International

Compensation
Nancy Johnson
April 2005

Definitions

Host country nationals (HCN)

Local citizens working for a foreign company

Expatriates
People working for a company from their native
country but in another country

Third party nationals

People working for a company with ownership
and at a location which is different than their
own country

Set Expatriate Pay Level

Exercise: You are a Compensation Executive with an

American Company making $100,000 per year. You are
married with a husband and two children. Your company
has asked you to live and work in:

London, England
Beijing, China
Cairo, Egypt
Montreal, Canada
San Palo, Brazil
Sydney, Australia
Baghdad, Iraq

Describe what factors you would consider in deciding how

and what types of factors are important to your relocation?
Exchange Rate

Financial

Currency
Inflation
Foreign Service Premiums
Hazard Premiums
Mobility Pay incentive to change
assignment
Taxes

Fringe

Housing allowances
Tax
Local customs
Education
Security
Extra paid time off to return home
Rest & relaxation leave

Balance Sheet Approach

Standard of living comparable to US

Ties to US
Dont want to assimilate into local culture
Short assignment
Return home to US following assignment
Income protection

Try to stay comparable in housing, goods &

services, discretionary income, & taxes

Considerations for Other

Employees

What is the proper role for the

balance between HNCs and TCNs?
Strategies
Think global, act local
One size fits all

Facilitates moving between countries

Think & act globally & locally

Legal differences
Cultural differences

Summary

Internal, external & individual equity

become far more complicated in
international compensation
Many more comparisons are made
and the change in exchange rate and
so forth become far more
complicated