Expatriate Compensation
In order for US companies to succeed abroad, expatriate compensation must be able to help ensure that remuneration is fair, but it must also be cost effective in the global marketplace. Smart companies balance business objectives abroad with the compensation package that they offer to their expatriates. These packages tend to include base salary, taxes, allowances, COLAs, housing and reimbursable expenses (Solomon, 70-76). Expatriates need extra energy to perform their duties. In order to induce competent people to carry out overseas operations, a company has to develop an effective expatriate compensation program. This program must provide adequate incentive to encourage people to work outside the country, and it must pay well enough to offset the inconvenience and hardship of maintaining an American standard of living in a new environment. Programs such as these must also take into consideration the needs of an individual to keep in contact with friends, family, and business associates who remain in the native country (Mendenhall, 394-404).There are several difficulties when it comes to dealing with the compensation and benefit issues of expatriates. Transportability of a pension plan, medical coverage, and social sec
There are two approaches to international compensation. The first is the Going Rate or the Market Rate Approach. In this approach the base salary is linked to the salary structure of the home country. It is based on local market rates. Compensation practices are based heavily on selected survey comparisons of local expatriates that are of the same nationality and on surveys that compare expatriates of all nationalities. In this approach base pay may be supplemented by additional payments which are only applicable in low-pay countries. The second approach is the Balance Sheet Approach. This approaches base objective is the maintenance of home country living standards plus financial incentives. The home country’s pay and benefits are the foundation for compensation in this approach. Adjustments to the home package are made to balance the additional expenditures required in the host country. Financial incentives, like the expatriate hardship premium, are added to the package in order to make it more attractive. This is the most commonly used system by multinational firms (Dowling, 187-193). Multinational companies provide vacations and special leave to their expatriates. Included as part of an employee’s regular vacation, annual home leave is usually provided and includes airfares for families to return to their home countries. Rest and rehabilitation leave can also be provided. It is based on the conditions of the host-country. This provides families with free airfares to a more comfortable location near the host country. Emergency provisions are also available in case of a death or illness in the family. Employees in hardship countries can also receive additional leave expense payments and rest and rehabilitation periods (Dowling, 186-187). Employees look for several things when they are offered a package to become an expatriate. The most important is that they are financially protected in terms of benefits, social security, and living
Some topics in this essay:
,
Foreign Service,
Sheet Approach,
Rate Approach,
home country,
base salary,
social security,
host country,
country living standards,
living standards,
compensation benefits,
country living,
home country living,
successful management compensation,
social security benefits,
financial incentives,
home leave,
benefit programs,
management compensation benefits,
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Approximate Word count = 1330
Approximate Pages = 5 (250 words per page double spaced)
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