Terrie's Job Tips -- Negotiating Initial Terms and Conditions: Part Four: The High End – Foreign Hires

By far the most entertaining side of negotiating benefits is for foreign hires coming in as expatriate managers (“expats”). These people are generally already well advanced in their careers and typically occupy CEO and director positions. They are dispatched by head office to fill an oversight and parent company representation role, and by virtue of the high profile of these people, status and comfort figure high in the remuneration package, as does tax work-arounds.

Compared to most of us, the world of the expat is rarified air. I once heard from a famous American company that while executives on posting from the parent company only drew salaries of JPY20m or so, the perks added on, quickly drove the price of a foreign executive up to JPY50m-JPY60m. No wonder foreign firms try to keep their head office secondees to a minimum. You can hire a lot of people for JPY30m!

Let’s look at some of the more common perks for the top 1% of the foreign workforce. I’ll make my usual “waiver” statement here and say that I am not a tax expert and you should get professional advice if you decide to follow up on any of these items.

Nannies and maids. Most foreign executives come into Japan either on foreign investment manager or intracompany transfers visas. The official line by the government seems to be that such people are generally married and with kids, and both they and their spouses are unlikely to speak Japanese. Thus, in order to reduce non-tariff trade barriers, they are allowed to employ foreign nannies and housemaids.

While this may seem a perk for the rich, dinner parties with servants tending to the guests come to mind, in fact, for couples where both parents work it can be quite a boon to have someone who speaks the family’s own language help look after the kids and clean the house. Further, a spouse recovering from childbirth will definitely need help in a foreign country with housework.

Most expat nannies and maids in Japan are from the Philippines, with a smattering from other countries. These people are typically hired as employees of the company the executive is working for. As employees, they are effectively merged into general costs of the company and in effect are not a taxable benefit for the executive.

Apartments. Most foreign multinationals (MNFCs) provide housing for their staff. Just how much they’ll pay depends on the status of the person. For a junior manager, the rate will be around JPY250,000-JPY500,000 per month. Married couples will generally get the higher end of the range and singles the lower end. Senior managers can expect an apartment of around JPY500,000-JPY800,000, and top-level people an apartment or detached house costing around JPY1m-JPY1.5m per month. Don’t forget, too, the 6-month prepayment needed to move in. If this seems like it’s a lot, it is, so some companies actually buy their own houses in Tokyo, for use by the ongoing cycle of senior executives. The cost of an apartment is generally only partially tax-deductible, and if it’s a luxury apartment, the premises are declared a home office for the executive.

Moving Allowances. This is an easy consideration for MNFCs to give their foreign executives. Most companies will pay for shipping of personal effects and furniture to Japan and give the employee a fixed budget for that person to find the cost-efficient way to move themselves around. As an amusing anecdote, I was once told that a British company allowed shipping according to the executive’s status. They would give a 20’ container for junior staff and a 40’ container for more senior ones. Since shipping takes time, companies will usually ante up for temporary accommodation and furniture until the personal effects arrive. These expenses are all non-taxed benefits for the executive.

Health and Pension. While health care in Japan is world class, some MNFCs give their more senior staff access to top private clinics. This is particularly true of executives with known health problems, such as heart trouble. Several high-end private hospitals here in Japan that executives should know about are Kameda Hospital out in Chiba and Saint Luke's in Tsukiji.

Perhaps more than health care, pensions are probably a bigger worry for an international executive. While Japan has pension matching agreements with the USA and 4-5 other countries, for expats from other countries the pension payments they make in Japan have no contributory effect to the national pension programs in their own home countries. This is a highly unfair aspect of the life of an international worker and most MNFCs therefore provide access to a private pension plan that ensures that the executive is not disadvantaged. Clearly this is a non-tariff trade barrier for foreign firms sending executives to work in Japan though, and I believe that the government needs to do more to promote bilateral pension agreements – just as they have done quite adequately with tax so far.