Relocating to a new city can be an exciting yet challenging endeavor, and when it comes to moving to a vibrant metropolis like Hong Kong, it’s essential to understand the intricacies of relocation packages. These packages are designed to assist employees and their families in making a smooth transition to their new home in Hong Kong.
Whether individuals are starting a new job or relocating for their current job, knowing how to negotiate a relocation package is essential. Moving is stressful enough and becomes even more stressful when employees are moving for work and when this move also includes their family.
Relocating for work usually comes with a lot of emotion, fear, challenge, and excitement. Since relocating for jobs is a difficult task, it is important that employees consider the important aspects of a relocation package.
Aspects to consider before relocating
Relocating for a job is an opportunity to make improvements in your life. Knowing how to negotiate a relocation package is helpful when preparing for your move. When you negotiate, you address your needs and what is important to you.
For example, some needs that might be important to you when relocating may include:
- A higher mortgage/rent cost allowance;
- An increase in salary;
- Subsidies for a higher cost of living for you and your family; or
- Assistance in finding a reputable school for your children.
How to approach the negotiation of relocation packages
In order to fully prepare yourself to negotiate a good relocation package, you should be fully aware of what a typical relocation package includes. It is wise to ask your employer’s HR department if they have a relocation policy and what standard benefits they offer.
In addition to speaking with the HR business partner, you should:
- Enquire with professionals in the industry if they have had similar relocation experiences with their jobs and inquire about their relocation packages; and
- Seek professional advice and consultation on relocation services.
Some businesses appreciate it when their employees suggest a package to benefit both sides. Your employer will be more likely to agree to your suggested relocation package if it benefits them as well.
Expat vs local packages
Remuneration packages for both local and expatriate employees in Hong Kong can vary based on factors such as the industry, job level, qualifications, experience, and the organisation itself. However, traditionally, expatriate packages tend to be more comprehensive and include additional benefits compared to local packages:
Local Remuneration Packages:
- Base Salary: Local employees usually receive a fixed monthly salary based on their role, qualifications, and experience. The overall compensation can vary widely depending on the industry and level of responsibility.
- Mandatory Benefits: Hong Kong has a mandatory contribution scheme called the Mandatory Provident Fund (MPF), where both the employee and employer contribute a percentage of 5% of the employee’s salary to a retirement fund.
- Bonuses: Aside from sign-on bonuses, many companies in Hong Kong offer discretionary bonuses based on individual and company performance. Often these are in the form of a “Chinese New Year Bonus” or a “13th month bonus”. These bonuses can be determined by factors such as annual appraisals, profitability, and overall company performance.
- Medical Insurance: Employers may provide medical insurance coverage for local employees, although the extent of coverage may vary amongst companies. Considerations to take into account include whether such medical insurance covers your spouse and dependents, and whether there is any life assurance policies in place for both you, your spouse and dependents. Many medical insurance plans also cover dental care, maternity benefits, rehabilitation or traditional Chinese medicine treatments. Coverage can be limited to Hong Kong, span to different countries or cover the insured (and the spouse/family) globally.
Expat Remuneration Packages:
- Base Salary: Expatriate employees in most cases receive a higher base salary compared to their local counterparts to compensate for the cost of living, relocation expenses, and the adjustment to a new environment. This higher salary is sometimes referred to as a “hardship allowance.”
- Housing Allowance: Expatriates are often provided with a housing allowance or accommodation by their employer. The allowance can cover rent, utilities, and other related expenses.
- Education Allowance: If the expatriate employee has children, companies may offer an education allowance to cover the costs of international schools, which can be quite expensive in Hong Kong. Many international schools in Hong Kong now often require that the parents of new students pay a debenture on admission. Parents can sometimes buy a higher priced debenture before beginning the admissions process and earn some priority in the selection system.
- Relocation Assistance: Employers may provide financial assistance to cover relocation expenses, such as shipping personal belongings, temporary accommodation, and flights for the employee and their family.
- Tax Equalisation and MPF Exemption: Some companies offer tax equalisation or tax protection policies to ensure that expatriate employees do not bear a higher tax burden due to international assignments. It is also important to note that if the relocating expat is a member of a retirement scheme of a place outside Hong Kong, they are exempt from requirements to be enrolled into a MPF scheme in Hong Kong. Relocating employees should also clarify with their employer if the employer (and/or the employee) is to continue contributing to the pension fund of the relocating employee in their country of origin.
It is worth to note that there are instances where expats on expat remuneration packages transition to a local remuneration package after a set amount of years of service. Under such circumstances it is common for employees and employers to re-negotiate the terms of the remuneration package upon such transition.
What employers can provide for relocation assistance cover to employees
Relocation assistance covers a variety of areas. It is vital to ensure that relocation packages offered include the following factors:
Accommodation
For relocating employees, it is common for relocation packages to include the following:
- Company Quarters: some companies may provide specified accommodation for the relocating employee and their families – under such circumstances, the lease of the accommodation will be taken out by the company instead of the employees themselves.
- Rental Reimbursements: Rental reimbursements take place where an employer reimburses the rent paid by an employee on his/her place of residence. This is afforded preferential tax treatment in Hong Kong and reduces the amount of income tax a relocating employee would be liable to pay in tax, if they are regarded as a tax resident in Hong Kong and not in their country of origin.
- Other Rental Allowances: companies often provide a set allowance amount for employees to be reimbursed after rent has been paid by the employee. An alternative that some companies offer may be allowances for relocating employees who have proceeded to purchase a property in Hong Kong and is paying off a mortgage.
- Full Rental Reimbursement: some companies may offer full reimbursement of rent paid by the employee for their chosen residence in Hong Kong.
Transportation and shipment of personal goods
Employers often cover transportation costs if you need to travel back and forth from your current location to Hong Kong. These may be part of the travel benefits provided as per company policy which may include allowances for flights to and from your originating country to Hong Kong, once or twice a year.
In addition, employers often cover the expense of moving belongings and furniture to the new residence of the relocating employee.
Storage of personal goods
If you have not yet rented a residence in Hong Kong, employers will often cover the cost to rent a storage unit for storage of personal belongings and furniture for the time being. It is prudent that such details are negotiated with employers by employees, as some employers will not cover this cost.
Visa and Immigration Support
Navigating the visa and immigration process can be daunting. Relocation packages often include guidance and support in obtaining the necessary work visas and permits for both the employee and their dependents. Often, companies covers the costs of obtaining such work visas for you and your dependents.
Tax Clearance
When relocating outside of Hong Kong and with reference to the guide published by the Inland Revenue Department (“IRD”), foreigners leaving Hong Kong will need to obtain a tax clearance. Departing employees need to file a form at least one month before their intended departure date. The employer of the individual is also required to give notification to the IRD of the impending departure of the employee at least one month before the expected departure date. At the same time, the employer must also temporarily withhold payments of salaries and all other moneys to that employee until the IRD issues a “letter of release”.
Failure to comply with such requirements by the individual or the employer may result in penal actions.
Final Considerations
Relocation packages are not one-size-fits-all and can be negotiated based on individual circumstances. It is crucial to communicate your needs and expectations with your employer to ensure that the package adequately addresses your requirements.
Relocation packages may carry tax implications, both in the home country and Hong Kong. Understanding the tax obligations and seeking professional advice can help avoid any surprises.
Some companies may offer temporary relocation packages, which provide benefits for a fixed period. Other companies may offer permanent relocation packages, providing long-term support. It is important to clarify the duration and terms of the package before making any decisions.
Relocation packages offer a range of benefits and support to ensure a smooth transition and help employees settle into their new environment. Understanding the key features and considerations of relocation packages allows individuals to make informed decisions and negotiate packages that cater to their specific needs.
As the Hong Kong SAR Government continues to implement policies to try and attract talent to Hong Kong through tax incentives and visa programs, the territory’s “brain drain” will hopefully slow down as well.
If you require assistance or have any query related to relocation, please do not hesitate to contact our Employment & Business Immigration team.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
