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INTERNATIONAL HUMAN RESOURCE MANAGEMENT Compensation & Benefits 2 Expatriate Compensation & Benefits Compensation Benefits Compensation Benefits Employment and Taxation Laws Organization’s Com- pensation Policy Competitors Standard of Living Political and Social Environment Allowances Economic Conditions Expatriate Costs • Expatriate costs may pose a multiple- fold expense in relation to employees who are not sent as expatriates to foreign destinations, and are usually significantly higher than the compensation accorded to HCNs and TCNs 3 4 • Example: • a Chinese manager with 15 years experience costs less than USD 70,000 per annum, while • a US expatriate manager with corresponding expertise would cost his or her organization USD 300,000 per year 5 Goals of an International Organization’s Compensation Policy (1) 1) Policy should be consistent with the overall strategy, structure and business needs of the international organization 2) Policy must work to attract and retain staff in those areas where the international organization has the greatest needs and opportunities. As a consequence, the policy must be competitive and recognize factors such as incentive for serving in a foreign location, tax equalization and reimbursement for reasonable costs 6 Goals of an International Organization’s Compensation Policy (2) 3)Policy should facilitate transfer of international employees in the most cost-effective manner 4)Policy must give due consideration to equity and ease of administration 7 Employee Expectations and International Organization’s Compensation Policy  Financial protection in terms of benefits, social security and cost of living in the foreign location  Foreign assignment offers opportunities for advancement through income and/or savings  Issues such as housing, education of the children and recreation are addressed Note that the expectations of the employees often do not coincide with the interests of the organization Key Components of International Compensation Programme for Expatriates • Base Salary • The base salary is usually the main component in international compensation, and is the main benchmark used for other elements in an expatriate compensation package, such as bonuses and benefits • The base salary is either paid in the expatriate’s home or parent country currency, or in the currency of the expatriate’s host country 8 Key Components of International Compensation Programme for Expatriates • Hardship Premium • For expatriate’s (usually PCNs, TCNs) who will encounter “hardships” caused by the transfer to a foreign location, determining the appropriate level of payment can be difficult 9 10 • Factors determining the hardship premium, usually expressed in terms of an expatriate’s base pay, are typically:  Assignment  Actual hardship  Tax consequences  Length of assignment