Tuesday, January 24, 2006

The End to the Expat Package

I wonder if Shane Solomon, the Australian picked to be the new chief executive of the Hong Kong Hospital Authority, was hired under “local terms,” or whether a handsome expat package was need to entice him to move from Melbourne to Hong Kong.

The news articles announcing Solomon’s appointment on January 11 didn’t provide details about his compensation beyond noting that he would start his new job on a three-year contract at an annual salary of about $HK4 million a year, or roughly the equivalent of about half a million U.S. dollars.

I imagine that at least they will pay his moving expenses.

Of course, half a million a year should be plenty to live comfortably even in Hong Kong, with its enormously expensive real estate, without the added inducements of a housing allowance, paid school fees and home leave, club memberships – the basic elements of what’s known as the “expat package.”

The issue is relevant since Solomon’s appointment comes at a time when Hong Kong is in the middle of a debate over whether providing such goodies to foreign workers constitutes racial discrimination. The Legislative Council is soon to consider a government proposal to combat racial discrimination.

The proposed ordinance requires employers to justify their offers of generous expat packages to foreign employees by proving that the recruit has expertise not readily available in Hong Kong. It would also flatly bar permanent residents from receiving expat benefits (foreigners can apply for permanent residency after seven years).

Business groups have already blasted the new law as being a regulatory nightmare. The ban on permanent residents seems to have generated less controversy, although some note that it might discriminate against Hong Kong natives who go abroad for many years to study before returning home (assuming they are offered expat benefits.)

Among the large contingent of foreigners here, there has always been a clear class division between those hired under local terms (basically salary alone and maybe health), and expat terms. The former were mostly journalists, missionaries, etc, and the latter with cushy expat packages usually the local managers of multinationals transferred to Hong Kong by their head office.

The general idea is that the district manager of Midwest Amalgamated and his family has to be assured that the lifestyle they were accustomed to in Des Moines will not be lowered by moving to Hong Kong. Thus an allowance large enough to cover, say, a 2,000 sqf apartment, help in paying school fees, membership in the American Club and so on.

I would guess that business interests will probably succeed in softening the language in the ordinance. After all, if you want to hire somebody from abroad, you still have to convince the Immigration Department that local candidates are not available before a work permit is issued. But in the long run, the expat package is probably on the way out.

Even before the new law was proposed, some multinationals were beginning to balk at the expense of sending foreign managers to Hong Kong. This was especially true in the aftermath of the Asian Financial Crisis and Hong Kong’s long recession. The British retailer Marks & Spencer decided to save on costs by hiring local rather than expat managers.

The Solomon case is unusual in that he is not heading some multinational but has been hired by the Hong Kong government to manage the publicly financed hospital system. In that respect the appointment bucks the trend toward “localization” that began in the early 1980s when Hong Kong began its transition to reunification with the mainland.

The Hospital Authority, which employs some 50,000 people, has been in trouble for years. Its budget deficit is ballooning, and its morale is still recovering from the trauma of the SARS epidemic. Shortly after the handover in 1997, some highly publicized medical procedure snafus undermined the new post-colonial administration’s reputation and popularity from the start.

It appears that the government decided it needs somebody outside the system to clean house and deliberatly scoured the world for the best administrative talent, eventually settling on Solomon, who is executive director of Metropolitan Health and Aged Care Services for the state of Victoria.

Like every other country, Hong Kong has its share of xenophobes. Many residents also harbor some well-engrained anti-colonial attitudes. But these impulses are reasonably contained. As the South China Morning Post explained:

“Eight years after the handover, it should be regarded as a positive sign for Hong Kong that Mr. Solomon’s appointment has not sparked any xenophobic reaction. He was chosen after a world-wide recruitment exercise, which netted both local and overseas candidates.

“The choice has prompted surprise, but neither the medical and para-medical professions nor patient groups have expressed opposition to having a non-local and non-doctor as leader of the public health system. That is the best testimony to the community’s open attitude towards foreign talent.”

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April 18, 2006 at 11:03 PM  

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