Executive Expat’s Package includes several expat’s allowances: relocation, COLA, housing, education and other additional benefits. We explain all the details behind expat’s finances and the German Social Security System.
- Salary Payment
- Cost of Living Allowance (COLA)
- Mobility Premium
- Hardship Allowance
- Other Benefits
- German Social Security System
Over 90% of companies compensate their expatriates based on their home country salary level. Only some have special international compensation schemes. All in all, your pay slip depends on the level you have reached within your local country… but only nominally.
As your home unit is based outside of Germany, in most cases your salary depends on your local currency. Some corporate policies define the payment method as follow:
- Whole salary paid in host country currency
This approach might be a bit risky, especially if you are staying in Germany for a longer period of time, as your savings will be gathered in EUR. Unless you are expecting to purchase a property in Germany or invest on the stock exchange, this method might not be of an advantage to you.
- Whole salary paid in home country currency
Although you risk currency exchange rates, you might be lucky to gain as well. This approach makes financial sense in cases when you are on a single status assignment (your family is still located in your home country) and your assignment is rather short-term.
- Mixed approach – defined amount paid in home country currency as home deposit and the rest in the host country currency
This is the most common system in Europe, which allows to split the currency risk and ensure stable savings in your home country.
- Payment in reference currency (i.e. EUR or USD) in cases where your home unit is outside of a Euro zone or USA.
All of the above manners have both advantages and disadvantages, however in cases when you are paid in a different currency than EUR, you are exposed to currency fluctuations. Hence in some months you can take an advantage of a weaker EUR or the opposite – risk lower salary.
If your company policy allows that, you might choose to cumulate more cash in EUR when the advantage is on your side and use it up in the future months. On the other hand you might set up a bank account in Germany in foreign currency, while most likely USD current accounts will be much easier to set up than of some different currencies. In that case, long term you spread the risk across many months and on average your losses and/or profits should break even.
This portion of your new salary is aimed to equalize differences in prices of common goods and services between Germany and your home country. Some companies use this allowance to balance the currency exchange risk, as a result the payment might differ every month.
In some cases, as cost of living in Germany is lower compared to London, Moscow, Paris or Stockholm, your employer might use a negative cost of living allowance meaning you shouldn’t count on any additional funds coming from this allowance.
This share of your payment has a motivational aspect. It should be a true increase in a salary, an incentive to move abroad. Depending on your company policies, it can be merged with COLA or hardship allowance. While COLA and hardship allowance are given and calculated on a hard basis, most likely you will be able to negotiate the level of the mobility premium.
It is designed to make up for different circumstances and hence difficulty combined with your new location. That is based on health risk, climate, cultural differences, language, availability of services, etc.
Depending on the home country this allowance may differ. But again, that all depends on your company policy.
This allowance is either paid out in cash or can include sponsoring of i.e. hobby courses or language classes.
Most of the European companies do support their international personnel in this aspect, by providing an allowance for a new house. However, that may again differ according to your level in a company ladder, family size or a fact, if you own a real estate in your home country or not. Some corporations provide their assignees with a given allowance to finance the rent, others will only pay the difference between the cost of rent in Germany and your home country.
Some other companies offer their employees free housing, especially in cases when you are sent abroad for a short-term project assignment. This can be either a hotel room, suite, services apartment or a company owned property.
Unless you are sent for a single status assignment, your family will be relocated with you to Germany. Most of the companies pay for the children’s education, however not necessarily for pre-school or university. Education of your children in an international school can account for up to 50% of your annual net salary so it’s quite important to understand, which costs are covered by your corporation.
Similarly, in most cases you and your family are eligible for a language classes, nevertheless some companies provide solely on-line courses or limit face-to-face lessons to certain amount of hours.
Regardless, if you were entitled to a company car in your home country or not, most companies provide additional benefits for expatriates on assignments, which in most cases is a car. Find out if your spouse can expect a vehicle as well or at least a discount on a lease rates.
Apart from all the allowances and benefits, as a registered citizen of Germany, you are entitled to some German Social Aid Payments e.g. child allowance (Kindergeld). You can apply for monthly payments starting from the date of residency registration and this allowance is not connected to your level of income. If you happen to get a baby in Germany, your spouse/partner is entitled to Parental Allowance (Elterngeld), even if she has never worked in Germany before.