How Do “Expat Lite” Programs Manage to Cut Costs? “Expat lite” refers to a reduced version of the traditional expatriate balance sheet compensation approach, which maintains the assignee’s standard of living throughout the assignment (with the exception of any incentives the employer decides to provide). The traditional full expatriate package – base pay, premiums, a wide array of allowances, and other perquisites (for example, a company car) – generally costs the company about 2.5 times the individual’s annual base salary. In comparison, “expat lite” packages may run higher as a multiple of base pay, but they significantly lower the overall cost of an individual assignment. At the same time, administering “expat lite” packages may be simpler than placing assignees on host-based compensation, as with the Local Plus approach. This cost-reducing impact of “expat lite” can be substantial if the company has a large expatriate population for which this type of package is appropriate. To that point, management often considers the following employee types eligible for a reduced assignee pay package: Employees who relocate abroad on a developmental assignment (typically younger and often single individuals). Certain categories of employees, such as those whose job does not involve either bringing in a lot of revenue or high risk. Career management/leadership development was ranked as the second most important reason for international assignments by respondents to Mercer’s 2012 Worldwide Survey of International Assignment Policies and Practices, with 43% stating they send employees abroad for this purpose. And 49% of companies expected this type of deployments to increase in the near future. Some employers already have terms and conditions in place for career management / leadership development (19%) and training (17%) assignments. An interesting contrast exists between employers headquartered in the North America (where 15% have policies for career management/leadership development assignments and 10% for training assignments) and those in the rest of the world, particularly Europe, Middle East and Africa (21% and 23%%) and Latin America (33% and 25%). A likely reason for the difference is the geographical proximity of host locations in the EMEA and Latin American regions, making it easier (and cheaper) to allow a younger employee to obtain international experience within the region. How “Expat Lite” Works In line with the traditional balance sheet approach, “expat lite” follows the overall “equalization” philosophy. The difference is visible in the lower premiums and allowances, for example: Since the assignment experience itself is the incentive for the individual to go abroad, a traditional foreign service premium is usually unnecessary. If the employer pays a premium, an alternative is to cap it. Either way, a hardship premium might still be appropriate, depending on the severity of the local host conditions, but at a reduced percentage of base pay. Host housing accommodations may be smaller and located in more moderately-priced neighborhoods than those for the typical expatriate. The company may also cut back on assistance for the sale or property management of the home-country residence; however, this aspect may be unnecessary for younger, single, early-career assignees who are not homeowners. Another option is to reduce allowable limits for furniture and household shipping or periods of temporary housing. Cost-effective cost-of-living indices may be appropriate, depending on the availability of high-quality goods and services in the host location. An employer might also cap the goods and services differential that bridges the gap between home and host prices. If the assignee is single, education allowances are unnecessary. That said, if children accompany the expatriate, and public schools are adequate, the company might consider restricting education assistance to local schools, letting the family pay for private education if they so desire. When implementing a reduced expatriate package, the company’s culture and overall budget play key roles. What one company might reduce or eliminate, another might find necessary. “Expat lite” programs can work on behalf of both the company and the employee – strategic goals are achieved, while the assignee earns international experience.