compensation for international managers

8/2/2019 Compensation for International Managers

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COMPENSATION FOR

INTERNATIONAL

MANAGERScompensation and benefits requires knowledge

of the employment and taxation laws, customs,

environment, and employment practices of many

foreign countries.

currency fluctuations and the effect of inflation

on compensation,

why and when special allowance must be

supplied and which allowances are necessary in

which countries.

local knowledge required in many of these areas

requires specialized advice; many multinationals

retain the services of consulting firms which may

offer a broad range of services


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OBJECTIVES OF INTERNATIONAL

COMPENSATIONFirst, the policy should be consistent with the overall

structure, and business needs of the multinational.

Second, the policy must work to attract and retain

taff in the areas where the multinational has the

reatest needs and opportunities.

Third, the policy should facilitate the transfer ofnternational employees in the most cost-effective

manner for the firms.

Fourth, the policy must give due consideration t

quity and ease of administration.

Key Components of an International Compensation

Program

three categories of employees: PCNs, TCNs and

HCNs.

the key components of international compensation,

which include base salary, foreign service

nducement/hardship programme, allowances, and

enefits.


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ase SalaryThe term base salary acquires a somewhat differen

eaning when employees go abroad. In a domest

ontext, base salary denotes the amount of cas

ompensation that serves as a benchmark for othe

ompensation elements (e.g., bonuses and benefits

or expatriates, it is the primary component of

ackage of allowances, many of which are directlated to base salary (e.g., foreign service premium

ost-of living allowance, housing allowance) as we

the basic for in-service benefits and pensio

ontributions.

oreign Service Inducement/Hardshi

remiumas compensation for any hardship, eligibility for th

remium

t is important to note that these payments are morommonly paid to PCNs than TCNs. Foreign servic

ducements, if used, are usually made in the form

percentage of salary usually 5 to 40 percent of ba

ay. Such payments vary, depending upon th

signment, actual hardship, tax consequences, an


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llowancesThe cost-of-living allowance (COLA), whic

pically receives the most attention, involves

ayment to compensate for differences ixpenditures between the home country and th

reign country (e.g., to account for inflatio

fferentials).

The provision of a housing allowance implies th

mployees should be entitled to maintain their homountry living standards (or, in some cases, receiv

ccommodations that are equivalent to that provide

r similar foreign employees and peers).

Those IN THE BANKING AND Finance industrnd to be the most generous, offering assistance i

le or leasing, payment of closing costs, payment o

asing

Management fees, rent protection, and equi

otection, Again, TCNs receive these benefits le

equently than PCNs.

Education allowances for expatriates

Allowances for education can cover items such a

ition, language class tuition, enrollment fees, booknd supplies, transportation room and board, an

compensation for international managers

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