IT has always been so. Life as an expatriate executive in Hongkong has been a financial bowl of cherries: the money is excellent; the help is cheap; and the taxes are unbeatable. The perks, too, have been attractive. Basics such as the apartment, the entertainment allowance and the pension scheme are generous. For the better paid, those other necessary expenses, such as the children's education, the car and the annual trip home can go straight to the company accountant for settlement. Other people pay for, wash and probably park your car, and if you have had the foresight to go into the banking and financial services sector, the bonuses are gratifying. ''In good times,'' the Managing Director of KPMG Management Consultancy Stanford Miller said this week, ''people in the financial sector can earn up to 10 months' salary in bonuses. That is on top of the usual 13-month package. Earnings can be very good in this field because the companies are usually small and the profits are big in good times. And there have been some good times lately.'' Yes, sir. It has been nice work if you were good enough, and from somewhere else. At 27 or 28, your salary package can add up to $1 million a year and grow to up to $2.5 million if you are on the fast track and make it to chief executive status by your early 40s. ''These people do very well. The biggest demand for accommodation this year has been for apartments in the $45,000 to $70,000 a month category. We have been run off our feet since the beginning of the year,'' Frank Marriott from First Pacific Davies saidthis week. ''But you would be surprised. Someone might be on $40,000 a month with a nice package but they are spending right up to their salary level.'' A 28-year-old analyst explains why: ''Look, people have a lot of expectations when they know you are an expat suit. Everybody eats and drinks what they feel like and entertainment is lavish. You can't have a party without champagne. It's easy to get rid of the money every month. But that's not to say that I am not looking after my future. ''I could save a lot of money. Plenty of people I know could live on the perks package and only use $10,000 or $12,000 of their own salary every month. I already have a house (with a mortgage) and I intend to buy a flat soon.'' To mere mortals who make up the bulk of the population such affluence is both the object of envy and a subject of fascination. But at another level, the colonial thinking that turned the Hongkong expatriate's pay and conditions into a corporate art form,has been questioned and, as a result, is in the process of radically changing. Local executives with the same skills, and often greater language abilities, have now become widespread in the upper echelons of Hongkong business and multi-national and international companies have had to re-think their approach to recruitment if they want to attract these senior managers to work for them. ''It's called equalisation,'' the Dean of the Baptist College Business School Y. K. Fan said this week. ''More and more companies in Hongkong have dropped the practice of offering expatriate packages. Now they are constructing an employment package that includes salary and fringe benefits that will be paid to the successful applicant whether they live in Hongkong or overseas. ''In tertiary institutions, for example, we offer conditions that are attractive enough to recruit overseas interest but will also be paid to locals. And depending on the position, local executives will be offered housing, or cash rental allowances, and all the other fringe benefits that used to be considered only for expatriate recruits.'' OTHER factors are at work on the equalisation process too. The bench mark for expatriate salary packages in Hongkong has always been based on civil service salary and employment conditions. Each year, civil service managers go out into the market place and determine the cost of the worker there. A large number of representative companies are included in the survey which is meant to identify the real rise in the cost of living and the going rate for staff at all levels in private enterprise. Traditionally these results are compiled, and civil service employees receive an appropriately adjusted increase in their salary, paid from April each year. For the last two years however, the pay increases have not been consistent. Pressures within the private sector have been so persistent that the costs of salary packages have continued to rise at about two per cent above inflation. Such costs can't help but come to the attention of the directors of the multi-national and international companies who maintain offices in Hongkong and, at a time when first world economies are deep in recession, high-priced executives are being closely examined for value. Traditionally, American companies set the private sector standards for pay and conditions for top management. These companies take the view that if they want to attract the top quartile of candidates for their jobs, they have to offer competitive pay andconditions. They still have this view but the application of that theory has developed into a revolutionary practice. Until five years ago, it was common to have a young, smart local accountant, lawyer or banker, receiving a package of pay, and usually minimal benefits, for performing the same work as the expatriate British or American colleague at the next terminal or in the adjacent office. Nobody talked too much about the issue because the forces of change were still undirected. Transition to mainland sovereignty was maybe seven years away, the brain drain temporarily took the smartest locals to other countries to earn a foreign passport and none of them had yet decided to return to bid for the top jobs. Meanwhile, as the periods of boom in Hongkong extended and the enormous potential of the Chinese mainland market was realised, demand for bilingual local staff increased. ''The equalisation process began to develop on two levels. Fewer expatriates were recruited and more locals received packages that included rental allowances and benefits like club memberships,'' Stanford Miller said. Three years ago, that package might include a cash allowance that had a housing component of $7,000 for a local young executive and club membership. Cars were considered only for the top echelons of the company but entertainment allowances, a retirement fund, medical insurances and paid holidays were the most frequent inclusions in the offer. But the packages still fell far short of those offered to expatriates. A separate study on local executive pay scales published last August by Q3 Associates Ltd indicated that the remuneration gap between expat and local executives performing the same job has narrowed, but has yet to be closed. The average total compensation package, including housing, bonus and cash allowances was $55,483 per month compared with $110,833 for a British expat and $146,283 per month for an US top level executive. Separate studies by Q3 revealed that the local executive's average salary was $45,000 per month, compared with $68,675 for a US expatriate and $63,700 for a British executive brought to Hongkong by the parent company. At 27 or 28, an expatriate university graduate with five years' experience, preferably with a multi-national company or a major hong such as Jardines or Swires, can expect to earn at least $30,000 to $40,000 a month in salary, receive a housing allowanceof about $40,000 per month and be given free medical and retirement insurance, a return trip home each year, a 13-month salary and a minimum of a three-month bonus, if the company is making money. This can round up to anything from $1 million to $1.4 million a year, and naturally causes controversy when it comes to locals' claims that they should be similarly rewarded. Paul Curley, the managing director of outplacement firm Q3 Associates Ltd, has compiled a number of authoritative surveys on the comparative pay rates of expats and locals which have identified a narrowing of the pay gap, but also a change in the construction of employment packages. Like Professor Fan, he said that companies were moving towards total pay packages, based on their estimates of the dollar worth of the job. For example, an upper management/company director's job might typically be assessed at $1.8 million a year. In the recent past that would have been modelled into a housing component, perhaps a car, education allowances and supporting benefits for the executive's future security. ''The thinking now is that the company will let the individuals make the decisions about how they will use the money they receive. Companies don't want to be bothered anymore with leases and real estate companies etc. So they give the person the equivalent amount in allowances and let them chose their own standard of living.'' This practice in itself is radical, and is the sort of language that gives the developers of Hongkong and their letting agents sleepless nights. ''We have found that many of the local top executives don't want housing allowances because they have bought into the market. It might be something the younger ones might need because they have just got married and have not had a chance to save money for a deposit,'' Mr Curley said. ''But the older and more successful they are, the less likely it is that they will want housing found for them.'' To keep these people satisfied, more and more companies ask no questions about how the prescribed amount for housing is spent. ''It works like this,'' said a recipient of this new form of package. ''The guy before me who worked for the same company lived in May Road in Mid-Levels, and had a company car. He was important but he was a lone operator in the region. He worked from home. The company picked up all the bills and he received a reasonable salary - about $40,000 per month. ''My deal is different. I get $120,000 a month and I am in charge of the lot. My travel, my costs, most of the fax and phone expenses but I live in a large flat in the Chinese part of the island that costs $20,000 per month, less than half the rent of mysuccessor. I can pocket the rest, with compliments from the company's accountant for my sensible decision-making.'' Stanford Miller says: ''What's happening is that there is more selectivity involved in recruiting expats. At the same time companies are trying to eliminate differences between local and expatriate executives. ''When it happens, it's done on two levels. They are increasing the benefits for local staff while trying to reduce the costs of expatriate contracts. This is particularly true for property rentals. ''In five years you may well find equalisation has occurred across the spectrum of top management in Hongkong. A lot of consultancy work arises out of this difference between expat and local packages. It can be a complete mess.'' ''What normally happens is that they don't adjust the expat perks and salary, but they hire new people on local terms. The new staff find out and complain to their bosses during the annual salary review. ''The usual response is to employ a personnel manager - which takes a long time - who [then] can't solve the problem so a management consultancy is called in to advise. By that time, it is eight months later, and the person with the original complaint might have left the company.'' The short-term results may be confusing but the long-term trend is not. In booming Asia, with the China market on Hongkong's doorstep, the territory remains the major regional centre for business into the next century. As the last vestiges of colonial employment practices are removed in the post-1997 environment of the Special Administrative Zone government, special treatment for expatriate workers will be a thing of the past. The costs however, for the best executives will not be cheaper. They will simply be fairer, and paid to people in Hongkong on the basis of their ability rather than their country of origin.