The compensation packages available to US/UK trained attorneys who currently are or who are considering practicing in China and Japan have become a hot topic lately among the expat attorney community as well as in the industry press, making it an opportune moment to consider relocation. As the market in Asia for attorney compensation matures and expands, so do packages available to expat attorneys. Unlike in the US, these packages can vary significantly among the top US and UK based firms operating in these regions, from city to city and country to country, and in some cases are even open to significant negotiation with a potential employer.
For more than seven years, Cypress Recruiting has focused exclusively on the Asian legal markets, providing a unique level of guidance throughout all stages of the recruitment and relocation process to associates as well as partners. Cypress has also provided extensive original research, market reporting and guidance to numerous law firms as they adjust their strategies, their compensation plans and even their partnership structures to meet the growing demands of the Asian markets, as well as the logistical and cultural issues inherent in doing business and expanding in the region.
Whether you are practicing (or planning to practice) in Tokyo, Hong Kong, Beijing, Shanghai or Singapore, there is the potential for considerable variation in the remuneration packages available from potential employers. This variation is based on a number of factors, including cost of living, competitiveness of the local legal market, a candidate's nationality and academic pedigree and whether a firm considers a location to be a hardship destination. In this survey, we provide a general outline of the various components of legal compensation packages in the Asian legal market, provide location-specific information, and discuss how an attorney candidate can ensure that they obtain the best package for themselves.
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The Expat Package- The basic components of an expat remuneration package can include:
- Base salary: With the exception of a few west coast and UK firms, the base salary for US qualified attorneys working in Asia will generally follow that of a firm's New York office, provided the candidate qualifies as a full associate (see below for information regarding "foreign or special associates"). For UK qualified attorneys, base salary typically follows the salaries of the firm's London office, but certain magic circle firms are now matching US salaries for US JDs.
- Performance (and Hour) Based Bonus: Most firms offer discretionary bonuses that will follow those given to attorneys at the firm's head office. Depending on the firm, any performance bonuses may or may not be pro-rated, and this is typically based on the candidate's start date, marketability and the firm's profitability in a given fiscal year.
- Tax equalization: Tax equalization plans are designed to make an expatriate's compensation package tax a neutral, based on the theory is that all US expats should incur a tax burden equal to that incurred if they were living in the United States, regardless of their actual tax liabilities under local laws. Any US citizen or permanent resident (green card holders), must pay US income tax, in addition to any income taxes due to the host country. Due to this double taxation, international firms will usually include a tax equalization provision as part of a remuneration package, which can offset the expatriate's tax burden; however, any tax benefit resulting from low tax jurisdictions such as Hong Kong would be to the employer's advantage. Foreign tax credits earned while on international assignment resulting from host country taxes are paid by the firm and considered the property of the firm. Many firms will offer a special allowance to PRC nationals who are subject to PRC individual income tax.
- Expatriate benefits: Firms also generally offer a range of additional benefits for foreign nationals working in Asia beyond those normally available to attorneys working in US or UK offices. These benefits often include the following:
- Housing allowance and/or offset: Firms generally offer funds to cover the cost of housing in the host city. Of course, the level of this allowance largely depends on the cost of living in a given location and some firms consider your familial status.
- Cost of living adjustments: Expatriates working in locations with an especially high cost of living, such as Tokyo and Hong Kong, will also often be offered a set amount to offset these higher costs.
- Home leave: Many firms will give an expatriate attorney (and his or her dependants) a set amount to cover travel to their home country (usually twice a year) as well as a set amount of holiday time for a home visit.
- School tuition: Attorneys with school-aged children may be offered funds to cover private school expenses for their children until the 12th grade.
- Social Clubs: Some firms will cover the cost of a social club of your choice (more common in Shanghai and Beijing).
- Relocation expense reimbursement: Most if not all firms will offer to cover the costs of a candidate's relocation abroad, including travel, shipping of furniture and personal possessions, and other related expenses. A firm will usually provide temporary housing until a permanent housing situation is found.
- Signing bonus: Depending on a candidate's qualifications and the needs of the firm or a specific office, some firms may offer a candidate a signing bonus.
It should be noted that the amount and form of distribution (lump sum versus allocated reimbursements) of these benefits vary from location to location and from firm to firm.
The Specifics– Beyond the general make up of an expat remuneration package, there are location specific factors that alter what an attorney may expect in each of the major legal centers in Asia. Here we discuss these specifics in more detail:
Hong Kong: Hong Kong, often described as the place where East meets West and long the doorway into mainland China for business and investment, is one of the world's truly cosmopolitan cities. The following should be kept in mind regarding packages for Hong Kong.
- Housing allowance: Given the extremely high cost of housing in Hong Kong, residential allowances are fairly standard, and commensurately high, up to US$5,000 per month in some cases. Local regulations, however, cap housing allowances at 40% of salary.
- Mandatory Provident Fund (MPF): One special factor in Hong Kong packages is the territory's Mandatory Provident Fund. The MPF is a basic retirement fund scheme, and every person who works in Hong Kong is required to contribute. Employers will deduct MPF contributions from a person's pay, and most firms make matching contributions. According to Hong Kong's regulatory scheme, the minimum contribution for both individuals and firms is 5% of salary, or 5% of HK20,000 (approximately US$2,560), whichever is less.
Mainland China (Beijing and Shanghai) :Mainland China's two international hubs, Beijing and Shanghai, are very different cities. However, whether you are looking at positions in Beijing, the seat of government which has seen incredible growth leading into the Olympics and looks to maintain that momentum, or in Shanghai, the traditional business center with its electric energy, the remuneration considerations are much the same.
- Generation considerations: Remuneration depends largely on whether the candidate is qualified in the US, UK or China, as well as on the type of the candidate's law degree (US LL.M. versus US JD).
- US and UK nationals:
- US and UK lawyers with a US JD or LL.B. will start at the associate level, as they would in their home country. While most firms still require Mandarin language capabilities, some firms have focused more on technical legal skills and no longer have a language requirement.
- The firm will be responsible for withholding and paying a candidate's housing fund contribution from their base salary, in accordance with the applicable regulations.
- PRC nationals:
- PRC attorneys who have a US JD or LL.M. degree from a top US law school, who are qualified to practice in New York or California and who have worked at an international law firm might be hired as an "associate," a "foreign associate" or a "legal consultant," depending on their former firm and level of experience.
- PRC nationals will be employed through FESCO or an equivalent PRC employment agency.
- Compensation for PRC nationals can vary, but they may receive a higher salary at a foreign firm than at a Chinese firm, although the pay at a US or UK firm for PRC nationals may still be below that of expatriates.
- Bonuses for PRC nationals may also be lower than for expatriates, and they may not receive an expat allowance package, although the firms may still pay for some travel and relocation expenses when coming from the US or UK back to China.
- Social Security Fund: Expatriates in China will likely have to make a contribution to a social security fund, which will be deducted from their paycheck. In China these funds are administered on a municipal basis, and the level of contribution will vary based on location.
- General Considerations: Expat compensation in Tokyo tends to be higher than that in other East Asian cities, in large part because Tokyo is a very mature and developed legal market. Many firms have made substantial commitments to the city, and the compensation packages available as a result can be an attractive consideration for an expat attorney.
- Housing Expenses: Firms usually pay the large deposits ("key money"), real estate agents fee and customary utility costs (electricity and gas).
- Foreign Exchange Offsets: Given the falling U.S. dollar as compared to the Japanese Yen, many U.S.-based international firms have been offering a foreign exchange adjustment, which is currently set at around US$1,500 per month. This adjustment is reevaluated quarterly, and is often worked into the cost of living adjustment process, which is also often reevaluated a quarterly basis.
The Conclusions- Finding the right package and the right opportunity is not simply a matter of dollars and yuan or yen, it is a complex process that must take into account and compare a multitude of factors. Attorneys considering a move within or to the Asian legal market should be aware that remuneration packages can differ considerably, based on their credentials, firm policies, and their destination. These attorneys maximize their own potential when they carefully consider their situation and the available opportunities, and carefully analyze how the components of varying remuneration packages fit together into the package that is the most attractive for them.
Remuneration issues are complex, sensitive and challenging to manage. It is therefore critical to have a knowledgeable and strong advocate to help you negotiate the right deal. Having an expert partner like Cypress Recruiting will help you reap substantial benefits as you pursue a career in the Asian legal market. If you have any questions about remuneration packages in Asia, or would like to speak with an experienced recruiter, please feel free to contact our New York office at +1.212.979.5900 or visit our website at www.cypressrecruiting.com.
© 2008, Cypress Recruiting Group
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