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International Compensation, NAMA: Muhammad Rafi Padantya NIM: 20311479 …
International Compensation
Introduction
Compensation is increasingly seen as
Mechanism to develop & reinforce a global corporate culture
Primary source of corporate control
Explicitly linking performance outcomes with associated costs
International compensation complexities
Pay
Housing
Safety
Transportation
Education of children
Length of stay
Objectives of international compensation
The policy:
should be consistent with overall strategy, structure, & business needs of the MNE
should facilitate the transfer of international employees in the most cost-effective way for the firm
must attract & retain staff in areas where the MNE has the greatest needs & opportunities
must give due consideration to equity & ease of administration
Components of international compensation for expatriates
Key components for expatriates
Base salary
Foreign service inducement & hardship premium
Allowances
Benefits
Approaches to international compensation of expatriates
Going rate approach
Balance sheet approach
4 balance sheet approach categories
Goods & services
Housing
Income taxes
PC & HC income taxes
Reserve
Local plus approach
The expatriate employee is paid according to prevailing salary levels, structure, & administrative guidelines of the home country
MNE approaches to international taxation
Tax equalization
MNE withholds tax obligation & then pays all taxes in HC
Tax protection
Employee pays up to amount s/he would pay on compensation in HC
Ad hoc
each expatriate handled differently
Laissez-faire
each is on their own
Issues to consider for expatriate benefits
Keep expatriates in home-country programs, particularly if the firm receives no tax deduction for it?
Option to enroll expatriates in host-country benefit programs &/or make up any difference in coverage?
Do expatriates receive home-country or are eligible to receive host-country social security benefits?
NAMA: Muhammad Rafi Padantya
NIM: 20311479
KELAS: MSDM Inter - K