Week 6 Lecture
In Week 6, we will evaluate expatriate compensation packages as well as compare and contrast compensation benefits in different countries. In prior weeks of this course, we focused solely on the issues of compensation and benefits in the U.S. This week the discussion will turn to topics on a global scale and we will examine compensation strategies for U.S. workers working for U.S. companies abroad and the compensation practices of other countries.
The increase of globalization and the increase of multi-national organizations over the last several decades require compensation managers to have some knowledge of compensating employees outside of the U.S. (Martocchio, 2017). U.S. organizations operate in other countries including Asia and Mexico for several reasons. However, one significant reason is that the labor force is paid substantially less than compared to U.S. employees U.S. (Martocchio, 2017).
Additionally, labor unions generally do not have much bargaining power in developing Asian countries or in Mexico, because the governments possess extensive control over workplace affairs, however some countries do have mandates on salary increases due to unionization
An expatriate is an employee who lives in foreign country for a set time to work for a specific organization. However, the organizations need to make the time abroad for the employee worth it for the employee consider the position. Therefore, expatriate employee packages come in many variations. What is included in any package will depend on several factors and there are a few main types of expatriate packages. The three (3) basic expatriate compensation packages are categorized as a full expat package, expat lite package, and local hire (Hall, 2015).
Typically, the full expat package is available to employees with highly specialized skills in their field and will often include many benefits ensuring a comfortable life style in most any country (Hall, 2015). A full expat package normally consisted of generous allowances for relocation, housing, vehicle, education, home travel as well as other benefits. An expat lite package will consist of a subset of benefits offered under the full expat package such as relocation but the allowances will not be as generous.
The local hire offers no benefits other than what a “local national employee in the host country would receive.” (Hall, 2015). The individual will pay all expenses to the host country, all housing costs and arrange for their own work and residence permits (Hall, 2015).
There are legal, cultural, and economic issues that HR professional need to be concerned with when sending or hiring employees abroad. Organizations need to know the law in the foreign county when it comes to labor laws, such as working conditions, hours, etc. However, the organizations also need to be knowledgeable about the compensation and benefits law of the foreign country. There are pay differences between countries and the organization needs to be aware of these differences and adjust the pay offer to the employee as needed.
Please review the Global Staffing (Links to an external site.) video which will provide an overview of global staffing including with expatriates, host-country nationals, and third-country nationals. It will also discuss how each staffing option presents some unique HR management challenges.
Gregg Learning. (2018). Global staffing (Links to an external site.) [Video file]. Retrieved from https://www.youtube.com/watch?v=11irCzsdip4
Hall, B. (2105). What to expect in your expat compensation package (Links to an external site.). Retrieved from
Martocchio, J. (2017). Strategic compensation: A human resource management approach (9th ed.). New York, New York: Pearson.
Evaluate the following methods for establishing base pay in international assignments: home country-based pay, headquarters-based pay, and host country-based pay.
Include within your discussion the strengths and weaknesses of each method and factors that should be considered when determining the appropriate international pay strategy.
How should organizations balance host-country income tax differentials?
How do compensation plans affect employees’ willingness to accept foreign assignments?
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