Expatriates assigned to a foreign location are faced with many decisions as they embark on their new experience. One of those decisions is how they will get to work each day. Transportation impacts several factors, including the commute time, work schedule, costs, local infrastructure, and safety. The options that exist in someone’s home location may not be the same options available in their host location, and the associated costs of those options may be very different.
In a recent pulse survey conducted by Aires, response data shows 79% of companies provide some level of assistance with host country transportation. Assistance with the mode of transportation and associated on-going costs are offered and covered in a variety of ways.
The majority of companies (86%) cover the costs of transportation in the host location through a cash allowance. The cash allowance is intended to cover the majority of transportation expenses and allows the expatriate to elect how to use the funds (e.g., public transportation, rental vehicle, etc.). It is important to note that the allowance is commonly based on one vehicle regardless of family size.
It can be challenging for employers to determine an appropriate cash allowance – trying to balance paying enough to help offset additional costs versus paying too much and creating a higher expense for the company – all while maintaining parity. There are multiple approaches to calculating the allowance, but the majority of companies (96%) pay this out on a monthly basis. Trends regarding transportation allowances have remained relatively unchanged over recent years.
REIMBURSEMENT OF COSTS
As an alternative to a transportation allowance, a smaller portion of companies opt for the reimbursement of some (or all) of the actual costs incurred. Similar to the transportation allowance, reimbursement is commonly done on a monthly basis and costs are limited to one vehicle. Items commonly considered for reimbursement include but are not limited to monthly lease/rental costs, insurance, gasoline/petrol, parking, regular maintenance, and emergency repairs.
A company may be in a position to provide an expatriate with a company-owned vehicle instead of reimbursing costs or providing a transportation allowance. Employers are more likely to offer company-owned vehicles to expatriates only in specific locations or on a case-by-case basis. Determining who is entitled to a company/fleet is often based on employment level, with only those in a qualifying position being offered a vehicle. As in both the case of the reimbursement of costs and the transportation allowance, only one company/fleet vehicle is provided. In addition to the monthly costs of the vehicle and similar to those items covered under the reimbursement of costs option, companies will also cover the costs of insurance, gasoline/petrol, parking/tolls and regular or emergency maintenance/repairs.
Many major cities have well-developed public transit systems, making it convenient to commute and travel within the city without the need for an automobile. Approximately 55% of companies state that public transportation is expected to be used when available and in major metropolitan locations such as London, Singapore, Tokyo, New York City, and Hong Kong.
Where public transportation is feasible, employers most often pay a cash allowance to cover the expenses, while a smaller portion reimburse expenses. Public transportation, when available and reliable, is most often the most economic approach to expatriate transportation.
CAR AND DRIVER
For those expatriates assigned to locations considered to be challenging, have dangerous driving conditions, or if there are safety and security concerns, a car and driver may be provided. Given the conditions in some locations, a local, experienced driver is recommended to navigate the infrastructure and to ensure safety. The benefit may be provided for a limited time to allow the expatriate to acclimate to the host location infrastructure and local driving laws/regulations or for the length of the assignment if safety and security are a concern. Locations where the provision of a car and driver are most often provided include China, India, Thailand, Indonesia, Philippines, Vietnam, and Nigeria. We sometimes also see this benefit provided in locations such as Brazil, Mexico, Russia, South Africa, Singapore, and Trinidad.
Finally, the talk of expatriate transportation often leads to the question, “What do I do with my current vehicles? Can I bring them to my host location?” Most employers will not cover the costs associated with shipping and importing vehicles to the host assignment location. In addition to the high costs of transporting the vehicles, there may be challenges and additional costs associated with high duties/taxes, vehicle compliance/regulations in the host country, and local driving laws/regulations. In order to assist employees with the disposal of their current vehicle(s) in the home location, 64% of companies offer an auto loss-on-sale benefit, while 53% offer an auto lease breakage benefit. Additionally, 78% of companies offer these benefits for up to two vehicles, most often capped at $2,500 per vehicle with appropriate documentation.
It is important to note that there is no single, one-size-fits-all provision that covers every host country and situation. While most often companies provide a transportation allowance, there are several ways to determine the value of the allowance as well as several options outside of the allowance approach. Most often, expatriate transportation benefits are determined by the host location, the level/position of the employee, or a combination of these criteria. Mobility policies are commonly written with these factors in mind and allow companies to determine the best approach for the host location and expatriate.