For many companies, maintaining a domestic compensation program that supports the strategic goals of the organization and meets the needs of employees is a difficult challenge. This challenge is intensified when a similar program must be designed to operate in multiple countries with different cultures. For organizations competing in a global marketplace, managing compensation requires a through understanding of the taxation of compensation and benefits, differing state social systems, differences in living standards and employee values and expectations.
Some of the most challenging questions in compensation practices are following:
- How does a company pay expatriates from difference home countries brought together to work on a project?
- What about compensation packages for same country nationals sent to different regions of the world?
Traditional compensation systems for expatriates, such as the balance sheet approach and going rate approach, may not be adequate for the company or expatriate in facilitating an case of transfer. Global enterprises require global compensation systems that allow the organization to maintain the flexibility and ease of transfer between countries and regions while providing employees a just wage. A compensation system must be designed to work regardless of where the expatriate is sent on assignment. To some degree, this requires rethinking the traditional focus on location and national culture in determining expatriate compensation.Traditional Systems of Global Compensation
Of the traditional global compensation schemes, the balance sheet method is most commonly used. More than 85% of US companies use some variation of this method to compensate their expatriates. The objective of the balance sheet method is to keep the expatriate economically whole or to ensure that the expatriate doesn’t financially suffer or come out ahead as a result of the international assignment.… Read the rest