Assessment Task 1: Compensation and Benefits for Expatriates

This report delves into the intricacies of compensating expatriate employees, focusing on the various components of a comprehensive compensation package. It explores the factors considered when designing compensation, including relocation assistance, housing and utility allowances, educational expenses for children, and cost of living adjustments. The report also addresses the significance of home leaves, tax equalization strategies, and the use of staff mobility premiums. Furthermore, it differentiates between home, host, and third-country nationals, and examines different compensation methods, such as home country-based and host country-based approaches. The conclusion emphasizes the importance of selecting appropriate criteria for designing expatriate compensation packages, considering country-specific factors and the duration of assignments. The report draws upon key concepts like the balance sheet approach and discusses the impact of exchange rates, inflation, and discretionary income on the overall compensation strategy.

Assessment Task 1
“Compensation and Benefits”
Research in Business
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Topic: Compensating expatriates
Introduction
The report discusses about the compensation and benefits of expats. Here we would refer
chapter number 14 that would throw light on key aspects such as repatriation issues (sending
money back to home country), balance sheet approach, and components of expats
compensation. The chapter talks about standards and enhanced benefits of expatriates along
with incentives given to them. There are several factors which are taken into consideration while
designing the compensation for expatriate employees of an organization. Expats is an individual
who living in a country other than his citizenship. Expats have basically shifted with or without
family to a new country for work or trade purpose; such as a company sends its employee to
work in US from India, an employee will be considered as an expatriate or expat for that
company. The primary concerns are to keep international compensation programme updated in
order to keep international employees interested and financially stable (Hall, 2015).
Designing of Compensation benefits package for Expatriate
The compensation of the expats includes several bouquets of benefits apart from base
salary. The extra benefits include the relocation assistance payments. The relocation payments
include the allowances given to an employee for relocating their families and luggage. It includes
the expenses related to travelling and transportation. Housing and utility allowances (a subset of
balance sheet approach) includes the allowances given as a difference between utilities and
housing costs in the USA; however US department of state refers to it as quarter’s allowance.
(Martocchio, 2014). Here, company tries to balance the tax of home country and host country.
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Moreover, the employees are even provided the educational expenses which may incur to
educate their kids during the service time. The package even includes a portion of Foreign
Service premium and cost of living allowances (also known as goods and services allowances)
given to an employee to compensate the standard of living expenses (Sonali Srivastava, 2014).
Furthermore, the part of salary even includes the pay named as Foreign Service hardship
premium which compensates the hardships faced by an individual and a family to stay in foreign
country. The hardship payment varies with the country and length of assignment. The cost of
living allowances is given to expats in order to cover the difference of monthly expense incurred
between home country and host country. Home leaves benefits and travel allowances covers the
expenses of travelling of an individual or a family, company given expense of trips taken to go
back to home or to visit home country. It provides an opportunity to create new growth
opportunity and avoid adjustment problems which may have been faced. The pay also considers
the tax equalization and tax protection. The pay related to tax Equalization basically protects
the expatriate from negative tax consequences. He has to pay tax both home country and host
country. Here the company will adjust the base income in way that an expatriate does not incur
any extra tax deductions. Along with all expenses, company is liable to pay staff mobility
premiums while moving from one country to another that disturbs the personal and family life
and hence bonuses and monetary incentives are provided to compensate discomfort that one feels
in a foreign country (Tornikoski, 2011).
North American Free trade agreement includes the agreement signed between United
States, Mexico and Canada to facilitate a trilateral trade. Host country National is basically an
employee who holds the citizenship of country where organizational branch is present but the
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headquarters is in another country. Third Country National is referred to the individuals or
employees who are basically in a transit or tour of foreign country. So a TCN is neither a home
or host country national. Home country-based pay method is basically way to compensate the
expatriates with the same amount that they would have received if they worked in their home
country. Host country-based method, on the contrary, would compensate the expatriates based
on the pay scale relevant in the host country. Headquarters-based method will compensate all
the employees working in the organization based on the pay scales that are relevant at the
headquarters of the organization Exchange rate here would mean the rate of exchange of
currency between United States and other countries like India. Inflation is basically the price
increase of products that occurs in any economy across the globe year on year. It erodes the
purchasing power of a country's currency. Indexes that compare the cost of representative goods
and services in local currency, purchased at foreign location with cost of comparable goods in
home country are known as indexes of living costs abroad. Discretionary income is an income
that remains after reducing the taxes, basic living costs and also the social security expenses.
Hypothetical tax is a part of equalization strategy of tax where in it uses a rate considering that
the onsite assignment never happened and the employee was still based out and working in his
home country.
Conclusion
Hence, it is important for a global human resource manager to select most relevant and
accurate criteria to design compensation package for expats. However, this varies from country
to country and projects to projects. The time frame of the assignment is also considered as one of
the factor to send an employee to foreign country with or without family.
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References
Hall, B. (2015, June 9). What to Expect in Your Expat Compensation Package. Retrieved April
13, 2019, from https://www.bluesteps.com: https://www.bluesteps.com/blog/expat-
compensation-package
Martocchio, J. J. (2014). Strategic Compensation: A Human Resource Management Approach
(8th ed.). Pearson Publication.
Sonali Srivastava. (2014). Expatriate Compensation : Compensation Methods for Expatriate.
Tornikoski, C. (2011). Expatriate Compensation. Finland : UNIVERSITAS WASAENSIS ;
Vaasan yliopisto .
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