Understanding Employment Packages

Understanding International School Salary and Employment Packages

International school employment packages can be difficult to understand especially for teachers who have never taught abroad.  Teachers often mistakenly assume that they salary is the salary when teaching abroad and that's all there is to know - however, nothing could be further from the truth.

The key to understanding the benefits and employment packages of teaching abroad, is to understand what money you will have in your hands at the end of the month, and what that money will buy you. This affects how much you can save (or spend) when you teach abroad.

International teacher employment packages are usually made up of six components:

• Cash payments: Salary and bonuses
• Tax status or tax relief
• Housing benefit (optional)
• Medical insurance (local only or international)
• Flight benefit (optional)
• Dependent benefits (optional)

And, the money you are left with at the end of all of this - which is affected by nothing more than the cost of living.

Salary and bonuses

International school salaries vary widely – from 500 US dollars a month to in excess of 5000 dollars a month. Salary is often the first thing teachers' look at when evaluating a job, but it should only be the starting point.

Factors that Influence Salaries and Savings

• Countries and cities that are more expensive tend to pay higher salaries than places with a lower cost of living, in order to compensate for this . But beware – your savings in a higher cost of living location might be low even if your salary appears higher.
• Places that are more popular often pay less than similar places that are less well known or desirable, simply because of the laws of supply and demand.  Kuwait, for instance, pays about 20% more than nearby Dubai for a similar class of job. This is because schools in Dubai get more applications, so they don't have to offer the same financial incentives that their lesser known neighbour does. 
• For a similar reason, colder places tend to pay higher salaries than warmer places.
• Salaries roughly track student fee structures in international schools. The higher the fees, the higher the budgets for teacher salaries and benefits tend to be, but this also means that there's strong competition for these posts.

Salaries may be quoted on a monthly or an annual basis for the duration of your contract, which is usually for 1 to 3 years.

Bonuses are benefits offered to teachers at the end of a contract, at end of year or when certain milestones are achieved such as no sick days, student attainment, etc. Bonuses, also called gratuity,  are a legal requirement in certain countries such as those in the Middle East. 

When evaluating a bonus as part of a package, make sure you understand how it is calculated , what you need to do in order to earn it, and how realistic it is that you will receive it. This will determine if you should include it in your calculations or not.

In the UAE and Kuwait for instance, employers are required to pay a gratuity based on your "basic salary" at the end of your service to the school provided you complete your contract (i.e.if you break your contract, or do not give sufficient notice, you may forfeit your gratuity), so it's something completely within your control and should be counted in your calculations.  On the other hand in a state school job in the Far East, your bonus might be dependent on how your students rate your teaching, so receipt of your bonus based on this approach is less predictable and probably should not factor into your calculations.

Tax-Free or Low Tax Salaries

The tax rate in a particular country has a huge effect on your take home pay. After all, it's not what is on your contract, but what you have in your hands at the end of the month that you can actually spend.  

To compare your earning potential at home and in a lower tax or no tax country, it is important for you to first calculate your take home pay, after tax. This should include what you pay in federal or national income tax, state or regional income tax, national insurance or social security taxes, and real estate taxes if you typically pay these. You can ask your school, at interview or offer stage, what the tax rate/take home pay is likely to be. 

The trends for taxes are as follows:

• Tax rates in Western Europe are higher than in most other regions of the world
• Salaries in the Middle East including UAE, Qatar, Kuwait, Bahrain, Saudi and Oman as well as Brunei are tax-free.
• Salaries in the Far East, Latin America, Eurasia and Southeast Asia, including China, Hong Kong, Singapore, Malaysia, Indonesia, South Korea and Thailand are taxed at a lower rate than most western countries for most teachers' salary bands.
• Salaries in some countries, notably regions of Africa and parts of Asia, are paid in two parts. Some is paid in local currency, which is subject to taxation. The rest is paid into your  home bank account or offshore bank and is not taxed.
• Some schools will pay your income tax for you, making their salaries effectively tax-free.
• Some countries tax housing, flight and medical benefits so make sure you understand this before you do your calculations.
• Check the rules in your home country about paying income tax on foreign earned income. 

Housing and Flights

Many international school packages offer housing and flight benefits. In places where housing is difficult for teachers to find or arrange, such as parts of the Middle East where a half or full year's rent and residency papers can be required upfront, schools will arrange the housing before you arrive. In other regions, where housing is plentiful and less difficult to arrange, you may get a housing allowance.  Some schools include the housing allowance as part of the salary, meaning you must pay for your housing out of your take home pay. 

The quality of available housing stock varies from region to region.

Key insights for housing are:

• In the Middle East, housing tends to be arranged in advance of your arrival, as it is a lengthy process usually requiring a full year's rent upfront. This means that you will probably not get a choice of where to live, but it also means you settle in more quickly.
• If housing is not provided, schools will typically arrange temporary accommodation for you (which may be paid by them or not). You will then be able to find your accommodation with the help of  a bilingual school liaison officer, human resources assistant , or local bilingual real estate agent . Make sure you research and factor in the cost of housing into your calculations to compare apples to apples when looking at different jobs. 
• In many parts of the world, housing allowances are provided to teachers, but you need to understand what this will buy you. It may allow you to rent a 3-bedroom villa or it may only be enough for your portion of a shared apartment.
• Housing is more expensive in urban areas with high population density. Tokyo, Singapore, Hong Kong, Dubai, Moscow and New York City are more expensive than their less populous neighbours.
• If you have a family and require more than one bedroom, you must fully understand whether or not the school sponsored housing benefit will suit you, and in many cases it will not.  You may have to avoid the more expensive locations unless your partner already has an employment package that provides additional housing support.
• Understand the cost of utilities such as water and electricity. In some regions, it is almost negligible, but in other regions it can be a significant cost.
• Location is very important and you will need to give due consideration to both your lifestyle and safety needs. Housing in an expatriate community will be more expensive than housing in areas where host nationals live. Think about how important it is to you to have say a Starbucks and/or a gym nearby, and do you really want to spend a significant portion of your salary to get it? At the same time, safety is important no matter where you are. Let the school advise you, as they have a vested interest in your wellbeing.

It's always a good idea to ask for pictures of typical accommodation available, and even to talk to teachers already at the school to determine what you can expect.  But remember that housing is a reflection of the locality, and it will almost certainly be different than what you are leaving at home.

Cost of Living

Once you have determined your disposable income, you now need to consider what that money will buy. For instance, $1.00 will buy xx times more in (low cost country) compared to (high cost country) which directly affects how much you need to earn to live comfortably and conversely, how much you are likely to save.

For those who have not worked abroad before, let's consider the cost of two different holidays.

• Holiday One is to an expensive location, such as Disneyland, New York City, Tokyo, Switzerland or Singapore. You intuitively understand that the cost of even a tiny hotel room, entertainment, transport and even a hamburger at a nearby restaurant is going to be more expensive than you are used to. You know your budget for this trip will need to be pretty big if you are going to enjoy yourself the way you hope to do.
• Holiday Two is to an inexpensive location, such as Egypt, India, Vietnam, Peru or even a camping holiday in a state park in your home country.   You understand that lodging, food, entertainment and transport will feel cheaper than it does at home and you spend the holiday amazed at what your money can buy you.

Teaching abroad is in many ways similar to going on holiday. You may have more or less buying power for each dollar or pound, but it will almost certainly be different to what you are used to.  A $500 holiday in an expensive location means making big compromises, whereas a $500 holiday in an inexpensive location might mean five star luxuries, and you might come back with change. 

Putting it all together to correctly evaluate international teaching employment packages

Once you understand all of the aspects, you now have the information you need to accurately evaluate your potential employment package. 

Below is an example of how a typical calculation would look

Representative Calculation Table*	United Kingdom	United States (California)	Kuwait
Yearly Pay	£24,000 ($38,750)	$50,000	9600 KD ($33,880)
Monthly pay  (yearly divided by 12)	£2,000	$4,166	800 KD
Bonus payments (yearly divided by 12)			16 KD
SUBTRACT
Income tax	£243	$935	0
National Insurance tax/ Social Security Tax, etc	£163	$758	0
State tax		$177	0
Council/Real Estate tax	£200	$300	0
Cost of rent (monthly)	£500	$800	0
EQUALS	£895 ($1450)	$1196	816 KD  ($2880)
Disposable income  (monthly)	$1450	$1196	$2880

*Each person's calculation will be different. These figures are for illustration purposes only based on an average Edvectus applicant, and each teacher must perform an analysis based on their personal financial situation.