International Compensation

1
International Compensation

• Nancy Johnson
• April 2005

2
Definitions

• Host country nationals (HCN)
• Local citizens working for a foreign company
• Expatriates
• People working for a company from their native
  country but in another country
• Third party nationals
• People working for a company with ownership and
  at a location which is different than their own
  country

3
Set Expatriate Pay Level

• Exercise You are a Compensation Executive with
  an American Company making 100,000 per year.
  You are married with a husband and two children.
  Your company has asked you to live and work in
• London, England
• Beijing, China
• Cairo, Egypt
• Montreal, Canada
• San Palo, Brazil
• Sydney, Australia
• Baghdad, Iraq
• Describe what factors you would consider in
  deciding how and what types of factors are
  important to your relocation?
• Exchange Rate

4
Financial

• Currency
• Inflation
• Foreign Service Premiums
• Hazard Premiums
• Mobility Pay incentive to change assignment
• Taxes

5
Fringe

• Housing allowances
• Tax
• Local customs
• Education
• Security
• Extra paid time off to return home
• Rest relaxation leave

6
Balance Sheet Approach

• Standard of living comparable to US
• Ties to US
• Dont want to assimilate into local culture
• Short assignment
• Return home to US following assignment
• Income protection
• Try to stay comparable in housing, goods
  services, discretionary income, taxes

7
Considerations for Other Employees

• What is the proper role for the balance between
  HNCs and TCNs?
• Strategies
• Think global, act local
• One size fits all
• Facilitates moving between countries
• Think act globally locally
• Legal differences
• Cultural differences

8
Summary

• Internal, external individual equity become far
  more complicated in international compensation
• Many more comparisons are made and the change in
  exchange rate and so forth become far more
  complicated