Question

What considerations must occur when developing international compensation packages for expatriates? What are the main components of international compensation packages for expatriates?

Your response should be at least 200 words in length.

Answer 1

To develop international compensation package for expatriates following considerations must occur:

1) Balance sheet:

In this balance sheet is considered to pay an expatriate similar to incumbents in same positions in the home country. A home country salary is determined for the expatriate in the same manner as for a domestic position. This salary is divided into four categories taxes, housing, goods and services and reserves. Employee has to pay amount from salary towards the four categories. Organization often pays relocation incentives too.

2) Negotiation:

In this negotiation is considered and it's very simple employer and the employee expatriate mutually agree on a package. This approach is relatively costly when number of expatriates is more, it is used when number of expatriates is less.

3) Localization:

In this consideration salary of expatriate is based on the salary of local or host country. In this cost of living is also considered.

4) Lump sum:

In this consideration home country's system is used to decide base salary. In addition to this expatriate is offered a lump sum amount of money for the items they want and to pay taxes, housing etc.

5) Cafeteria:

In this consideration senior level expatriate and people with high total income related to base salary are compensated. This is similar to lump sum consideration but instead of giving a single amount, expatriate gets the options to select from.

Main components of international compensation packages for expatriates:

1) Base salary:

It is the amount that an expatriate gets in the home country. This is an important component because salary of expatriate is calculated on base salary mostly.

2) Benefits:

Benefits include the other facilities that an expatriate gets in the host country like health insurance, children plans for education etc.

3) Allowances:

Allowances are also offered to an expatriate often. These are apart from salary like daily allowances etc.

4) Incentives:

These are also apart from salary and mostly provided on the basis of performance and for expatriates relocation allowances also provided often.

5) Taxes:

Taxes for expatriates are decided according to the host country tax structure and this is also added in the salary package.

6) Time off:

Some companies offer time off to expatriates so that they can go to their home country or they can meet the family.

These are some components for developing international compensation package for expatriates.

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