BUS 325 Week 9 Quiz – Strayer

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Quiz 8 Chapter 8

International Compensation

TRUE/FALSE

1. Increased complexities in global pay include the decreased use of outsourced activities and subsequent labor pricing needs.

2. The competing objectives of the international firm and the expatriate employee are fundamentally different from that which exists in a domestic environment.

3. The term “base salary” acquires a somewhat different meaning when employees go abroad.

4. Base salary must be paid in local country currency.

5. Foreign service inducements are usually made in the form of a percentage of salary and usually amount to 30 to 60 percent of base pay.

6. The provision of a relocation allowance implies that employees should be entitled to maintain their home country living standards.

7. Many employers cover the expense of one or more trips back to the home country each year.

8. The provision of a cost-of-living allowance implies that the cost-of-living in the foreign assignment is higher than at home.

9. PCNs and TCNs do not usually receive the same treatment concerning educational expenses.

10. Pension plans are very easy to deal with from country-to-country, as national practices are similar

11. The Going Rate Approach is based on local market rates.

12. With the Going Rate Approach, if the location is in a low-pay country, the multinational usually supplements base pay with additional benefits and payments.

13. The Balance Sheet Approach links the base salary for PCNs and TCN to the salary structure of the relevant home country.

14. Generally the developed countries tend to rank as more expensive than developing countries because their wage costs are higher.

15. It is a common practice for MNEs to use a home-country balance sheet approach for TCNs except in the USA.

16. “Universal” pay systems may be preferred by corporate pay planners rather than having to deal with myriad “Local” systems.

17. Firms will never provide standardized “core” pay in the global firm.

18. Paying TCNs according to their home-country base salary can be less expensive than paying all expatriates on a PCN scale.

19. MNEs using the Balance Sheet approach to international compensation are constantly updating compensation packages for cost of living changes.

20. Obtaining up to date information on international living costs is a constant issue for multinationals.

MULTIPLE CHOICE

1. Successfully managing compensation and benefits in a multinational context:

a. Requires knowledge of employment and taxation law, customs, environment, and employment practices of many foreign countries

b. Requires the use of both the going rate approach and the balance sheet approach to international compensation

c. Does not require familiarity with currency fluctuations

d. Does not require the use of any kind of base salary

2. In a domestic context, base salary:

a. Is the primary component of a package of allowances

b. Includes cost-of-living allowance

c. Denotes the amount of cash compensation serving as a benchmark for other compensation elements

d. Is determined by using the Going Rate Approach

3. Which of the following is the foundation block for international compensation whether the employee is a PCN or TCN?

a. Tax protection

b. Foreign service inducement/hardship premium

c. Allowances

d. Base salary

4. Which of the following involves a payment to compensate for differences in expenditures between the home country and the foreign country?

a. Home leave allowance

c. Cost-of-living allowance

b. Housing allowance d. Relocation allowance

5. The provision of a housing allowance:

a. Is not often assessed on a case-by-case basis

b. Does not ever include a fixed housing allowance

c. Implies higher living standards

d. May include company-provided housing

6. The purpose of home leave allowances is to:

a. Compensate for differences in expenditures between the home country and the foreign country

b. Give expatriates the opportunity to renew family and business ties, thereby helping them to avoid adjustment problems when they are repatriated

c. Cover moving, shipping and storage charges, and temporary living expenses

d. Give employees a chance to leave their homes to tour their potential foreign assignment

7. Relocation allowances:

a. Do not usually cover temporary living expenses

b. Usually cover temporary living expenses

c. Cover discretionary items

d. Do not usually cover moving

8. MNEs generally pay allowances in order to:

a. Change the living standards of employees

b. Encourage employees to take international assignments

c. Avoid certain taxes

d. Discourage employees from taking international assignments

9. Most US PCNs typically:

a. Remain under their home country benefit plan

b. Adopt US benefit plans

c. Take advantage of both their home countries’ and the US’s benefit plans

d. Do not receive benefits, only allowances

10. Firms need to address many issues when considering benefits, including:

a. Whether or not to maintain expatriates in home-country programs

b. Whether or not to use the Going Rate Approach

c. Whether or not to use the Balance Sheet Approach

d. Whether or not expatriates should receive any social security benefits

11. Benefits that may be provided to employees include:

a. Base pay c. Vacations and special leave

b. Tax protection d. Cost-of-living allowances

12. The base salary for an international transfer is linked to the salary structure in the host country using:

a. Tax protection c. The Going Rate Approach

b. Tax equalization d. The Balance Sheet Approach

13. The Balance Sheet Approach:

a. Is the most widely used approach to international compensation

b. Relies on survey comparisons

c. Creates potential re-entry problems

d. Creates variation between expatriates of the same nationality in different countries

14. An advantage of the Going Rate Approach is that:

a. There is variation between assignments for the same employee

b. There is equality in pay with local nationals

c. There is equity between assignments

d. It results in fewer taxes

15. A disadvantage of the Balance Sheet Approach is that:

a. There can be variations between assignments for the same employee

b. There can be variations between expatriates of the same nationality in different countries

c. There may be potential re-entry problems

d. It can result in great disparities between expatriates of different nationalities and between expatriates and local nationals

16. The four categories of outlay incurred by expatriates that are incorporated in the Balance Sheet Approach are:

a. Goods and services, housing, income tax

and reserve

b. Housing, base pay, goods and services and taxation

c. Taxation, housing, exchange rate and goods and services

d. Reserve, housing, taxation and evaluation cost

17. The most common taxation policy used by multinationals is:

a. Tax protection c. Tax equalization

b. Parent country national taxation

d. No taxation

18. “Globals” are:

a. Expatriates c. Commuters

b. Permanent international assignees

d. International travelers

19. Many multinationals respond to complexity of tax issues across countries by:

a. Ignoring all tax issues except for the Parent company

b. Retaining the services of international accounting firms

c. Having an in-house tax division to prepare all tax related forms and addresses all country tax issues

d. Leaving all tax issues up to the employee

20. A firm-external theory of job worth is influenced by:

a. Behavioral theory c. Cultural and institutional perspectives

b. Level of internationalization

d. Local market conditions

21. Pay strategy may be defined in terms of a series of interlocking strategic choices on:

a. Basis of pay, units of aggregations, patterns of variation in pay and job evaluations

b. Industry/competition, size of organization, organizational structure and job evaluations

c. Employment relationships, corporate culture, basis of pay and job evaluation

d. Local market conditions, laws, basis of pay and job evaluations

22. An external, environmental norm in global pay strategy would be:

a. Traditional employment relationships

c. Resource-based view of the firm

b. Labor unions and educational systems

d. Institutional economics

23. Performance verses seniority is a strategic choice of pay strategy considered in:

a. Job evaluation system

c. Internal equity

b. Units of aggregation

d. Basis of pay

24. In a recent cost of living survey, the most expensive city to live in is:

a. London c. Zurich

b. New York d. Tokyo

25. The Top Five highest taxation countries are:

a. Netherlands, Belgium, Germany, Australia and Italy

b. USA, Netherlands, France, Germany and China

c. China, Australia, Belgium, France and Malaysia

d. Taiwan, France, Netherland, Belgium and Australia

26. International compensation is characterized by:

a. Complexity, culture and corporation

c. Complexity, challenges and choices

b. Complexity, cultural challenges

d. Complexity, cooperation and competition

27. Global pay practices consist of firm level decisions about:

a. Pay mix, pay level and standardization versus localization

b. Pay levels, pay mix and hierarchy versus egalitarian basis

c. Pay levels, cultural norms and pay bases

d. Pay mix, pay culture and standardization versus localization

28. International compensation is:

a. On a practical level, simpler than a domestic pay system

b. Not considered critical for most multinational enterprises

c. Still essentially equivalent to the topic of expatriate pay practices in all multinational enterprises

d. More complex than domestic pay due to outsourcing and balancing centralizations and decentralization of pay forms

29. National and regional differences in the meaning practice and tradition of pay:

a. Are rapidly diminishing

b. Have practically disappeared with global cultural integration

c. Remain significant sources of variation in the international firm

d. Are actually increasing due to national and regional protectionist legislative mandates

30. A seamless network of pay providing members, made up of global firms, their specialist consultant and local and regional public and private interests are:

a. A reality

b. An impossibility

c. Not considered critical to MNEs executives

d. A goal not yet a reality

31. The “Local Plus” approach to international compensation

a. Pays expatriates solely based on prevailing local wage conditions

b. Provides nothing but benefits in transportation assistance, housing and dependent’s education

c. Combines some local pay practices with some expatriate benefits

d. Always includes tax equalization policies

SHORT ANSWER

1. Present the general objectives of international compensation for a firm.

2. List the objectives of international compensation for an employee.

3. Discuss the key components of an international compensation program.

4. Describe the advantages and disadvantages of the Going Rate Approach to international compensation and the Balance Sheet Approach.

5. What are the three vertical levels of global pay strategies?

6. Describe some categories of Basis-for-Pay of strategic pay systems.