EXPATRIATE REMUNERATION

Of those types of overseas employment described above, the one that most obviously prompts special treatment of the employee is the expatriate assignment. How much expatriates are paid depends upon their job and status, personal commitments, the territory to which they are assigned and other variables.

An expression commonly found in the policy documents of multinational companies runs approximately thus: 'the aim of the expatriate remuneration policy is to ensure that individuals are "neither better nor worse off" as a result of their overseas tour of duty'. However, more and more companies are now increasingly unwilling to commit to such statements, faced with the spiralling cost of expatriate assignments and an increased focus on the real value to the company of sending employees abroad. It is often only possible to maintain an expatriate's home standard of living at significant cost to the company, particularly if the spouse is working as well.

The cost of sending an employee abroad far exceeds the salary outlay. In addition, the company must consider the air fares to and from the destination, which are not insignificant when individuals are accompanied by their families and may return once or twice a year for leave, or need to go to a holiday resort for rest and recuperation. Accommodation costs, relocation expenses, language training and UK boarding school fees are further financial burdens to be carried by the employer. Clearly, it is an expensive exercise and one that should not be undertaken without some obvious benefit to the employer. It is now generally accepted that the most common reason for assignment failure is the inability of the expatriate or partner, or both, to adapt to the local culture. Yet despite the importance of the spouse's contribution to a successful assignment, few organizations include the spouse in the selection process. A pre-assignment trip to the host location to allow the expatriate and any accompanying family to decide whether they can live in the host location, as well as a cultural briefing before going, is recognized as a way of minimizing assignment failure. Language tuition and independent financial counselling are often arranged for expatriates at this stage and are recognized as diminishing anxiety quite considerably.

Companies should remember that this anxiety and sense of displacement recur when the individuals are repatriated. The problems of reentry have been researched in some detail in recent years and good employers now recognize that the assignment does not end with the expatriate's return to the home country. If appropriate, employees should be made aware that practical assistance and counselling are available to them, should they require them.

There are three main expatriate remuneration systems in current use as described below:

1.  balance sheet or build-up (home based);

2.  local market rate (host based);

3.  hybrid (usually a combination of home- and host-based pay systems).

The choice of the most appropriate method is dependent on a number of factors, which would normally include:

1.  reason for the assignment (developmental, management function, skills transfer);

2.  nationality of expatriates and the countries to which they are sent (developed, developing, etc);

3.  length of the assignment (short-term, long-term, permanent);

4.  need for equity between certain groups of employees (eg other expatriates, local peer group).