Compensation and Compensation and Benefits for American Benefits for American

ExpatriatesExpatriatesSarah BradySarah Brady

Deanine EstesDeanine EstesShannon JohnsonShannon Johnson

Kate RobertsonKate Robertson

Questions for our Questions for our Expatriates and ExpertsExpatriates and Experts

Ms. Kate RobertsonMs. Kate Robertson - Human - Human Capital Advisory Services Division -Capital Advisory Services Division -

MercerMercer

Ms. Shannon JohnsonMs. Shannon Johnson – Colgate – Colgate PalmolivePalmolive

Ms. Deanine EstesMs. Deanine Estes - Proctor & - Proctor & GambleGamble

Ms. Sarah BradyMs. Sarah Brady - Chevron - Chevron

CAUTION…CAUTION…

What is an American expatriate?What is an American expatriate? There is not “one correct There is not “one correct

method” to create a method” to create a compensation package.compensation package.

There are more factors above There are more factors above and over what we have and over what we have discussed…we choose the main discussed…we choose the main issues.issues.

Failed AssignmentsFailed Assignments

Many expatriate assignments Many expatriate assignments fail each year ~30%fail each year ~30% Family dissatisfactionFamily dissatisfaction Cultural issuesCultural issues Feeling of isolation from home Feeling of isolation from home

companycompany Financial dissatisfactionFinancial dissatisfaction

High costs associated with High costs associated with failuresfailures

OverviewOverview Monetary Factors Monetary Factors

of Expatriate of Expatriate CompensationCompensation

Non-monetary Non-monetary FactorsFactors

Political Political ImplicationsImplications

Current EventsCurrent Events

Monetary Factors: Monetary Factors: Base SalaryBase Salary

Base SalaryBase Salary Comparable to home countryComparable to home country

Serves as a reference point for establishing additional benefitsServes as a reference point for establishing additional benefits

Greatest point of flexibilityGreatest point of flexibility Choose methodChoose method

Home country-basedHome country-based

Host country-basedHost country-based

Headquarter-basedHeadquarter-based

““Base salary is the greatest point of flexibility. Companies set a maximum Base salary is the greatest point of flexibility. Companies set a maximum that’s not a maximum, to be honest”that’s not a maximum, to be honest”

-David Kohtynski, Nike-David Kohtynski, Nike

Monetary Factors:Monetary Factors:Assignment PremiumAssignment Premium

Incentive: persuade Incentive: persuade acceptance of acceptance of international international assignmentsassignments

Environmental or Environmental or hardship premiumshardship premiums

Mobility premiumsMobility premiums

Monetary Factors:Monetary Factors:Tax ConsiderationsTax Considerations

Tax burden depends on location Tax burden depends on location of assignmentof assignment

Solution: Tax EqualizationSolution: Tax Equalization Simple and easily understoodSimple and easily understood Benefits both employee and Benefits both employee and

employeremployer Employee will not receive the tax Employee will not receive the tax

burdenburden May be high cost to EmployerMay be high cost to Employer

Monetary Factors:Monetary Factors:PayrollPayroll

Not placed on foreign Not placed on foreign location’s payrolllocation’s payroll

May accrue Social May accrue Social Security benefits Security benefits

Consider exchange Consider exchange rates and inflationrates and inflation

Non-monetary Factors:Non-monetary Factors:Family ConsiderationsFamily Considerations

Assimilation programsAssimilation programs Support programsSupport programs Call centersCall centers Language programs Language programs Cultural awarenessCultural awareness

Non-monetary Factors:Non-monetary Factors:Medical CoverageMedical Coverage

27% of expatriates are 27% of expatriates are dissatisfied dissatisfied

Employers provide full Employers provide full coveragecoverage 2 plans may be 2 plans may be

necessarynecessary Supplemental plans are Supplemental plans are

necessarynecessary

Non-Monetary Factors:Non-Monetary Factors:HousingHousing

Housing and utilities allowanceHousing and utilities allowance Goods and services allowanceGoods and services allowance Cost of housing differencesCost of housing differences Expatriates discouraged from Expatriates discouraged from

selling their American homeselling their American home American communities in American communities in

foreign landsforeign lands

Non-monetary Factors:Non-monetary Factors:EducationEducation

Match American standardsMatch American standards

Tuition reimbursementTuition reimbursement

Non-Monetary Factors:Non-Monetary Factors:Days OffDays Off

Travel ExpensesTravel ExpensesChildren Children EmployeesEmployees

Rest and Recreation Rest and Recreation daysdays

Non-Monetary Factors:Non-Monetary Factors:RepatriationRepatriation

Employees forfeit “special” Employees forfeit “special” compensation compensation

Re-assimilation problemsRe-assimilation problems Difficult to collaborateDifficult to collaborate ResentmentResentment

SolutionsSolutions Re-assimilation courses offeredRe-assimilation courses offered Promotion offeredPromotion offered Career development programsCareer development programs Capitalize on foreign experiencesCapitalize on foreign experiences

Political Implications: Political Implications: Attack on September 11Attack on September 11thth

Fear of domestic and international air travelFear of domestic and international air travel

Safety became top prioritySafety became top priority

Travel restrictions to certain regionsTravel restrictions to certain regions

Extra approvals and precautionary measuresExtra approvals and precautionary measures

““After September 11After September 11thth some companies curtailed travel some companies curtailed travel and cautioned employees but there wasn’t any and cautioned employees but there wasn’t any

huge exodus.”huge exodus.”-Wall Street Journal, 2002-Wall Street Journal, 2002

Political Implications:Political Implications:War on IraqWar on Iraq

Large impact on expatriates in Large impact on expatriates in Middle-Eastern regionMiddle-Eastern region Fear for livesFear for lives Opinionated with respect to Opinionated with respect to

business implicationsbusiness implications

Current Economic Current Economic ConditionsConditions

Companies Companies are are decreasing decreasing number of number of expatriatesexpatriates

Localization is Localization is a more cost a more cost efficient efficient option option

ConclusionConclusion

Many factors in sending expatriates abroadMany factors in sending expatriates abroad Every company compensates differentlyEvery company compensates differently

TOP PRIORITY: MAKE THE TOP PRIORITY: MAKE THE EXPATRIATE HAPPY!!EXPATRIATE HAPPY!!

““““It is important to get an understanding of how your It is important to get an understanding of how your employees perceive the international human resources employees perceive the international human resources policy you’ve put in place and why you have relocated policy you’ve put in place and why you have relocated them. It is necessary to make sure they feel good about them. It is necessary to make sure they feel good about the programs that are underway to facilitate their the programs that are underway to facilitate their international assignment. You want to know you are international assignment. You want to know you are meeting their needs.” meeting their needs.”

- John Fadel, Deloitte & Touche- John Fadel, Deloitte & Touche

QUESTIONS FOR YOU…QUESTIONS FOR YOU…

If you were an expatriate, what would If you were an expatriate, what would you perceive as being the most you perceive as being the most important benefits? Why?important benefits? Why?

Would you let the current social and Would you let the current social and political events affect your decision to go political events affect your decision to go abroad? If not, what extra abroad? If not, what extra compensation would you deem compensation would you deem necessary? necessary?

Would you fear coming back to the U.S. Would you fear coming back to the U.S. after working abroad? What types of after working abroad? What types of repatriation programs would you like to repatriation programs would you like to see implemented within your company?see implemented within your company?

QUESTIONS FOR US…?QUESTIONS FOR US…?

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