Question

Discuss 9 options available for expatriate compensation. Consider how each of these options might be used for a transnational and a multi-domestic company.

Answer 1

A good compensation package is the one which is fair for the expatriate and cost effective for the organization. The options available for expatriate compensation include the following:

1.Home based approach

The home-based provides international employees with an expatriate compensation package that equalizes cost differences between the international assignment and the same assignment in the home country of the individual or the organization. It is based on some key assumptions and is designed to protect expatriations from cost differences between their home and host countries.

It is a good approach to be used by transnational companies as they are present across different nations and thus calculates the differences between the costs at these two places.

2.Host based approach

In this approach the assignee transfers to the host country payroll and receives base and incentive pay based on host country compensation practices and regulations. It may be a cost-effective option to the traditional home-based approach.

This approach can be used by multi domestic company as the company also works as per local responsiveness and if the pay is also decided as per the local compensation practices its easier to integrate the system.

3.Global Market Approach

A global market approach to expatriate compensation requires the international assignment be viewed as ongoing & continuous process even though the assignment may be for various periods of time and the employee may be in various countries. The expatriates are on the equivalent compensation scale, regardless of their home country.

This approach could be beneficial for transnational companies as they undertake foreign direct investment and engage in foreign production. So. it would be better for them to use this approach for expatriate compensation.