internatinal business chapter3

1. EXPATRIATE
COMPENSATION
BY:
SRIDEVI H.V

2. MEANING OF COMPENSATION
Compensation is the total of all monetary and non-
monetary rewards provided to employees in return to
their services.
The overall objective of providing compensation is to
attract, retain, reward and motivate employees.

3. COMPONENTS OF COMPENSATION
PACKAGE
1. BASE SALARY
2. BENEFITS
3. LONGTERM BENEFITS
4. ALLOWANCE
5. INCENTIVES
6. TAXES

4. BASE SALARY
Base salary is amount of money that an expatriate
normally receives in the home country.
Basic pay serves as the benchmark against which
bonus and benefits are calculated.
The salaries usually are paid in home currency, local
currency or combination of both.

5. BENEFITS
Alternatively known as indirect compensation, hidden
salary roll, or service programmes. Benefits include a
suite of programmes such as-
• Entertainment
• Festival celebrations
• Use of club facilities
• Paid vacations
• Vehicles
• Telephone facilities.

6. LONG TERM BENEFITS
The most common long term benefits offered to
employees of MNC’s are employee stock options.
Some of the commonly used stock options schemes
are:
A. Employee stock option plan (ESOP)
B. Restricted stock unit (RSU)
C. Employee stock purchase plan (ESPP)

7. ALLOWANCE
Allowance is money that a company provides to
an employee for a specific purpose.
Some of the common allowances are:
• Cost of living allowance (COLA)
• Spouse assistance
• Housing allowance
• Home leave allowance
• Education allowance
• Relocation allowance

8. INCENTIVES
An incentive is something that motivates an individual
to perform an action.
In the process a growing no. of firms have dropped the
ongoing premium for overseas assignment and
replaced it with one-time lumpsum premium.
Some of other popular incentives are:
• Referral bonus
• Retention bonus

9. TAXES
MNCs generally select one of the following
approaches :
• Tax equalization
• Tax protection

10. FACTORS INFLUENCING
COMPENSATION
INTERNAL
ENVIRONMENT
EXTERNAL
ENVIRONMENT
• Goal orientation
• Capacity to pay
• Organizational
culture
• Workforce
composition
• Parent nationality
• Labour market
characteristics
• Government
• Industry type

11. APPROACHES TO COMPENSATION
PACKAGE
1. Balance sheet approach
2. Going rate approach
3. Lumpsum method