Week 5 Discussion

Compensation for the Expatriate

According to Martocchio (2017):

The development and implementation of international compensation programs typically pose four challenges to companies that U.S. compensation programs do not have to consider. First, successful international compensation programs further corporate interests abroad and encourage employees to take foreign assignments. Second, well-designed compensation programs minimize �nancial risk to employees and make their and their families’ experiences as pleasant as possible. Third, international compensation programs promote a smooth transition back to life in the United States upon completion of the international assignment. Fourth, sound international compensation programs promote U.S. businesses’ lowest-cost and differentiation strategies in foreign markets. U.S. companies must determine the method for setting expatriates’ base pay. Final determination should come only after companies carefully weigh the strengths and limitations of alternative methods. In addition, the purchasing power of base pay is an important consideration. Purchasing power affects the standard of living. (pp. 308–310)

The Expatriate’s base pay compensation package consists of the core compensation, employee bene�ts, and enhanced bene�ts.

Methods for Setting Base Pay

Components of Expatriate Compensation Review each tab to learn more.

U.S. companies must determine the method for setting expatriates’ base pay and the purchasing power of the base pay.

U.S. companies use one of three methods to calculate expatriates’ base pay

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Home country-based method

Financial Exercise:

An expatriate has been assigned to Japan. His gross salary is $60,000 (lives in Houston, TX). He has provided a comfortable lifestyle for a family of four. Will he be able to offer the family a comparable lifestyle with the same income?

Evaluate the currency exchange rate.

Evaluate the housing costs.

Determine the monthly expenses for groceries.

Analyze the transportation expenses.

Determine the childcare expenses for two children.

Assess the cost of a mobile family plan and the Internet.

Calculate miscellaneous expenses.

Foreign service premiums, hardship allowances, and mobility premiums may offset expenses for the expatriate. Be sure that the expatriate does not experience a �nancial risk.

Reference:

Martocchio, J. J. (2017). Strategic compensation: A human resource management approach (9th ed.). [Vital Source digital version]. New York, NY: Pearson Education, Inc.

Core Compensation

Employee Bene�ts

Enhanced Bene�ts

Example: The home country-based pay method compensates expatriates the amount they would receive if they were performing similar work in the United States.

Host country-based method

Example: The host country-based method compensates expatriates based on the host countries’ pay scales.

Headquarters-based method

Example: The headquarters-based method compensates all employees according to the pay scales used at the headquarters.

(Martocchio, 2017, pp. 310–311)

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Additional Materials

From your course textbook, Strategic Compensation: A Human Resource Management Approach, read the following chapter:

Compensating the Expatriate

From the South University Online Library, read the following article:

A New Practical Guide for Determining Expatriate Compensation: The Comprehensive Model (https://www.thecampuscommon.com/library/ezproxy/ticketdemocs.asp?

sch=suo&turl=http://search.ebscohost.com/login.aspx? direct=true&db=ofm&AN=525409352&site=eds-live)

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