Custom Approaches to Compensating Expatriates
Balance cost-effectiveness with competitiveness, meet business needs, and enhance assignee development with a customized expatriate compensation plan
What works for one organization often will not work for another. The best compensation system for your company should balance cost-effectiveness with competitiveness, meet business needs, and enhance assignee development.
In many cases, the most suitable system for paying expatriates is to follow the balance sheet approach, retaining them in the home-country pay structure and providing cost equalizers and, if appropriate, incentives. However, should this method not be the best approach to meet your company's particular needs, ORC will help you choose the best solution from options such as:
- Pure Home-country Salary—Maintains expatriates (usually on business trips lasting several weeks to a few months) on home-country pay and benefits with no cost equalizers, premiums, or other add-ons.
- Headquarters-based Pay—Keeps a multinational expatriate work force on headquarter pay and benefits, orienting cost equalizers to headquarters.
- Host-country Approaches—Provide comparable salaries in local currency for expatriates and local nationals doing similar work, generally eliminating cost equalizers and premiums.
- Net-to-net Approach—Integrates employees who make a permanent or indefinite move into local pay programs, adjusting home-country net pay for any cost-of-living difference, then grossing up for local taxes and housing.
- Higher of Host or Home—Compares (at net pay level) a home- or headquarters-based build-up with placing the employee in the host-country pay structure, allowing selection of the option that yields the highest net compensation.
- Modified Balance Sheet—Maintains a partial link to home-country compensation and benefits, using some common pay elements regardless of the expatriate's home country.