Compensating Executives Appropriately for Expatriate Assignments

¶ … International Compensation Package for Expatriate Executives Assigned to Mexico This memorandum is in response to your request for a comprehensive and effective international compensation package to encourage the employees selected to take the assignment to facilitate the launch of the company's new operations in Mexico. The following recommendations are based on 10 equal expatriate positions with a domestic equivalent salary of $80,000. Notwithstanding these equivalencies, the research to date confirms that "one-size-fits-all" compensation packages may be less effective than individualized approaches that take executives' current life situation into account (Divakaran & Mani, 2012).

It is reasonable to suggest that some of these 10 executives (particularly those who are single) will require little or no encouragement to accept the assignment to Mexico, viewing it as a plum assignment given the lower cost of living and amenities that are available there (Cost of living comparison between Mexico and the U.S., 2015).

By contrast, many if not most of these 10 executives may require significant encouragement in order to convince them that the assignment to Mexico is in their best interests because of the stress and anxiety that expatriate assignments can produce (Wederspahn, 1999). First and foremost, the compensation package should include a 10% bonus for any executive who agrees to the assignment to Mexico.

In addition, all executives should be offered adequate per diem payments that compensate them for the inconveniences they will likely experience as a result of relocation and separation from their family and friends in the United States (Segal, 2009). This is an especially attractive, cost-effective compensation strategy because although there are some percentage limits on meals and entertainment, per diem expenses for expatriate executives are almost entirely tax deductible (Segal, 2009).

The compensation package should also delineate the specific amount of time the executives will be required to remain in Mexico irrespective of the status of the company's expansion plans. In this regard, Stroh and Black (2009) advise that, "At the very least, a company should have a clear policy limiting the length of time that an employee may retain expatriate status" (p. 127). Furthermore, the compensation plan should include provisions concerning the manner in which these executives will be localized upon their return to the states (Stroh & Black, 2009).

In order to help encourage executives to remain until the new expansion in Mexico is operational, the compensation package should also include a bonus payment equivalent to one-fourth of their annual salaries or another amount determined by the company's executive leadership team. Finally, the compensation package should also.