ihrm, dr. n. yang1 chapter 8 international compensation

IHRM, Dr. N. Yang 1

Chapter 8

International Compensation

IHRM, Dr. N. Yang 2

Chapter Objectives• In the introductory chapter we described IHR managers as

grappling with complex issues: Manage more activities from a broader perspective, Be more involved in the lives of their far-flung

employees Balance the needs of PCNs, HCNs and TCNs Control exposure to financial and political risks and Be increasingly aware of and responsive to host-country

and regional influences.

• In this chapter, all of these issues and concerns are brought out in a discussion of compensation issues.

• In the introductory chapter we described IHR managers as grappling with complex issues: Manage more activities from a broader perspective, Be more involved in the lives of their far-flung

employees Balance the needs of PCNs, HCNs and TCNs Control exposure to financial and political risks and Be increasingly aware of and responsive to host-country

and regional influences.

• In this chapter, all of these issues and concerns are brought out in a discussion of compensation issues.

IHRM, Dr. N. Yang 3

Chapter Objectives

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 international compensation Outline the two main approaches to international

compensation, and the advantages and disadvantages of each approach

Introduce a third emerging approach: local plus Examine the special problem areas of taxation, valid

international living cost data, and the problem of managing TCN compensation

Examine the recent developments and global compensation issues.

IHRM, Dr. N. Yang 4

Introduction

Global compensation managers increasingly deal with two areas of focus. They must manage highly complex and turbulent local

details, while Concurrently building and maintaining a unified,

strategic pattern of compensation policies, practices and values.

Domestically, such as in the U.S., how would you determine a compensation package? What factors to consider?

Internationally?

IHRM, Dr. N. Yang 5

IntrinsicIntrinsic

Participate in decision making

Greater job freedom and discretion

More responsibility

More interesting work

Opportunities for personal growth

Diversity of activities

Cost-of-living increase

Labor market adjustment

Time-in-rank increase

Profit sharing

Explicit Membership-

based

Protection programs

Pay for time not worked

Services and perquisites

Non-FinancialNon-FinancialPreferred office finishingPreferred lunch hours

Assigned parking spaces

Preferred work assignments

Business Cards

Own secretaryImpressive titles

Employee Compensation

FinancialFinancial

ExtrinsicExtrinsic

Piecework

Commission

Incentive plansPerformance bonusesMerit pay plans

Implied Membership-

based

Performance-based

IHRM, Dr. N. Yang 6

Per Capita Incomes by Metropolitan Area (U.S. Average: $29,469)

TOP 10

1 San Francisco, Ca $57,414 6West Palm Beach, Boca Raton, Fla

$41,007

2 San Jose, Ca $55,157 7 Trenton, NJ $40,954

3New Heaven, Bridgeport, Stamfort, Danbury, Waterbury, Conn.

$46,542 8Seattle, Bellevue, Everett, Wash

$40,686

4 Bergen, Passaic, NJ $42,726 9 Nassau, Suffolk, NY $40,353

5Middelsex, Sommerset, Hunterdon, NJ

$42,392 10 Naples, Fla $40,121

Source: U.S. Department of Commerce Bureau of Economic Analysis, The Mercury News, August 4, 2002

IHRM, Dr. N. Yang 7

Per Capita Incomes by Metropolitan Area (U.S. Average: $29,469)

BOTTOM 10

1McAllen, Edinburg, Mission, Texas

$13,344 6Auburn, Opelika, Ala.

$18,484

2Brownsville, Harlingen, San Benito, Texas

$14,906 7 El Paso, Texas $18,535

3 Laredo, Texas $15,114 8 Merced, CA $18,536

4 Yuma, Ariz. $16,002 9 Provo, Orem, Utah $19,128

5 Las Cruces, N.M. $17,321 10 Pine Bluff, Ark. $19,826

Source: U.S. Department of Commerce Bureau of Economic Analysis, The Mercury News, August 4, 2002

U.S. Metropolitan Area Per Capita IncomeInflation Adjusted by Metropolitan Consumer Price Indexes

Bottom 10Rank Metropolitan Areas 2000 in 2009$ 2009 Change

19 Denver 46,205 45,982 -0.5%

20 Miami-West Pallm Beach 41,937 41,352 -1.4%

21 Riverside-San Bernardino 30,600 29,930 -2.2%

22 Portland 39,703 38,728 -2.5%

23 Tampa-St. Petersburg 38,048 36,780 -3.3%

24 San Francico 61,831 59,696 -3.5%

25 Dallas-Fort Worth 41,575 39,514 -5.0%

26 Detroit 40,412 37,541 -7.1%

27 Atlanta 39,775 36,482 -8.3%

28 San Jose 68,185 55,404 -18.7%

Unweighted Average 43,801 43,700 -0.2%

IHRM, Dr. N. Yang 8

Source: Wendell Cox, 2011; http://www.finfacts.ie/img/cost_of_living_cities_2013_Finfacts_full.jpg

U.S. Metropolitan Area Per Capita IncomeInflation Adjusted by Metropolitan Consumer Price Indexes

Top 10

Rank Metropolitan Areas 2000 in 2009$ 2009 Change

1 Baltimore 43,729 47,962 9.7%

2 Pittsburgh 39,024 42,216 8.2%

3 Washington 53,753 56,442 5.0%

4 Philadelphia 43,572 45,565 4.6%

5 St. Louis 38,636 40,342 4.4%

6 Milwaukee 40,028 41,696 4.2%

7 Los Angeles 41,382 42,818 3.5%

8 Houston 42,232 43,568 3.2%

9 Cleveland 38,396 39,348 2.5%

10 Chicago 42,761 43,727 2.3%

IHRM, Dr. N. Yang 9

Source: Wendell Cox, 2011;http://www.finfacts.ie/img/cost_of_living_cities_2013_Finfacts_full.jpg

International Compensation Complexities

Pay package and approachesBase pay and benefits

Taxes

Cost of living

Housing Safety Transportation Education of children Length of stay

IHRM, Dr. N. Yang 10

International Compensation

Increasingly seen as a mechanism to develop and reinforce a global corporate culture

A primary source of corporate control Explicitly linking performance outcomes

with associated costs



Objectives of International Compensation

Should be consistent with the overall strategy, structure and business needs of the MNE.

Must be sufficient to attract and retain staff in the areas where the MNE has the greatest needs and opportunities, hence must be competitive and recognize factors such as incentive for foreign service, tax equalization and reimbursement for reasonable costs.

Should facilitate the transfer of international employees in the most cost-effective manner for the firm.

Must give due consideration to equity and ease of administration.


Expatriate Expectations

Financial protection in terms of benefits, social security and living costs in the foreign location

Opportunities for financial advancement through income and savings

Issues such as housing, education of children, home leave, and recreation to be addressed in the policy

Career advancement and repatriation.


Requirements for Successful International Compensation and Benefits

Knowledge of employment and taxation law, customs, environment and employment practices of many foreign countries

Familiarity with currency fluctuations and the effect of inflation on compensation, and

A good understanding of why and when special allowances must be supplied and which allowances are necessary in what countries

All within the context of shifting political, economic and social conditions.

All within the context of shifting political, economic and social conditions.


Key Components of International Compensation

The area of international compensation is complex, primarily because multinationals must cater to three categories of employees:

PCNs, TCNs and HCNs Key Components:

Base salaryForeign services inducementHardship premiumAllowancesBenefits

The area of international compensation is complex, primarily because multinationals must cater to three categories of employees:

PCNs, TCNs and HCNs Key Components:

Base salaryForeign services inducementHardship premiumAllowancesBenefits


Base Salary In a domestic context, base salary denotes the amount of cash

compensation serving as a benchmark for other compensation elements (such as bonuses and benefits).

For expatriates, many allowances are directly related to base salary (e.g. foreign service premium, cost-of-living allowance, housing allowance)

It is the basis for in-service benefits and pension contributions – may be paid in home or local-country currency.

The base salary is the foundation block for international compensation whether the employee is a PCN or TCN.

Major differences can occur in the employee’s package depending on whether the base salary is linked to the home country of the PCN or TCN, or whether an international rate is paid.


Foreign Service Inducement and Hardship Premium PCNs often receive a salary premium as an inducement

to accept a foreign assignment or as compensation for any hardship caused by the transfer. The definition of hardship, eligibility for the premium and amount

and timing of payment must be addressed. In cases in which hardship is determined, U.S. firms often refer

to the U.S. Department of State’s Hardship Post Differentials Guidelines to determine an appropriate level of payment.

Foreign service inducements are usually made in the form of a percentage of salary, 5-40% of base pay. Such payments vary, depending upon the assignment, actual

hardship, tax consequences and length of assignment.

More commonly paid to PCNs than to TCNs.


Allowances

Multinationals generally pay allowances in order to encourage employees to take international assignments and to keep employees ‘whole’ relative to home standards.

Establishing an overall compensation policy can be very challenging, partly because of the various forms of allowances, such as: COLA – Cost-of-living allowance Housing allowance Relocation allowance Education allowance Home leave allowance Spouse assistance


Cost-of-living Allowances (COLA)

COLA receives the most attention, to compensate for differences in expenditures between the home country and the foreign country (e.g., to account for inflation differentials, currency fluctuations, etc.).

COLA may also include payments for housing and utilities, personal income tax or discretionary items.

The provision of a housing allowance implies that employees should be entitled to maintain their home-country living standards (or, in some cases, receive accommodation that is equivalent to that provided for similar foreign employees and peers).

International comparison of cost of living is difficult and can be problematic.

Mercer Cost of Living Survey – Worldwide Rankings 2012

2012 2011 City Country1 2 TOKYO JAPAN

2 1 LUANDA ANGOLA

3 6 OSAKA JAPAN

4 4 MOSCOW RUSSIA

5 5 GENEVA SWITZERLAND

6 7 ZURICH SWITZERLAND

6 8 SINGAPORE SINGAPORE

8 3 N'DJAMENA CHAD

9 9 HONG KONG CHINA

10 11 NAGOYA JAPAN

11 14 SYDNEY AUSTRALIA

12 10 SÃO PAULO BRAZIL

13 12 RIO DE JANEIRO BRAZIL

14 16 BERN SWITZERLAND

15 21 MELBOURNE AUSTRALIA

16 21 SHANGHAI CHINA

17 20 BEIJING CHINA


2012 2011 City Country18 15 OSLO NORWAY

19 30 PERTH AUSTRALIA

20 12 LIBREVILLE GABON

21 17 COPENHAGEN DENMARK

22 19 SEOUL SOUTH KOREA

23 34 CANBERRA AUSTRALIA

24 31 BRISBANE AUSTRALIA

25 18 LONDON UNITED KINGDOM

26 44 KHARTOUM SUDAN

27 46 ADELAIDE AUSTRALIA

28 29 ST. PETERSBURG RUSSIA

29 51 CARACAS VENEZUELA

30 43 SHENZEN CHINA

31 38 TEL AVIV ISRAEL

31 38 GUANGZHOU CHINA

33 32 NEW YORK CITY UNITED STATES

34 23 NIAMEY NIGER

Source: Mercer Cost of Living Survey 2012, Mercer international basket, including rental accommodation costs, base city New York


Relocation Allowances Usually cover moving, shipping and storage charges,

temporary living expenses, subsidies regarding appliance or car purchases (or sales) and down payments or lease-related charges. Allowances regarding perquisites (cars, club memberships,

servants and so on) may also need to be considered (usually for more senior positions, but this varies according to location).

These allowances are often contingent upon tax-equalization policies and practices in both the home and the host countries.


Education Allowances

Expatriates’ children are an integral part of any international compensation policy. Allowances for education can cover items such

as tuition, language class tuition, enrolment fees, books and supplies, transportation, room and board, and uniforms.

PCNs and TCNs usually receive the same treatment concerning educational expenses.


Allowances for Spouse Assistance

To help guard against or offset income lost by an expatriate’s spouse as a result of relocating abroad. Some firms may pay an allowance to make up for

a spouse’s lost income. U.S. firms are beginning to focus on providing

spouses with employment opportunities abroad, either by offering job-search assistance or employment in the firm’s foreign office (subject to a work visa being available).


Alternative Allowances

Housing alternatives may include: Company-provided housing, either mandatory or optional A fixed housing allowance Or assessment of a portion of income, out of which actual

housing costs are paid.

Home leave alternatives: Allow foreign travel rather than returning home Expatriates may become more homesick than others who

return home for a ‘reality check’ with fellow employees and friends.

As a firm internationalizes, formal policies become more necessary and efficient.


Benefits

In addition to the already discussed benefits, multinationals also provide vacations and special leave. Annual home leave usually provides airfares for families to

return to their home countries. Rest and rehabilitation leave, based on the conditions of the

host country, may provide the employee’s family with airfares to a more comfortable location near the host country.

Emergency provisions are available in case of a death or illness in the family.

Employees in hardship locations often receive additional leave expense payments or rest and rehabilitation periods.


Issues Concerning Benefits

Very difficult to deal with country-to-country, as national practices vary considerably: Transportability of pension plans Medical coverage Social security benefits

Firms need to address many issues, including: Whether or not to maintain expatriates in home-country benefit

programs, particularly if the firm does not receive a tax deduction for it. Whether firms have the option of enrolling expatriates in host-country

benefit programs and/or making up any difference in coverage. Whether expatriates should receive home-country or host-country

social security benefits.


Issues Concerning Benefits (cont.)

Laws governing private benefit practices differ from country to country, and firm practices also vary.

In some countries, expatriates cannot opt out of local social security programs. In such circumstances, the firm normally pays for these additional costs. European PCNs and TCNs enjoy portable social security

benefits within the European Union.

Multinationals have generally done a good job of planning for the retirement needs of their PCNs, but this is generally less the case for TCNs.


Two main options in the area of international compensation:

Going Rate Approach (also referred to as the Market Rate Approach)

Balance Sheet Approach (also known as the Build-up Approach).

A third emerging approachLocal Plus typically in the Asia Pacific region

Approaches to International Compensation


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.

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.

Table8.1


Advantages and Disadvantages of the Going Rate Approach

Advantages Equity with local

nationals Simplicity Identification with

host country Equity among

different nationalities

Advantages Equity with local

nationals Simplicity Identification with

host country Equity among

different nationalities

Disadvantages Variation between

assignments for same employee

Variation between expatriates of same nationality in different countries

Potential re-entry problems

Disadvantages Variation between

assignments for same employee

Variation between expatriates of same nationality in different countries

Potential re-entry problems

Table8.2


The Balance Sheet Approach

The basic objective is to ‘keep the expatriate whole’ through maintenance of home-country living standard plus a financial inducement to make the package attractive. Home-country pay and benefits are the foundations of

this approach Adjustments to home package to balance additional

expenditure in host country Financial incentives (e.g., expatriate/hardship premium)

added to make the package attractive Most common system in usage by multinational firms

The basic objective is to ‘keep the expatriate whole’ through maintenance of home-country living standard plus a financial inducement to make the package attractive. Home-country pay and benefits are the foundations of

this approach Adjustments to home package to balance additional

expenditure in host country Financial incentives (e.g., expatriate/hardship premium)

added to make the package attractive Most common system in usage by multinational firms

Table8.3


Major Categories Incorporated in the Balance Sheet Approach

Goods and services Home-country outlays for items such as food, personal care,

clothing, household furnishings, recreation, transportation, and medical care.

Housing Major costs associated with housing in the host country.

Income taxes Parent-country and host-country income taxes.

Reserve Contributions to savings, payments for benefits, pension

contributions, investments, education expenses, social security taxes, etc.


A Typical Balance Sheet

Reserve Reserve Reserve Reserve

Goods and Services

Goods and Services

HousingHousing

Housing

Income Taxes Income Taxes

Premiums and Incentives

Host-Country Costs Paid by Company and

from Salary

Host-Country Costs

Home-Country Equivalent

Purchasing Power

Home-Country Salary

Home- and Host-Country Income Taxes

Goods and Services

Additional Costs Paid by Company

Housing

Income Taxes

Goods and Services


International Costs of Living

Multinationals using the Balance Sheet Approach must constantly update compensation packages with new data on living costs, which is an on-going administrative requirement.

Must also be able to respond to unexpected events, such as the currency and stock market crash, which suddenly unfolded in a number of Asian countries in late 1997.

The level of local knowledge requires specialist advice.

Multinationals using the Balance Sheet Approach must constantly update compensation packages with new data on living costs, which is an on-going administrative requirement.

Must also be able to respond to unexpected events, such as the currency and stock market crash, which suddenly unfolded in a number of Asian countries in late 1997.

The level of local knowledge requires specialist advice.

Top 10 costliest cities for expatriates 2014/ 2013: 1. Luanda, Angola

2. Moscow, Russia

3. Tokyo, Japan

4. N’Djamena, Chad

5. Singapore, Singapore

6. Hong Kong, China

7. Geneva, Switzerland

8. Zurich, Switzerland

9. Bern, Switzerland

10. Sydney, Australia

Top 10 costliest cities for expatriates 2014/ 2013: 1. Luanda, Angola

2. Moscow, Russia

3. Tokyo, Japan

4. N’Djamena, Chad

5. Singapore, Singapore

6. Hong Kong, China

7. Geneva, Switzerland

8. Zurich, Switzerland

9. Bern, Switzerland

10. Sydney, Australia

http://www.finfacts.ie/costofliving.htm

Local Plus Approach

The expatriate employee is paid according to the prevailing salary levels, structure, and administrative guidelines of the host location …

“Expatriate-type” benefits in recognition of foreign status

Does not typically include:COLA, mobility premiums, hardship allowances, familiarization visits, home leave, cross-cultural training, other pre-departure or spouse assistance



Expatriation compensation worksheet

Table8.4

2013


Advantages and disadvantages of the Balance Sheet Approach

Advantages: Equity

Between assignments Between expatriates of

the same nationality Facilitate re-entry Easy to communicate

to employees

Advantages: Equity

Between assignments Between expatriates of

the same nationality Facilitate re-entry Easy to communicate

to employees

Disadvantages: Can result in great

disparities Between expatriates of

different nationalities Between expatriates

and local nationals Can be complex to

administer May entail difficulty to

attract human capital

Disadvantages: Can result in great

disparities Between expatriates of

different nationalities Between expatriates

and local nationals Can be complex to

administer May entail difficulty to

attract human capital

Table8.5

Compensation approaches & strategies for long-term international assignments


Table8.6a



Table8.6b



Table8.6c



Table8.6d


MNE Approaches to International Taxation Tax Equalization

Firms withhold an amount equal to the home-country tax obligation of the PCN, and pay all taxes in the host country.

Tax Protection The employee pays up to the amount of taxes he or

she would pay on compensation in the home country. In such a situation, the employee is entitled to any windfall received if total taxes are less in the foreign country than in the home country.

Ad hoc – each expatriate is handled differently Laissez-faire – each is on their own


Maximum marginal federal tax rates

CountryMax. marginal % rate

Australia 45.00

Belgium 50.00

Canada 29.00

Chile 40.00

Denmark 26.48

France 40.00

Germany 45.00

Italy 43.00

Japan 40.00

Korea 35.00

CountryMax. marginal % rate

Mexico 28.00

Netherlands 52.00

New Zealand 39.00

Poland 40.00

Spain 27.13

Sweden 25.00

Switzerland 11.50

Turkey 35.00

United Kingdom 40.00

United States 35.00

Table8.6d


City 1 Big Mac in min City 1 Big Mac in min

Chicago, Tokyo, Toronto 12 Kuala Lumpur, Vilnius 41

London, Los Angeles, Miami 13 Bucharest, Riga 42

Hong Kong, New York, Sydney 14 Beijing 44

Dublin, Frankfurt, Luxembourg, Montreal, Zurich

15 Bangkok, Kiev 45

Copenhagen, Geneva, Vienna 17 Istanbul 48

Dubai, Nicosia 18 Delhi 49

Amsterdam, Auckland, Berlin, Brussels 19 Río de Janeiro 51

Lyon, Munich, Paris, Stockholm, Taipei 20 Sofia 56

Barcelona, Moscow, Oslo 21 Buenos Aires 57

Lisbon 23 Bogotá, Lima 58

Tel Aviv 24 Budapest 59

Manama 25 Mumbai 61

Johannesburg 26 Bratislava 62

Helsinki, Madrid, Milan, Rome, Seoul 27 Santiago de Chile 69

Athens, Shanghai, Tallinn 30 Cairo 82

Warsaw, Doha 31 Manila 88

Ljubljana 34 Caracas 126

Singapore 34 Mexico City 129

Prague 38 Jakarta 136

São Paulo 40 Nairobi 158

Working time required to buy one Big Mac

Table8.7

Issues to consider for expatriate benefits Keep expatriates in home-country programs,

particularly if the firm receives no tax deduction for it?

Option to enroll expatriates in host-country benefit programs &/or make up any difference in coverage?

Do expatriates receive home-country or are eligible to receive host-country social security benefits?



Social Security Contributions by Employers & Employees

Table8.8


A Wider View on Business Costs

Relate costs of doing business in different economies to statistic measures of: Wages of employees, more than expatriates Costs for expatriate staff Air travel and subsistence Corporation taxes Perceived corruption levels Office and industrial rents Road transport.

Generally the developed countries tend to rank as more expensive than developing countries because their wage costs are higher, but nothing is absolute.


Rank Country Average Real Salary: Senior Managers (€) Rank Country Average Real Salary:

Senior Managers (€)

1 Turkey 79,021 15 Netherlands 58,915

2 India 77,665 16 Czech Rep. 57,416

3 Russia 77,355 17 Australia 55,505

4 Switzerland 76,913 18 Canada 54,032

5 Brazil 76,449 19 Italy 53,003

6 Poland 76,269 20 France 51,396

7 Spain 75,904 21 Belgium 51,196

8 Germany 75,701 22 Denmark 48,228

9 Japan 69,634 23 U.K. 46,809

10 Austria 66,243 24 Slovakia 45,389

11 Portugal 66,191 25 Norway 42,939

12 Ireland 62,608 26 China 42,288

13 USA 61,960 27 Hungary 41,406

14 Greece 60,785 28 Finland 41,018

Average - 59,651 29 Sweden 37,652

World Pay Report: Emerging Economies Come First in New International Pay Stakes, 2006

Tentative Conclusions

Complexity, challenges, & choices Emerging trends and developments Unexpected events Professional networking and consulting

services



Some Tentative Conclusions: Patterns in Complexity

International compensation administration is more complex than its domestic counterpart, but not radically different in pattern or form.

Recent developments in the study of global pay issues may be seen to operate at three distinct levels: The basic level of cultural values and assumptions; The level of pay strategy, practices and systems

design; The level of pay administration and form.


Some Tentative Conclusions: Patterns in Complexity (cont.) At the level of cultural values, a debate is

ongoing between

Advocates of pay systems that value competitive individualism and result in ‘hierarchical’ pay systems with large pay differentials for executives, market-sensitive professions and other ‘critical’ employee groups, and

Advocates of pay systems that value cooperative collectivism and result in more ‘egalitarian’ pay systems with smaller pay differentials and more shared group or firm-wide reward practices.


Complexity, challenges and choices in global payFigure

8-1


Chapter Summary

In this chapter, we have examined the complexities arising when firms move from compensation at the domestic level to compensation in an international context.

It is evident from our review that compensation policy becomes a much less precise process than is the case in the domestic HR context.

To demonstrate the complexity, challenges, and choices, we have:


Summary

Detailed the key components of an international compensation program

Outlined the two main approaches to international compensation (the Going Rate and the Balance Sheet), introduced a third new approach – Local Plus, and contrasted the advantages and disadvantages of each approach

Outlined special problem areas such as taxation, obtaining valid international living costs data, and the problems of managing TCN compensation.

Presented a model of global pay that highlights the complexity and yet familiarity of pay practices in the global context.

The combination of pay decisions based on strategic global standardization and sensitivity to the changing local and regional conditions that characterizes the state of international pay practices.


Implications for IHRM

Providing a strategic yet sensitive balance can only be achieved by creating and maintaining professional networks comprised of home office and local affiliate HR practitioners, outsourcing selected activities through specialist consultants, and a close cooperation with local and regional governments and other key local institutions.

Providing a strategic yet sensitive balance can only be achieved by creating and maintaining professional networks comprised of home office and local affiliate HR practitioners, outsourcing selected activities through specialist consultants, and a close cooperation with local and regional governments and other key local institutions.

Vocabulary

education allowances relocation allowances spouse assistance balance sheet, going rate or

market rate, & local plus approaches

taxation tax equalization tax protection, ad hoc &

laissez-faire approaches international base pay pay strategies


compensation complexities, challenges, &

greater choices HRIS = HR information system Key components base salary foreign service inducements hardship premium COLA = cost-of-living

allowance housing allowance home leave allowances


Discussion Questions

1. What should be the main objectives for a multinational firm with regard to its compensation policies?

2. Describe the main differences in the Going Rate and Balance Sheet Approaches to international compensation.

3. What are the key differences in salary compensation for PCNs and TCNs? Do these differences matter?

4. What are the main points that MNEs must consider when deciding how to provide benefits?

5. Why is it important for MNEs to understand the compensation practices of other countries?

6. Explain how balancing the interests of global and local, occupational and functional perspectives might play out in a compensation decision scenario.

ihrm, dr. n. yang1 chapter 8 international compensation

Documents

global compensation

tcn compensation

compensation package

complex issues

introductory chapter

yang1 chapter

yang2 chapter objectives

yang3 chapter objectives