Essential for recruitment and retention in locations with challenging living conditions, Lauren Smith explores methodology and policy issues related to this costly allowance.

All expatriates, no matter where they are posted, have to make some adjustment to life in an unfamiliar environment, and all members of an expatriate’s family will be affected by the move. The spouse and family are integral parts of a global assignment and must be given special consideration. Because each city and each country in the world has unique characteristics, cultures, and charm, the global move requires the ultimate in patience and adaptability.

The expatriate family may experience stress, frustration, anxiety, and considerable disturbance during an assignment, especially when living conditions in the host country differ from those at home. The hardship allowance is paid in recognition of these difficulties. According to the 2007 Expatriate Salary Management Survey, conducted by ECA International, New York, NY, nearly all companies pay a hardship allowance in certain locations.

There are many organisations that provide hardship tables that note their recommended allowance by location. One of the most frequently used providers within the United States is the U.S. State Department (DOS). DOS data should be scrutinised for a few reasons:

• The formula used to generate hardship recommendations is tailored to government workers and does not consider conditions applicable to employees working for commercial or charitable enterprises. In some locations abroad, U.S. government civilian employees have access to military or post commissaries, duty-free imports, and use of military mail and medical facilities. If these benefits were not available to employees, the hardship recommendation may be different.
• Other factors, such as the quality of housing occupied by government employees, also could affect the post differential level.
• Questionnaire reports are required to be updated by posts with established differentials every two years. Voluntary reports may be submitted by any post at any time. Consequently, some locations are surveyed less often than others.
• The hardship calculated by DOS is, by definition, compensation for living conditions that differ substantially from those in the continental United States. Thus, the global use of these tables may not be justifiable.

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