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A hardship allowance is paid to an assignee as incentive to accept an assignment in a hardship location and/or as compensation for adapting to the difficult environment. The criteria used to determine a hardship location include climate, environmental risk, political instability, security risks, availability of goods and services, cultural isolation, lack of social amenities or medical facilities, heavy pollution, risk of disease, etc.
Determining which locations warrant a hardship allowance can be subjective. Each assignee will assess a location using their personal experiences, background and preferences. Many companies use the services of a third-party, data company, who can evaluate each assignment location objectively, using a scoring system for each hardship criteria. The overall scores for each location are used to develop appropriate hardship allowances.
Living conditions in locations change over time; therefore, the third-party, data companies regularly review the hardship scores. Over time, locations will be added or removed from the recommended hardship allowance list.
The hardship allowance is typically calculated as a percentage of annual base salary, provided to the employee through the term of the assignment. Hardship allowances may also be referred to as Danger Pay, Location Premium and Hazard Pay.
Statistics:
- 64% of companies provide hardship allowance
- 31% of companies that provide hardship allowance do not cap the amount
Note: above data collected from a sample of companies with international programs and is therefore not representative of all companies relocating employees. Based on Long-Term Assignment – more than one (1) year and less than five (5) years in duration. “Industry Relocation Trends” topic information intended for high level overview. For more detailed information, please contact your Paragon representative.
