Comprehensive and Detailed Explanatio n:
Hardship allowances are financial incentives offered to expatriates who are assigned to locations
with difficult living conditions, such as:
Political instability
Limited access to healthcare or education
Extreme climates or high crime rates
This payment compensates for a decrease in living standards, not for economic fluctuations or salary
variations.
GPHR Study Guide Extract – Global Compensation and Benefits / Assignment Allowances:
“A hardship allowance is provided when the host country presents challenging or uncomfortable
living conditions compared to the employee’s home country. It serves to offset the perceived or real
reduction in lifestyle quality.”
Exchange rates are handled via other mechanisms (e.g., COLA), and net salary changes are part of
balance sheet calculations, not hardship pay.
