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    International Compensation

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    Ipsita Satapathy
    This document discusses international compensation and managing pay for employees working abroad. It outlines the key components of an international compensation program and examines two main approaches: the going rate approach and the balance sheet approach. The going rate approach bases pay on local market rates, while the balance sheet approach aims to maintain the employee's home country living standard plus a financial incentive. The document also explores issues around benefits, taxation challenges, and developing a global compensation strategy that considers the complexities of paying employees across different countries and cultures.

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    International Compensation

    Uploaded by

    Ipsita Satapathy
    413 views12 pages
    This document discusses international compensation and managing pay for employees working abroad. It outlines the key components of an international compensation program and examines two main approaches: the going rate approach and the balance sheet approach. The going rate approach bases pay on local market rates, while the balance sheet approach aims to maintain the employee's home country living standard plus a financial incentive. The document also explores issues around benefits, taxation challenges, and developing a global compensation strategy that considers the complexities of paying employees across different countries and cultures.

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    International compensation design

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    This document discusses international compensation and managing pay for employees working abroad. It outlines the key components of an international compensation program and examines two main approaches: the going rate approach and the balance sheet approach. The going rate approach bases pay on local market rates, while the balance sheet approach aims to maintain the employee's home country living standard plus a financial incentive. The document also explores issues around benefits, taxation challenges, and developing a global compensation strategy that considers the complexities of paying employees across different countries and cultures.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    413 views12 pages

    International Compensation

    Uploaded by

    Ipsita Satapathy
    This document discusses international compensation and managing pay for employees working abroad. It outlines the key components of an international compensation program and examines two main approaches: the going rate approach and the balance sheet approach. The going rate approach bases pay on local market rates, while the balance sheet approach aims to maintain the employee's home country living standard plus a financial incentive. The document also explores issues around benefits, taxation challenges, and developing a global compensation strategy that considers the complexities of paying employees across different countries and cultures.

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    At a glance
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    The key takeaways are that there are two main approaches to international compensation - the Going Rate Approach and the Balance Sheet Approach. The Going Rate Approach bases compensation on local market rates while the Balance Sheet Approach aims to maintain the expatriate's home country standard of living. There are advantages and disadvantages to each approach.

    The two main approaches are the Going Rate Approach and the Balance Sheet Approach. The Going Rate Approach bases compensation on local market rates while the Balance Sheet Approach aims to maintain the expatriate's home country standard of living plus provides a financial inducement.

    The four categories used in the Balance Sheet Approach are: goods and services, housing, income taxes, and reserve.

    International Human Resource

    Management
    Managing people in a multinational context

    International
    compensation

    Chapter Objectives
    In this chapter we:
    Examine the complexities that arise when firms
    move from compensation at the domestic level to
    compensation in an international context.
    Detail the key components of an international
    compensation program.
    Outline the two main approaches to international
    compensation and the advantages and
    disadvantages of each approach.
    Examine the special problem areas of taxation, valid
    international living cost data and the problem of
    managing TCN compensation.
    Examine recent developments and global
    compensation
    issues.
    2
    IHRM Chapter
    7

    Issues when considering


    benefits
    1. Whether or not to maintain
    expatriates in home-country
    programs, particularly if the firm
    does not receive a tax deduction for
    it.
    2. Whether firms have the option of
    enrolling expatriates in host-country
    benefit programs and/or making up
    any difference in coverage.
    3. Whether expatriates should receive
    home-country or host-country social
    IHRM Chapter 7

    Table
    7-1

    Going Rate Approach

    Based on local market rates


    Relies on survey comparisons among:
    - Local nationals (HCNs)
    - Expatriates of same nationality
    - Expatriates of all nationalities
    Compensation based on the selected survey
    comparison
    Base pay and benefits may be supplemented
    by
    additional
    payments
    for low-pay countries
    IHRM Chapter
    7

    Table
    7-2

    Advantages and disadvantages of the


    Going Rate Approach

    Advantages

    Disadvantages

    Variation between
    Equality with local
    assignments for
    nationals
    Simplicity
    same employee
    Identification with host Variation between expatriates
    of same
    country
    Equity amongst
    nationality in different
    countries
    different
    Potential re-entry problems
    nationalities

    IHRM Chapter 7

    Table
    7-3

    The Balance Sheet Approach

    Basic objective is maintenance of home-country living


    standard plus financial inducement
    Home-country pay and benefits are the foundations of
    this approach
    Adjustments to home package to balance additional
    expenditure in host country
    Financial incentives (expatriate/hardship premium)
    added
    to make the package attractive
    Most common system in usage by multinational firms
    IHRM Chapter 7

    Four Balance Sheet Approach


    categories
    1. Goods and services home-country
    outlays for items such as food, personal
    care, clothing, household furnishings,
    recreation, transportation and medical
    care.
    2. Housing the major costs associated with
    housing in the host country.
    3. Income taxes parent-country and hostcountry income taxes.
    4. Reserve contributions to savings,
    payments for benefits, pension
    contributions, investments, education
    IHRM Chapter
    7
    expenses,
    social
    security taxes, etc.

    Table
    7-4

    Expatriate compensation worksheet

    IHRM Chapter 7

    Table
    7-5

    Advantages and disadvantages of the


    Balance Sheet Approach

    IHRM Chapter 7

    Some issues when


    1. Keep expatriates inbenefits
    home-country programs,
    considering
    2.

    3.
    4.
    5.

    particularly if the company does not receive a


    tax deductions for it?
    Enroll expatriates in host-country benefit
    programs and/or making up coverage
    differences?
    Does host-country legislation regarding
    termination affects benefit entitlement?
    Do expatriates receive home-country or hostcountry social security benefits?
    Should benefits be maintained on a homecountry or host-country basis? Who is
    responsible for the cost? Should other benefits
    offsetIHRM
    anyChapter
    shortfall
    in coverage? Should home7

    10

    Table
    7-8

    Range of working times required to buy


    one Big Mac

    IHRM Chapter 7

    11

    Figure
    Complexity,
    7-1

    challenges and choices in

    global pay

    IHRM Chapter 7

    12

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