Magazine article Global Finance

Paying for Expats

Magazine article Global Finance

Paying for Expats

Article excerpt

As companies globalize, the number of employees taking on foreign assignments grows. Compensation specialists at Towers Perrin suggest ways to keep expatriate costs in line, while remunerating employees fairly for taking on overseas duties.

Select the Right People

1 Too often companies focus on a candidate's technical abilities and gloss over his or her ability to adjust to a new corporate and social culture."The single biggest cause of assignment failure is the inability to adapt to the new situation," says Robert Freedman, a Towers Perrin expert in international compensation, "not a lack of credentials." For some expats, business styles clash; the shortcomings of local backup talent is too frustrating. For others, unhappy children may effect job performance; a working spouse who can't find meaningful local employment may be mis erable or won't make the move at all. Some companies relocate employees only at an early stage in their careers or later, when they're "empty nesters," Freedman says.

Don't Just Leave Them There

2 Preparing expats and their families, constantly evaluating job performance, and mentoring when appropriate helps ensure that the expat performs well-and stays for the entire length of the assignment.

Adopt a Multiple Reward System

Rather than using full balance sheet compensation models that guarantee a comparable home country standard of living, consider:

3 Modified balance sheet compensation. Offer a reasonable home or headquarters standard of living for a prescribed period of time.

4 Net-to-net. Provide after-tax, afterhousing income in the host country comparable to what transferees would receive at home.

5 Destination pricing. In addition to salary on par with the local marketplace, throw in compensation elements (housing, education allowances for dependents) to facilitate the transfer.

6 Localization structure. …

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