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International employee compensation approaches

Its main idea is to maintain the expatriate’s standard of living throughout the assignment at the same level as it was in his/her home country. In other words, it is about ensuring the same purchasing power, which helps to maintain the home country’s lifestyle.

Ø  Home-country salary shows the basic level of each category at home.

Ø  Assignment-location costs indicate that expenditures for income taxes, housing, and goods and services are typically higher abroad.

Ø  Assignment-location costs paid by employer and from salarydemonstrates that expatriates pay the same amount as their domestic counterparts, with the employer making up the difference, as indicated by the shaded portion of each category.

Ø  Home-country equivalent purchasing power illustrates that expatriates have the same purchasing power as typical domestic peers, and may also receive incentives.

Balance sheet approach exmple

Going rate approaches:

Ø  the going rate approach, which is also known as the ‘localization’, ‘destination’ or ‘host country-based’ approach

Ø  in this method, the base salary for international transfer is linked to the salary structure in the host country.

Example: A Indian bank operating in London use local British salaries, the salaries other Indian competitor banks in London or the average salary offered by all foreign

banks operating in London as the reference point for the base

salary offered