Question

Hi Tech World in UAE provides advanced technological solutions to its clients. In order to satisfy and delight their customers, they believe in hiring the best talent from around the globe. Their workforce consist of more than sixty percent expatriates. The compensation manager needs information on the various suitable approaches for setting the expatriate employees’ base pay.

Discuss briefly the three approaches available for him to set the expatriate employees’ base pay.

Answer 1

A good expatriate compensation must be one that is fair for the expatriate's contribution and also cost-effective for the organization. There are three approaches to determine expatriate compensation. The compensation manager of Hi-Tech World in UAE must determine which of the following approaches he must follow to set the expatriate employee's basic pay.

1. Home-Based Approach: It is also called a balance sheet approach. This approach is based on key assumptions of cost differences between the expatriate employee's home and host countries. It equalizes the cost differences between an expatriate employee's international assignment and the same assignment in their home country. It is the most popular approach of all the three.
2. Host-Based Approach: This approach is a cost-effective approach to the organization. In this approach, the expatriate employee is compensated based on the host country's compensation regulations and practices. It works by integrating employees into the local host country salary structure.
3. Global Market Approach: This approach is much more inclusive than the other approaches. In this approach, all assignees and expatriates are on an equivalent compensation scale irrespective of their home country. This approach requires the organization to view the international assignment as continuous even if the assignment is over various periods of time.