Host-Plus assignments have gained a reputation as a lower-cost alternative to home-based assignments, but are they as budget-friendly as they seem? Often, we assume that removing the tax equalization component of the assignment leads to immediate cost savings, but this is not entirely true. While they are indeed less costly than fully expatriate assignments, there are hidden expenses that organizations should be aware of.
Ongoing Allowances
One of the biggest drivers of cost in Host-Plus assignments is the ongoing "plus" allowances. As highlighted in our recent One-Way Transfers & Host-Plus webinar, these include benefits such as housing, education for children, and annual home leave. While these elements make Host-Plus assignments more appealing to employees, they quickly add up—especially when provided for the entire duration of the assignment! In fact, 48% of companies offer full housing support for the entire length of the assignment, making this a significant ongoing expense.
Tax Implications Aren't Negligible
Although Host-Plus assignments are not tax-equalized, they still have considerable tax-related costs. The webinar noted that employees typically receive grossed-up allowances to cover these taxes, which although are less than the full cost of a tax equalization, can still be quite substantial. Additionally, 57% of companies provide tax preparation support for the entire assignment, further increasing the overall cost.
Shadow Payroll and Administrative Costs
Beyond financial costs, many companies underestimate the administrative burden and time costs associated with Host-Plus assignments. Maintaining shadow payroll to ensure employees stay connected to their home country’s social security scheme is a common practice, but it adds complexity and cost to the process. According to AIRINC’s recent benchmark on “Host-Plus Assignments" report, 55% of companies make efforts to keep employees in the home retirement plan, which requires additional payroll management.
Is It Worth It?
While Host-Plus assignments can be a cost-effective way to temporarily deploy talent abroad, the hidden expenses can make them more expensive than anticipated. It's essential for organizations to conduct thorough cost estimates beforehand, considering all the ongoing allowances and administrative requirements.
Read the highlights of our recent benchmark surveys here. If you are with a corporate company, please contact us to receive a copy of the full survey report.
Download the highlights to learn why one-way transfers and host-plus assignments are being leveraged, as well as the key markers of these approaches, including:
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Determining compensation and benefits for one-way transfers and host-plus assignments
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Relocation support for the move to the new location
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On-going assistance in the destination location
Watch Again - Webinar: Top Trends in One-Way Transfers and Host-Plus Assignments
