Benefits and Allowances

Generally MIs have relied upon a simple remuneration package consisting of base pay complimented by a basic set of social benefits and allowances. There has been little attempt or desire to replicate the allowances and in-kind benefits that are typical of many national employment packages, particularly those in developing countries, which are often designed to minimise taxation on salaries. The employment benefits common to international civil servants may be broadly categorised into two groups, social benefits, generally applicable to all regular staff (such as pensions, leave and insurance); and those which are granted only to expatriates (education benefits for dependent children or home country travel). Social benefits operate outside of national legislation and have to cover some situations that are not common to private sector plans, such as the impact of different tax rates on retirees. The benefit with the greatest implication for most MIs is the pension, which usually costs between twenty and 25% of payroll. ¹ In value and for most organizations with headquarters in the US, in cost, the next most important benefit is medical insurance. Medical costs have often been funded on a pay-as-you-go basis, which leaves MIs exposed to significant risk as retiree numbers increase. A similar situation exists in pensions programmes, which also have pay-as-you-go funding (e.g. OECD and EU). These issues will be examined in this chapter along with a review of leave programmes and cash allowances. Expatriate benefits are considered in Chapter 12.