Apart from Relocation Benefits and Expat Benefts, let’s look into common cash allowances offered to expats.
Common Expat Cash Allowances
- Hardship Allowance
- Housing Allowance
- Cost of Living Allowance / Goods and Services Differential Allowance
Hardship Allowance
Hardship Location is a place where expats might experience difficulty due to socio-political risk, environmental risk, health risk, etc.
If you’re being sent as an expat on-assignment to a country considered as a hardship location, then your employer may compensate for that by providing a Hardship Allowance.
It’s also a company’s way of to incentivize people to accept an offer to work temporarily in a hardship location.
This cash allowance is typically calculated as a percentage of your base pay.
Cost of Living Allowance (COLA)
Also known as Goods and Services Differential Allowance (GSDA).
COLA is provided when an expat is sent from a low cost location to a high cost location,
And when your salary is not adjusted to the high cost location market pay.
If there is a significant difference in the cost of living between your home country vs host country, it would be difficult for you to maintain the same lifestyle that you’re accustomed to.
To compensate for that loss of purchasing power, you may be given a Cost of Living Allowance.
For example: India to Germany
And Receiving India-based salary
But if you’re sent from low cost to high cost location,
And your salary is adapted to the high cost location market salary norms, you might not qualify to receive COLA.
For example: South Africa to UK
And Receiving UK-based salary
COLA is calculated based on a Cost of Living Index.
COLA Index is the relative difference in the cost of living between the home and host location.
I will not get too technical with the calculation here, but
You might want to check-out this helpful article from
Your Cost of Living Allowance is usually reviewed on a regular basis, and could be subject to increase or decrease quarterly / semi-annually / annually.
