Major Aspects of An International Compensation Package


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International Compensation Packages

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Major Aspects of An International Compensation Package

  2. 2. Major Aspects of An International Compensation Package • • • • • • Base salary Foreign service inducement premium Allowance Benefits Incentives Taxes
  3. 3. Factors Affecting Global Compensation And Benefits • Dealing with diverse standards and costs of living and multiple currencies, exchange rates, inflation, tax rates etc • Maintaining the suitable balance between global consistency and local significance. • Addressing organizational business changes (expansions, mergers and acquisitions, joint ventures, Greenfield operations and investitures). • Complying with local compensation practices, laws and regulations. • Accommodating varied employee values and expectations stemming from differences in cultures, languages and communication preferences.
  4. 4. Determinants of Expatriate Compensation – Findings among Expatriate Members of SEFE By VESA SUUTARI & CHRISTELLE TORNIKOSKI
  5. 5. Main Focus of Article • Empirical research made on expatriate compensation packages and their determinants and which provides help for compensation-related decision-making. • In the light of this, the first objective of the study is to analyze the expatriate compensation packages of ( Finnish) expatriates in the light of the identified elements of expatriate compensation.
  6. 6. • The second objective is to analyze the determinants of such compensation packages, i.e. to see which background variables influence the compensation package design and what kind of influence those variables have. Empirical evidence was collected among the Finnish expatriate members of SEFE
  7. 7. What Does Expatriate Means……. Expatriates means all kinds of employees that move from one country to employment in another country and are assigned longterm assignments, in other words for more than one year
  8. 8. Expatriate Dissatisfaction •Black (1991) found that 77% of the expatriate managers were dissatisfied with their expatriation salaries, their benefits and their international compensation packages in general. •Assignment failure has been described as one of the biggest drawbacks companies have to face and many times dissatisfaction of compensation is the reason of failure
  9. 9. Cost Vs Effectiveness The cost of expatriates is typically seen to be very high from the company point of view and the other hand on firms need to strive continually to achieve maximum effectiveness from typically limited and closely monitored compensation budgets.
  10. 10. Compensation Package Components • • • • • Base Salary Bonuses Allowances Insurance / Incidental Benefits Taxation
  11. 11. TYPES of ALLOWANCES • • • • • • • Overseas premium Cost-of-living allowance Housing allowance Hardship allowance Car allowance Dual-career allowance. Home-leave / travel allowances,
  12. 12. Determinants Of The Compensation Package Design There are two types of determinants : • Internal Determinants • Eternal Determinants
  13. 13. Internal Determinants Internal determinants consists following variables : 1. 2. 3. 4. 5. 6. 7. Labor-pool of the employee The employee’s management level in the organization The stage of the family-life-cycle Nature of the assignment Candidate’s background Nature of the task Objectives and Missions of companies
  14. 14. Eternal Determinants Eternal determinants consist following variables: • • • • Level of economic development of the host country Level of organizational/internal cultural diversity Environmental risk Nationality of Company
  15. 15. Data And Method •The sample of the present study consisted of Finnish expatriates operating around the world. •The survey was carried out in cooperation with the Finnish union for qualified economics graduates •The data was collected in 1996 through the use of questionnaire distributed to an identified sample of 660 individuals •In the event, 265 expatriates returned the questionnaire and thus the response rate was about 41%
  16. 16. • Resulting sample of Finnish expatriates included 73% working for private Finnish companies and the remaining 27% working for a private foreign employer. • These expatriates operated mainly in the following areas: Scandinavia, Other Western Europe, Central and Eastern Europe , USA and Asia • Expatriates were on average 39 years old and the majority of them (79%) were males. • 79% of the expatriates were married and 72% of the expatriates had their children with them and in most cases (59%) these children were of school age.
  17. 17. Results • • • • • • The first objective of the study was to analyze the expatriate compensation packages of Finnish expatriates The results of the study indicated that the total salary-level of expatriates varied a lot. Expatriate received performance-based bonuses. With regard to holiday payments it was most common that hostcountry principles were followed or the holiday payments were not paid at all. Every third expatriate reported that their taxation treatment was taken into account When their salary-level was defined. From the different types of allowances, allowance were received by the majority o the expatriates. About every third of them received also a cost-of-living allowance and an oversea premium.
  18. 18. Results The second objective was to analyze the determinants of the expatriate compensation. • With regard to studied determinants, many significant variables could be identified. • Support was received for expectations in the case of the following variables: sex, age-group, family situation, level in the organizational hierarchy, nature of assignment, area of operation and the nationality of the employer. • In the case of the task type, the only difference appeared when general • management tasks were contrasted with other tasks. Still, this is related to the level in the organizational hierarchy since general management tasks typically represent higher organizational levels. • No additional differences appear across the task types and thus the task type was not a very relevant explanatory variable.