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When it comes to international employee assignments, it is not only the salary that is relevant in many companies, but above all the assignment package. This overall package is crucial for budget and cost planning, as it includes additional benefits that vary in cost depending on the destination country, involve administrative effort, and may have tax and social security implications. At the same time, allowances are the subject of most individual decisions, as employees' life situations, family circumstances, and expectations vary greatly. If benefits are not regulated systematically, they have to be renegotiated for each assignment. This creates unnecessary effort that is difficult to reflect in the budget.
In practice, there are three different models for defining assignment packages. The models differ less in terms of the basic financial aspects and more in terms of how decisions are made, documented, and implemented consistently across multiple cases.
Recurring issues such as accommodation, school fees, home leave, health insurance, or support for partners quickly reveal whether a company follows a consistent model or has to make many individual decisions. This makes a noticeable difference for HR and finance, because costs can only be reliably planned if benefits are promised to employees within the framework of a transparent system.
Basic models for cost and budget control
1. Ad hoc decisions on a case-by-case basis
With this approach, assignment packages are negotiated individually. This is particularly common when a company only has a few assignments per year or when C-level positions are involved. The advantage of the ad hoc model is its flexibility. The package can be tailored to the specific situation, for example, in the case of special requirements in the destination country, tight deadlines, or family commitments that are not covered by a standard solution.
The disadvantages usually only become apparent after a certain period of time. As soon as several cases become comparable, discussions about equal treatment arise. Benefits that have been approved once are used as an expectation in the next case. The business also begins to make commitments in the context of recruitment or project planning that can hardly be revoked later.
This creates additional work for HR because each decision leads to new clarifications, must be clearly documented, and requires adjustments to payroll. From a budget and cost planning perspective, the package often only becomes fully visible once the essential commitments have already been made.
2. Structured policy with fixed benefits
This model works with defined policies depending on the type of assignment (e.g., short-term, long-term, or local plus). The policy specifies the conditions that apply (e.g., for accompanying family members) and the benefits that are provided depending on the assignment category. In addition, upper limits for benefits are often defined (e.g., for housing or school costs), and basic standards are established (e.g., tax protection vs. tax equalization).
This standardizes recurring benefits, makes internal processes more efficient, and increases comparability between different cases. Coordination with payroll and finance also becomes easier because benefits are more likely to be the same and the process is recurring. This approach is helpful for budget and cost planning because the essential benefit components are determined in advance. The disadvantage is that fixed packages rarely suit all situations. Employees receive benefits they do not need, while other benefits that would actually be relevant in specific cases are missing. In practice, this leads to exceptions and, in turn, to decisions on a case-by-case basis. As soon as a company approves many exceptions, the package model loses some of its effectiveness. This is particularly evident in the areas of housing, schooling, and home leave, where even small deviations can have a significant impact on costs.
3. Structured policy with cafeteria model
The cafeteria model establishes a binding framework within which employees can select benefits. The company defines which benefits are available and how they can be obtained. This eliminates the need for time-consuming individual decisions and creates a basic system that allows employees to make appropriate choices.
Practice shows that this often leads to greater acceptance because employees can choose benefits that suit their personal situation, while unnecessary benefits are eliminated.
A cafeteria model works particularly well when the framework is clearly defined and the options are designed in such a way that the tax and social security implications are known to all parties involved. In order to achieve real simplification and cost transparency, the way in which the selected benefits are administered is also crucial.
A housing budget or school costs require different procedures than a lump-sum gross allowance for living abroad. If the benefit components are insufficiently defined, the complexity shifts to implementation. This means that the cafeteria model is only sustainable if the benefits can be reliably processed via payroll, providers, and accounting systems, thus ensuring that budgets remain traceable even during their ongoing use.
Exception processes for international employee assignments
Exceptions will occur in almost all companies when it comes to international employee assignments. However, the decisive factor here is whether they are handled in a structured manner or arise as spontaneous goodwill solutions. Without a regulated process, commitments are made that are later difficult to trace, perceived as unfair, or simply expensive.
This is particularly sensitive for budget and cost planning, because many exceptions arise precisely in areas that are costly (e.g., housing, schooling, home leaves, or partner support).
A functioning exception process is, therefore, based on comprehensible criteria and clear decision-making paths. Typical reasons include the level of safety in the destination country, medical circumstances, the availability of suitable schools, special requirements of the role, or recruitment situations in which the company is not competitive without additional benefits.
It is also crucial to determine who is authorized to make decisions up to what budget amount, what documents are required, and how the impact on the budget is documented. Even without detailed figures, it must be clear whether an exception is a one-time occurrence or whether it will increase the cost of the assignment over months and years.
Conclusion
Originally published by Linkedin
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
