Mobility Basics: Covering living expenses on short-term assignments

Short-term international assignments have, in many organisations, become an essential means of moving talent for a wide range of purposes; especially for project work, career development, or to overcome some of the challenges that come with long-term assignments. Employees on short-term assignments normally retain their home compensation and benefits and continue to be paid through home payroll. However, practice varies on how to compensate these employees for living costs incurred during the assignment. In ECA’s Short-term Assignments Survey, most participating organisations report providing a cash allowance to cover all daily expenditure in the host location, although a sizeable minority report that they only compensate for the difference in living costs between the home and host locations with a cost of living adjustment (COLA).

Which approach should you take? Providing COLA to short-term assignees may work in some cases and is generally the more cost-effective option. However, global mobility teams may face pushback, or even low assignment uptake, if remuneration falls short of expectations (especially as assignees whose families remain at home have household living costs to cover in two countries). Allowances designed to cover essentials in full, such as those produced by ECA’s Short-term Allowance Calculator, can overcome these issues and give companies an equitable, consistent and defensible approach to apply across all assignees. 

Below is a guide to some of the key differences between short-term allowances and COLAs:

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