Expatriate Compensation Package Compensation Is a Crucial

Expatriate Compensation Package

Compensation is a crucial link between strategy and its successful implementation. There is a fit between compensation and the goals for which the firm wants managers to aim. In this way employees may not feel exploited (Deresky, 2011). The employees need to perceive equity and good will in their compensation and benefits whether they are parent country nationals or host country nationals. Expatriates have to be competitively remunerated.

Compensation of expatriates whether from parent or host country calls for reconciliation of the parent and host country financial, legal, and customary practices (Deresky, 2011). To ensure that expatriates do not lose out on through their overseas assignment the balance sheet approach has to be used to equalize the standard of living between the host country and the home country and to add some compensation for inconvenience or qualitative loss. The multinational corporations have to make up additional costs that the expatriate stands to incur for taxes, housing, and goods and services (Crandall & Phelps, 1991). Under circumstances when tax differential is considered complex and expensive for the company, a policy of tax equalization can be used (Deresky, 2011). This is when a company pays any taxes due on any type of additional compensation that the expatriate receives for the assignment. S/he pays in taxes what s/he would have paid back home. Efficient tax planning can nevertheless be used to lessen the burden of foreign taxes. Regarding parent company compensation all components of the compensation package have to be considered in light of home and host country legalities and practices (Deresky, 2011). Some of the components that have to be factored here include: salary, taxes, allowances, and benefits. Regarding salary, issues pertaining to local salary buying power and currency translation as compared with home salary have to be critically looked into. The bonuses or incentives for dislocation have to be factored in. any differential effects of taxes as a result of expatriate's assignment have to be equalized. Relocation expenses; cost of living adjustments; housing allowance for assignment and allowance to maintain house at home; trips home for expatriate and family; and private education for the expatriate's children have to be factored into the expatriate's compensation package (Deresky, 2011). Finally, health insurance and stock options have to be looked into by the multinational corporations where these expatriates work.

It is imperative that the compensation package for these expatriates be competitive to attract, motivate, and retain the best local managerial talent.