Approaches to International Compensation Show
Approaches to International Compensation- There are two basic approaches to determine the international compensation package: 1. Going Rate ApproachThis is based on local market rates. It relies on comparisons of surveys of the local nationals, expatriates of same nationality and expatriates of all nationalities’ pay packages. In this approach, the compensation is based on the selected survey comparison. The base pay and benefits may be supplemented by additional payments for low pay countries. The advantages of the Going Rate Approach are,
The disadvantages of Going Rate Approach are,
2. Balance Sheet Approach:The Balance Sheet Approach to international compensation is a system designed to equalize the purchasing power of employees at comparable position levels living abroad and in the home country and to provide incentives to offset qualitative differences between assignment locations. The balance sheet approach is widely used by international organizations to determine the compensation package of the expatriates. The basic objective is the maintenance of living standards of the home country plus financial inducement.
The advantages of the Balance Sheet Approach are:
The disadvantages of the Balance Sheet Approach are:
Go back to Tutorial Go to Home Page Get industry recognized certification – Contact usIn which approach the base salary for the international transfer is linked to the salary structure in the host country?Balance Sheet Approach:
The balance sheet approach is widely used by international organizations to determine the compensation package of the expatriates.
What are the main approaches of international compensation?Going Rate Approach
This is based on local market rates. It relies on comparisons of surveys of the local nationals, expatriates of same nationality and expatriates of all nationalities' pay packages. In this approach, the compensation is based on the selected survey comparison.
What is the host country based approach?The host-based approach uses the market rate of the host country to determine the salary on offer. This could be the salary which local employees receive or, particularly in countries with large expatriate populations, it could be based on the salary received by other expatriates in that country.
What is base salary in international compensation?Base pay. Base pay is the primary component of a package of allowances and may be paid in-home or local-country currency. The base salary is the foundation block for international compensation whether the employee is a Parent Country or from any other country.
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