The Costs of Hardship and Danger

How much should you pay an employee who is willing to risk their life on your behalf in a hot spot? Many companies look to the U.S. State Department, which calculates just how 40,000 citizens assigned to 600 posts abroad, will be compensated for the varying risks they assume.

    The State Department compiles quarterly reports determining what allowance an employee living abroad deserves for enduring both hardships and danger. The “hardship differential” is intended to compensate for living in unhealthy or physically difficult conditions. “Danger pay” is to compensate for living in the midst of civil insurrection, civil war and terrorism, which presents a threat of harm or imminent danger to the employee. These differentials, which range up to a maximum of 25% of base pay in each category, are not intended to apply to housing, which is provided by the government.

    While private companies usually exceed the premiums suggested by the State Department, the figures are never the less useful in objectively assessing the difficulties and dangers expats are likely to encounter. Bogota, Columbia, for example, wins only a 5% hardship differential, as many amenities that Americans expect are easily obtained, but scores a 15% differential on danger pay. Baghdad, unsurprisingly, scores 25% in each category. Here are some samples of other locations, and how difficult and dangerous they are judged to be in each category.

Workforce Management, June 2004, p. 34 — Subscribe Now!