Reader question: Negotiating your expat contract

I recently received a question from a reader asking for advice and insight on their upcoming move to Shenyang. I thought the question and response might be helpful for someone else as well, so with permission I’ve posted our correspondence. If you’re currently on expat assignment and have something else to add, I’d love for you to chime in on the subject in the comments. If you’re not yet an expat but also have questions, feel free to ask away and I or my fellow expats will try to fill in with what we’ve learned so far.

The more information we can share, the better off we’ll all be.

Reader question:

Hi. My husband and I just returned from a job interview in Shenyang. The company flew both of us over for a look-see and interview. We were there for 3 days. (I know, who goes all the way to China and stays for just 3 days?) The work would likely be in both Shenyang and Yingkou, or perhaps mainly in Yingkou. It would be a 2-3 year contract.

I’d appreciate any advice you’d like to share. My husband is supposed to let the company know what he wants for compensation and benefits. Are there benefits you’d recommend asking for? What about Chinese taxes? Are there employers who pay taxes for their employees? We saw that the marginal rate goes up to 45%, and then we would owe US taxes as well. I read in China Daily while we were there that foreign workers will now be covered by the Chinese social security, medical and unemployment insurance, to the tune of an additional 11% payroll deduction. That wouldn’t leave much for us!

We recognize the challenges we’d face living in China, and think that we can not just manage, but truly come to enjoy the adventure. I’ve enjoyed reading about your experiences, and look forward to having our own China stories to share.

My thoughts and suggestions:

LB and I finally got the chance to go through some of your questions (I have no idea about a lot of the details like taxes and stuff.) We had a few thoughts on the subject between us. Not sure how it works out with you, but we were pretty fortunate to be sent by an international company who has quite a few expats here already. It was NOT a perfect process by any means (get ready to be flabbergasted over and over… and make sure you throw any expectations you have out the window. You’ll be much better off for it.) but they do take care of us pretty well. Will you be working for a Chinese company as a foreign expert? Not sure how that will change the process, but it surely will. It is a different culture for sure. Make sure you get it all in writing, but realize even then, that doesn’t always mean a whole lot when you’re dealing with this culture. You’ll still have to ask for things even if they’re in the contract.

You’ll want to keep these things in mind at the very least.

Shenyang China Riverside Garden

1. Housing: Make sure they are providing you with housing. Most companies do. A budget of 15,000 – 20,000 RMB per month should be sufficient for a furnished apartment or, in some cases a townhouse, in a nice complex/neighborhood although that will likely vary a lot depending on what city you’re in. That will get you a very nice apartment in Shenyang.

Another option would be to negotiate a smaller monthly allowance for an unfurnished apartment plus a stipend for purchasing furniture or shipping your own furniture from the States. This was actually the option we chose, and I was really glad we did. It was great to be able to choose my own furniture and design my own home rather than feeling like I was living in someone else’s house. I will say that if it hadn’t been for the new Ikea in Shenyang though, I doubt this option would have worked out as well. Also, I don’t think this is very common in China. Most apartments come furnished, I believe, but it worked out really well for us.

Our company goes through a realty company who specializes in placing expats (We used KELT. There is alsoCentury 21 in Shenyang). It was a big help dealing with people who speak English and who’s job it is to take care of the lease, dealing with the landlord, getting your proper permits, etc. We also don’t deal with paying the rent at all. That is paid directly by the company. We do pay for utilities though. We’ve been here almost a year and still occasionally contact them with any issues we have with our apartment (like yesterday, when we woke up to no electricity). Our realtor has become a great friend who I call on for all kinds of questions and translating. She was indispensable in the beginning when we were just learning to function here.

If they do agree to pay for your housing, make sure you are able to pick your apartment, or at least see where it is they want to put you. The exact apartment. Most apartments are privately owned and one building can have several levels of quality. I would suggest negotiating a “housing allowance” and then shopping for your own place. To me, it is the most important part about making this place feel like home. Especially for you as the wife since you’ll be spending a lot of time there.

2. Car and driver: I’m not sure how you’ll work out working both in Yingkou and Shenyang but google maps says it is about 2.5 hours drive. If you’ll have to do a lot of commuting back and forth I would definitely make sure you are provided with a car and driver. Inside Shenyang, it is no problem getting around with the buses and plenty of taxis. We don’t have a car and do fine without it, but I think if you’ll be outside the city then you’ll need one.

3. Language lessons: You need to learn Chinese to really have a good experience here. It’s a difficult language and some people don’t bother learning it but I think you have a much less frustrating experience when you can break down the communication barrier even just a little. I would suggest asking for a set language budget or set number of hours of tutoring for both you and your husband. I think the companies I’ve heard of usually offer 100 hours.

4. Moving costs: Negotiate your shipping and moving costs. You’ll probably need at least an air freight container. They come in several sizes. Another option is a sea freight container. They are much larger and are typically used if you want to bring your furniture from home. They take much longer to arrive however.

5. Vacation time: This one has been a big issue for us. If you’re going to want to travel a lot (and there is so much to see in Asia!) make sure you have enough time to take off to do it. I think you need at least 20 days, probably 25 would be better.

6. Home flights: Will they pay for you to take a trip home once a year or twice a year? For both of you? If so, do you get extra days to compensate for the travel time or will you have to take vacation days? Something to think about considering it takes 3 days of traveling to get to the States and back.
(p.s. A trip to China in 3 days?? How in the world???)

7. Taxes: This is the one I’m not so sure about. You are responsible for taxes in both China and the US. You’ll definitely need to hire a professional to take care of all the taxes. I would make sure that is also paid for by the company. Most companies here take responsibility for paying the Chinese taxes. (I’m not sure about the China Social Security thing, haven’t heard anything about that.) Our company takes care of all the taxes here and our pay stays the same. They also offset the taxes in the US so that we pay the same as we would if we were still employed in the US. One other thing to remember is that all of the benefits they pay for such as your car and driver, your housing, etc. is considered taxable income by the US government even though it isn’t showing up in your bank account. Add it all up and that first tax bill will make your eyes pop out of your head.

8. Getting paid: You want to get paid in the US if possible. There are two ways it is done here. One company that I know of pays 75% of your income in the US and 25% in Chinese RMB. Even at 25% most people don’t spend that much and end up with lots of RMB left to change at the end. It is a real pain and quite difficult to change money back from RMB to US dollars. Our company pays 100% of our paycheck in to our US account and we then make a wire transfer (reimbursable at 1 per month) to our Chinese bank account in the amount we need. Either way works fine I think. Getting paid 100% in China is usually a huge hassle so I’ve heard.

Salary: Obviously it depends on the company, but generally, if you work as an expat for a foreign company you can expect your previous salary + 30-50% increase (b/c you have to live without Dunkin Donuts whole bean coffee and JIF peanut butter.) + cost of living adjustment + additional compensations listed above. I would say that most expats come to China for the money. But it is a GREAT experience even without the padding of the bank account!

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3 thoughts on “Reader question: Negotiating your expat contract

  1. on taxes if your there a year etc. (there are a few requirements but they are easy to meet) then you qualify for the expat tax break
    basically the first $92+k to $94K (close) you dont have to pay USA Fed Taxes on
    i changed my state of. res. from Ga. to Nevada before my move
    now i dont have a state tax burden and the first $ is fed tax free as well
    there are many companies that are in the USA that specialize in doing your taxes
    if anyone needs links let me know

    • I knew about the federal tax break, how did you go about finding out about GA? I’m in SC so it’s something we’re trying to figure out…

      • Ga or other…. if you change your state of residence just pick one that don’t have state income tax such as Nevada. They all have their requirements and each may vary. For Nevada rented an apartment for 3 months, changed my drivers license and registered to vote. then sent the Ga. Dept of Revenue a registered letter that i am no longer a resident of Ga but of Nevada. Then i am no longer required to pay. However if you own a house, land etc in S.C. it may complicate things to say you are not a resident any more unless you can get it set up as a vacation home etc. I don’t know the law for S.C. so you may need to see a tax lawyer or other official that knows.