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Expats and the cost of living abroad

High costs for companies make flexibility in global mobility difficult

The cost of living is an important factor when choosing a location for international professionals.

Which city in the world is the best to live in is often linked to the question of the cost of living for expatriates. According to a survey by the consulting company Mercer, the cost of living for foreign skilled workers in 226 cities worldwide was examined.

Mercer said it measured more than 200 comparable cost factors for the “Cost of Living City Ranking” study in March 2024. These included, but were not limited to, costs for housing, transportation, food, clothing, household goods, and entertainment.

It’s a big surprise because five European cities made it into the top ten for the highest cost of living in the evaluation. And as one would expect, four of them are in Switzerland: Zurich (third place), Geneva (fourth place), Basel (fifth place), Bern (sixth place), but London is also in the top ten eighth place.

As in previous years, Hong Kong is in first place, closely followed by Singapore, which has experienced a real boom in the last few years since the Corona crisis. “In our opinion, the high cost of living in the two Asian cities is clearly due to the high rental costs for living space. This is also evident from the survey,” says Kai Mütze, Managing Director of IAC Unternehmensberatung GmbH. In addition, both are important economic centers that attract large numbers of expats, which in turn drives up the cost of goods.

Also in the top ten are New York City in seventh place, Nassau in the Bahamas in ninth place and Los Angeles in tenth place. All U.S. cities in the ranking are in the top 100 and seven cities rank in the top 20.

The German cities are further down in comparison, but still among the top 100. Berlin leads the German rankings in 31st place in the global ranking, followed by Frankfurt in 35th place and Munich in 38th place. Düsseldorf is also in the top 100 (51st place), Hamburg (54th place), Stuttgart (70th place), Nuremberg (85th place) and Leipzig (86th place). Apart from Munich and Stuttgart, which remained almost unchanged in the ranking, all other German cities became more expensive – and in some cases considerably. Frankfurt, for example, rose by 13 places, Düsseldorf rose by 23 places.

The conclusion can certainly be drawn from this that German cities also entail significantly higher costs for companies and expats. The missions to Germany have become correspondingly more expensive. Companies may therefore need to rethink their approach in order to design the remuneration packages for expatriate assignments differently. In the end, it must not result in the posted employees having to restrict themselves massively; this would lead to a feeling of discomfort and could endanger the postings. A termination would be a possible consequence, which usually leads to a massive financial loss for the company. But the expatriate might also be dissatisfied and word of this could get around the company. Consequently, further assignments would be more difficult to enforce. “There needs to be a rethinking of global mobility in order to be able to address the issues. Higher costs for expatriate assignments make flexibility in international personnel management more difficult,” says Kai Mütze.

IAC Management Consulting is happy to help you when it comes to finding the right strategy for foreign assignments. The competence also lies in the design of guidelines and compensation packages as well as in the administrative support of assignments from visa processing to payroll worldwide.

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