious benefit that we can argue for not wanting to go to negotiate a better package, assuming that no one else who is a serious competitor of ours wants to.
A local contract in comparison refers to someone who is already ‘a local’ in the country, meaning that they already live there whether they are a foreigner or not. The benefit for the company is that the employees tend to enjoy living abroad and so it is easier to negotiate a more affordable package for them.
Serious expat contracts tend to be reserved for senior management and are difficult to get earlier in our career. Local contracts can be hugely beneficial here since we can position ourselves to leapfrog our peers over time with unique experience and skills needed abroad that many are not aware of.
For example, some businesses have subsidiaries abroad and are dying to have people from their own country staffed there to help bridge the gap between the local staff and the headquarters. In the right place, we can advance our career before returning back home into a senior role through the extra responsibility we’ve been able to take on abroad.
Local contracts don’t have to pay particularly badly if you know where to look for them. I managed to secure a local contract that paid the equivalent as someone ten years my senior, with the same background and on an expat contract being relocated from home.
Why salary isn’t everything
Many of us tend to focus overly on the salary when looking for jobs. That can be a good idea at home but abroad, that decision becomes a lot more complex. Especially, because the living costs, salary, and tax aren’t the same in each country and often aren’t even comparable.
Things like PPP and the Big Mac index have been created to try to even out the numbers and offer a better 1 to 1 comparison but it is still challenging to do so when it comes to an international expat contract.
Instead, we can use a site like Numbeo to check the estimated living cost in our city, google around to get a rough idea of taxes, and focus on the disposable income we have after paying for everything necessary for the lifestyle we’d like.
That number is more reliable across countries and especially if you are ambitious and want to save, invest or start a business. You’ll often find that taking a slightly lower salary abroad compared to what you might get at home can be hugely beneficial because the taxes and living costs might be lower.
Often the key considerations from the company’s side are how our package will look compared to the other staff at the office and at home. If we get a nice car with a driver, what kind of signal does that send? And is it one that we want to send?
Other questions they might be asking themselves are:
- Can we justify the value vs the cost?
- Can a local do the same work?
- How easy is it to get someone else relevant out there? What’s the talent pool like?
- How willing are you to move? What is your leverage versus theirs?
Which is cheaper of the two depends on the situation e.g. Singapore might attract expats from other Asian countries that are comfortable with a lower salary than a local, whereas in other countries it might be the other way around. If you are the one being paid more, it’s key to consider how the company considers the value we can bring compared to our cost.
In the expat contract, the most common items to consider are:
- Salary
- Benefits like phone, meal, taxi allowance
- Relocation, (shipping your stuff) and temporary housing until you can move into your new home
- Driver
- Housing
- Retirement contributions
4 secrets to negotiating an expat contract
With the overview of the expat contract types out of the way, let’s look at some tips to negotiate a better contract.
First we have to consider the pros and cons from both our side of the table and the company’s side based on the points I mentioned.
In general, the more obscure the city, the more negotiation power we have because it is difficult to find quality talent. For example, it tends to be more difficult for a foreign company to find the right people in a city like Kasghar (China) compared to in London.
1. Showing them that they can’t live without us
Often the challenge on our side is showing just how good we are and the value we can provide for the company. Having a strong background and track record makes a big difference but if we don’t have that, we can sometimes mitigate it by showing them upfront. In these situations, just saying we can do something doesn’t mean much compared to showing.
Is there some way you can work with them in advance to show how awesome you are? For example through freelance work, working for free for two weeks to get a better understanding of the job, etc. That way they already trust you.
2. Get a raise by kicking ass before the performance review
If you have negotiated an offer and are still on the fence but not 100% happy with it, there is something we can do down the road.
Work with them to set up a performance review six months from the start with specific targets, and ask in advance that if you hit them, you’d like to discuss a compensation adjustment. No one is going to say no to a discussion down the road and it allows you to prove your worth first and make it a no brainer for the company to give you a raise down the road.
The majority of the work done to get a raise during the performance review isn’t in the actual meeting but in advance, and it isn’t unheard of for top performers to get raises of several thousand dollars per year.
3. Practice the interview in advance
Practice in the mirror in advance. So many people read this, nod their head but never do it. It makes all the difference to say the words out loud as you build practice what to say in the situation.
The employer has negotiated stuff like this many times and might say something just to throw you off. It is easy to be caught off guard unless you’ve practiced in advance because the words will flow almost automatically as you start the sentence. It feels great.
I was working on a negotiation with a friend of mine. He did well and suggested the same to his colleague. That guy didn’t practice in advance, failed and went back to my friend saying it didn’t work. As they went over the steps, it turned out that the guy had skipped practicing. My friend convinced him to try again and actually practice. Two weeks later the guy came back head over heels excited about an amazing raise AND the boss later spoke to my friend in bewilderment, “I don’t know what happened to that guy in those two weeks!”
4. Avoid giving the first number
The perfect example of practicing in advance is when they ask for our expected salary. When they do, tell them you’d like to better understand the problems you are solving and how you are able to contribute value first.
They will often continue to pressure you for a number and you’ll have to repeat. It is difficult to put a number on something when it isn’t clear yet what kind of results and targets you’ll help the company hit since every business puts a different value on different things. They would pay one amount for sweeping the floors and another for bringing in high value clients.
How you’ll know if the company is low balling you or giving a great offer
The big challenge when we get an offer and an expat contract is knowing whether we are being low-balled or if the package is great. Especially, because it’s difficult to get accurate facts from salary websites for expat contracts abroad. Either we’ll have too many answers going in all directions or none at all.
The best approach in that situation is to contact recruitment agencies and other expats in the same city to get a lay of the land. Other expats usually won’t be willing to share their own salary but they tend to have a decent lay of the land if they have been there for a while.
Ideally, you already have some friends in the country you are relocating to. Otherwise, use the network you’ve begun building as part of your research for finding jobs in that country.
Takeaways
- ‘Local’ expat contracts can be an advantage in the early stages of our career
- Find a way to show how awesome you are before you negotiate a package
- Check with people in the market to see where your offer falls
