The Asia Chronicles: EXPAT / COLA Allowances - Movin’ on Up

Ed. note: This post is authored by the Asia Recruiting Team at Kinney Recruiting, sponsor of the Asia Chronicles. Kinney has made more placements of U.S. associates and partners in Asia than any other firm in the past five years. You can reach them by email: asia at kinneyrecruiting dot com.

Please note that Robert Kinney will be in Hong Kong during the week of Sept. 25 and the Kinney Recruiting team will be in HK the following week as well. Alexis Lamb is permanently based in HK of course. We were was also in HK last week.

Check out our daily blog at theasiachronicles.com. Recent posts there include: “IPO’s (And Legal Work): From Gloom to Vroom”; “Hiring Spree in HK / China Fund Formation“; and “Korea – The Next Frontier – But When?“.

As we predicted in November, 2010, a COLA/Expat package of US$80,000 (annually) has become the standard in Hong Kong and China, up from $60,000. Please feel free to check out this link to see some of our recent articles on expat / cola allowances in Asia: http://www.theasiachronicles.com/archives/category/expat-packages

Most US and UK firms in Asia get us involved when they are considering any changes to their US associate expat / cola benefits package. In some cases we have even helped draft expat benefits policies for firm clients opening new offices in Asia. The reasons are quite simple: a) the hiring partners at these firms know us well after years of working together; b) they know we see more offer letters than anyone else in the market, from firms they consider relevant to them re associate recruiting; and c) unlike in other overseas markets (such as Moscow and Dubai for example), most US and UK firms in Asia tend to not share this information with anyone (recruiters, candidates or other firms), except when they provide offer letters. Thus, we have been asked for advice in this area from firms in Asia for years, going back to 2005. Without any doubt there is not any better source than our Kinney Asia team for major law firm expat / cola allowances in Asia.

With that said, we of course are never going to publish any specific firm’s expat / cola allowance information. In our posts on expat /cola allowances, we are only going to divulge general market info, without naming firms. However, of course we do provide to our associate candidate clients all the details on specific firms’ expat / cola policies that we cannot publish here. Recently, we are seeing quite an uptick in the market regarding these allowances. For example, in the past few months a magic circle firm has moved from $65,000 to $85,000 and three more Wall Street firms have moved from an allowance in the $60’000’s to one in the $80,000′s. Here is the current breakdown of expat / cola allowances above $80,000 at the top end of the market in HK / China, compared to 18 months ago (these numbers are for associates with no children as some firms pay substantially higher allowances for associates with children):

US$90,000 and above
- There are currently three US firms (although one of these firms has tax equalization on the base, so the overall take home pay is not top market). Eighteen months ago there were two firms at this level.

US$85,000
- There are currently three firms at this level, one UK firm and two US firms.
18 months ago there were no firms at this level

US$80,000
- There are currently four US firms at this level.
Eighteen months ago there was one US firm at this level.

Thus, in early 2010, only three US or UK firms in HK / China were paying $80,000 or higher expat / cola allowances for all their US associates with no children. Today that number has increased to ten firms. Further, we have seen offer letters this year with US80,000 or higher allowances from additional firms, not among the above ten firms. Although it is not the approach of the majority of firms in the market, a number of firms do determine expat / cola on a case by case basis, rather than a uniform amount for all their US associates. Some of these firms have been offering US$80,000 or higher allowances recently as well (although not to all of their US associate offerees).

Most of the top Wall Street firms are still below $80,000, but we expect that to change over the next 6 to 12 months. Of the above ten firms, only four are Wall Street firms. Three other Wall Street firms offer expat / cola allowances in the $70,000′s and most of the rest are in the mid $60,000′s. It is only a matter of time before most of these firms will raise their allowances to the $80,000’s and a few of these firms are already in serious internal discussions to do just that.

One significant change in the market in the past 18 months is that the very top market expat / cola allowances are not coming from Wall Street firms, but instead several US firms not based in NYC as well as one magic circle firm. A few of the top Wall Street firms that had for years been paying top five allowances in the HK / China market are now no longer even in the top 15 in allowance amount. Further, due to some US firms offering sometimes very high allowances, on a case by case basis, it has become common for Wall Street firm offers to be lower than other firms they may be competing with for a particular candidate.

A couple of Wall Street firms raised their allowance from the $60,000’s to the $70,000’s in the past year and, anecdotally, we know that it took a lot of internal discussion and a fairly long approval process from NYC senior management to make this happen. Most likely those firms will raise to the $80,000’s within the next year, but these firms’ partners in HK / China have to go through a process to get such a raise approved and it can take time. On the other hand, some US firms give their senior partners in Asia a lot of discretion in raising or lowering (rarely happens even in down market) expat / cola allowances and at those firms the process can be as little as a few days from HK / China office request to US senior management approval. There are some US firms that will be in the $80,000’s soon, but are simply waiting for US senior management to approve the raise.

There are still several major US firms that do not pay any allowances to US associates in HK / China. Those firms are having a difficult time recruiting and retaining the top US associate talent. In some cases, these firms provide large signing bonuses to especially sought-after offerees, in order to help counter their firm’s strict no expat / cola allowance policy.

About half of US and UK firms which pay competitive housing / cola in the region will also provide substantial additional allowances for US associates with children. These additions can range from $10,000 to as much as $80,000, depending on the firm. For example, one of our mid level US associate candidates, married with one child, was recently offered an expat / cola allowance of US$125,000 (at a firm that offers US$95,000 for unmarried associates with no children). Another of our mid-level candidates with two children was recently offered US$105,000 (at a firm that figures out expat / cola on case by case, with associates with no children typically receiving around US$75,000 for their allowance). The most generous of firms in this area is a US firm that offers an additional $20,000 for one child and then another additional $55,000 for a 2nd child. Most firms that do offer additional allowances for associates with children limit the increase to $10,000 or $20,000 per child.

Also, a growing minority (but still a small minority) of top US firms also provide direct tuition reimbursement assistance for associates with school aged children. This is important to associates with multiple children in school (especially when additional benefits based on size of family are not offered) because the cost can easily be $30,000 per child per year. A handful of firms provide full reimbursement, but most firms that do offer tuition reimbursement limit it to $10,000 reimbursement per year per child. We believe that this $10,000 reimbursement will catch on and eventually be offered by most firms (although it may take a couple of years for a majority to offer this). Keep in mind that the handful of firms in HK / China which offer their housing / cola allowances on a case-by-case basis (rather than have a set policy for a certain allowance across the board for all US associates) of course take into account whether an associate has children.

A growing trend in the market is more US and UK firms offering their US associates “home leave” benefit on top of the expat / cola allowance. This benefit usually consists of economy or business class tickets for the immediate family to anywhere in the world (or in some cases, limited to the associate’s home country or US). In other instances it is provided as a cash allowance. Less than 50% of firms offer home leave assistance, but it is a growing practice.

In Hong Kong and China, there is and will be for the foreseeable future fierce competition among peer firms for the very best talent available and the top US associate talent will expect a competitive expat / cola allowance. While it is very rare that an associate candidate will choose one firm over another for less than a $20,000 difference in expat / cola, a larger difference will usually be influential in a decision.

If you would like more information on expat / cola allowances in HK / China, we encourage you to get in touch, preferably before you have passed your CV on to the last cold-caller who caught you in the office. We are always available at asia@kinneyrecruiting.com.