How has the Covid-19 pandemic impacted location allowances?

It seems like a long time ago now, but it was just the second day of 2020 that the Location Ratings team at ECA first saw reports of a SARS-like condition emerging in Wuhan, China. There was nothing particularly unusual about this – we monitor a wide range of news sources and subscribe to a number of news feeds from security consultants, receiving many daily alerts and updates from all over the world. We regularly see reports on outbreaks of conditions like dengue fever or measles, occasionally Ebola and, rarer still, bubonic plague. So, it was another incident that we noted with interest, something to keep an eye on over the coming weeks and months. Of course, this outbreak would soon be identified as the new coronavirus with which we are now all too familiar, but at the time it was difficult to imagine the degree to which the world would be impacted over the coming year. 

Just how much the world was upended in 2020 is evident in the new location ratings scores and location allowances published by ECA in mid-November. It seems strange to see cities in Italy or France, to name just two of many potential examples, now warranting a location allowance (though whether an allowance is payable or not may depend on the home location of the assignee). However, to those who have been following pandemic developments, and the various restrictions implemented by governments around the world to control the spread of the virus, it will actually come as little surprise. These restrictions have varied considerably in terms of severity and therefore the location ratings scores for many places have been affected to varying extents. 

As the pandemic progressed, we identified three areas in our scoring methodology where expatriates were particularly feeling the impact of pandemic-related restrictions:

  External Isolation

Many countries completely shut their borders or banned international flights altogether, making it impossible for expatriates to leave or enter their host country, even in the case of an emergency. Though the number of these was considerably higher early in the pandemic there are still a sizable number of locations that have seen score increases in this section due to the ongoing lack of international connections. Australia is one such example; flights are available here, but only Australian or New Zealand permanent residents are currently allowed to enter the country.

  Recreation 

In terms of score increases, this is the section which has been most impacted by lockdowns and pandemic-related restrictions. We have seen a huge variety of approaches taken by authorities around the world in terms of which recreational facilities have been shut during lockdowns. The new scores here also represent a realistic assessment of the social activities that are now totally unavailable compared to those that can be reasonably continued online, or which can still be reasonably accessed despite capacity limits. Many European locations were under strict lockdown at the time of publication and therefore some cities which previously scored zero points here now receive around half of the twenty points available due to the lack of access to cinemas, gyms, museums, or children’s activities.

  Socio-Political Tensions 

There is a part of this assessment that looks at any restrictions on freedom of movement experienced by expatriates in the host country. Again, we have seen a huge number of variations on the degree to which freedom of movement around the country has been affected by pandemic-related measures. Argentina, for example, experienced a particularly extensive and draconian lockdown. If very strict and lengthy curfews are currently in force, or if movement between certain regions or cities within a country is banned, then this is taken into account in the new scores for socio-political tensions.

Which Location Ratings sections haven't changed?

Those locations seeing the largest score increases, in some cases moving that city into a higher location allowance band, are likely to have seen upward movement in one or more of these categories. Some people will reasonably ask why other sections of the scoring have not also seen pandemic-related increases. Perhaps the most obvious of these is the Health section. Part of the reason for not increasing health scores is that once an outbreak becomes a pandemic there will, by definition, be a risk of infection in almost every country and it would not be appropriate to simply add the same number of points on for every single location. 

Additionally, each country has measured the number of cases and deaths in different ways, meaning that making potential score increases based on international comparisons would be very problematic. Some countries may even have political reasons for inflating or deflating their official statistics, meaning that some of the international comparisons seen in the media may be misleading. Additionally, we do not believe there have been significant additional difficulties accessing medical facilities for non-coronavirus reasons. 

Another section that has not seen scores particularly impacted is Air Pollution. Early in the pandemic there were numerous reports that air pollution levels had dipped sharply due to decreased traffic and industrial activity. This was particularly evident in high pollution countries such as China and India. However, once initial lockdowns were eased air quality soon declined again, so we continued to assess the likely long-term situation regarding air pollution in our scoring. Indeed, recent reports suggest that the pandemic has had little impact on the continued rise of global CO2 emissions. 

Striking the correct balance between maintaining our long-term philosophy while recognising the significantly increased hardships faced by expatriates has been especially challenging this year. A widely reported issue early in the pandemic was panic buying leading to empty supermarket shelves. However, this soon relented as the pandemic wore on, and the fact that food and supplies of other essentials have remained largely consistent may explain why we have not seen more civil unrest so far. Those assignees with children may also question why the Education scores have not been increased with so many educational facilities being closed. This is because international schools have generally been able to implement adequate online learning tools – the impact on education would surely have been greater in the pre-internet era.

We always have to be wary of media hype and misinformation when creating objective assessments of the hardships facing expatriates, this year perhaps more than ever. In our new scores we have focused on matters of verifiable fact when assessing the impact of the pandemic on international assignees. The new scores allow companies to adequately compensate their expatriates for the increased challenges they are experiencing in their host locations. The responses and anecdotes we received from expatriates in this year’s location ratings survey certainly painted a picture of significantly more difficult situations, made worse by being so far from home. So, if a move now warrants an allowance where it did not previously then it is appropriate to apply it. This also eliminates the need for any separate “pandemic allowance”. 

Though it has certainly been the main focus, the Location Ratings team has not only been assessing the impact of the pandemic on expatriates. Other natural hazards have occurred, with a major earthquake in the Turkish city of Izmir, cyclones causing damage in the Pacific and wildfires raging in Australia. Socio-political turmoil or military action has been experienced in countries like Belarus, Ethiopia, Kyrgyzstan, Armenia and Azerbaijan. Meanwhile, recent attacks in France and Austria show that the terror threat in Europe has not gone away. The largest score increase of any location in 2020 is Beirut in Lebanon, which was severely impacted by the large chemical explosion at the city’s port in August. Combined with the effects of the pandemic, as well as the deteriorating infrastructure and economic situation, the blast means that Beirut now warrants a higher location allowance on many home bases.

Returning to the pandemic, we sincerely hope, of course, that many of the changes discussed here will not be sustained in the long or even medium-term. If the recently developed vaccines can be rolled out efficiently and deployed effectively, then there is hope of a return to at least some degree of “normality” by this time next year. Because of this, some companies may choose to wait and see if the heightened allowances are repeated after the next survey rather than applying the new location allowances now. This approach is understandable in such exceptional times and, after all, it can be difficult to take an increased allowance away once implemented. However, we would advise that the newly published allowances are applied so that expatriates can be adequately compensated for the issues they have faced in this most difficult of years.

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