Hardship allowances compensate employees for challenges beyond normal cost of living differences. They recognize that some locations present difficulties warranting additional compensation regardless of expenses. Hardship payments help attract employees to challenging locations.
Hardship Factors
Factors driving hardship ratings include security and safety conditions, healthcare availability and quality, climate extremes, isolation and remoteness, infrastructure limitations, educational facilities, pollution levels, and cultural adjustment challenges.
Rating Systems
Providers publish hardship ratings for locations worldwide. These typically use indices or percentage premiums representing the degree of hardship. Companies use these ratings to determine allowance amounts, often as a percentage of base salary.
Application
Hardship allowances are separate from cost of living adjustments, addressing different concerns. Some locations have high hardship but low costs. Others have high costs but low hardship. Packages may include both elements based on location characteristics.