Compensation and Benefits for American Expatriates

Sarah Brady Deanine Estes Shannon Johnson Kate Robertson

Questions for our Expatriates and Experts

Ms. Kate Robertson - Human Capital Advisory Services Division Mercer Ms. Shannon Johnson Colgate Palmolive Ms. Deanine Estes - Proctor & Gamble Ms. Sarah Brady - Chevron

CAUTION

What is an American expatriate? There is not one correct method to create a compensation package. There are more factors above and over what we have discussedwe choose the main issues.

Failed Assignments

Many expatriate assignments fail each year ~30%

Family

dissatisfaction Cultural issues Feeling of isolation from home company Financial dissatisfaction

High costs associated with failures

Overview

Monetary Factors of Expatriate Compensation Non-monetary Factors Political Implications Current Events

Monetary Factors: Base Salary

Base Salary

Comparable to home country Serves as a reference point for establishing additional benefits Greatest point of flexibility Home country-based Host country-based Headquarter-based

Choose method

Base salary is the greatest point of flexibility. Companies set a maximum thats not a maximum, to be honest -David Kohtynski, Nike

Monetary Factors: Assignment Premium

Incentive: persuade acceptance of international assignments Environmental or hardship premiums Mobility premiums

Monetary Factors: Tax Considerations

Tax burden depends on location of assignment Solution: Tax Equalization

Simple

and easily understood Benefits both employee and employer Employee will not receive the tax burden May be high cost to Employer

Monetary Factors: Payroll

Not placed on foreign locations payroll May accrue Social Security benefits Consider exchange rates and inflation

Non-monetary Factors: Family Considerations

Assimilation programs
Support

programs Call centers Language programs Cultural awareness

Non-monetary Factors: Medical Coverage

27% of expatriates are dissatisfied Employers provide full coverage

2

plans may be necessary Supplemental plans are necessary

Non-Monetary Factors: Housing

Housing and utilities allowance Goods and services allowance Cost of housing differences Expatriates discouraged from selling their American home American communities in foreign lands

Non-monetary Factors: Education

Match American standards Tuition reimbursement

Non-Monetary Factors: Days Off

Travel Expenses Children Employees Rest and Recreation days

Non-Monetary Factors: Repatriation

Employees forfeit special compensation Re-assimilation problems

Difficult to collaborate Resentment

Solutions
Re-assimilation courses offered Promotion offered Career development programs Capitalize on foreign experiences

Political Implications: Attack on September 11th

Fear of domestic and international air travel Safety became top priority Travel restrictions to certain regions Extra approvals and precautionary measures

After September 11th some companies curtailed travel and cautioned employees but there wasnt any huge exodus. -Wall Street Journal, 2002

Political Implications: War on Iraq

Large impact on expatriates in Middle-Eastern region

Fear

for lives Opinionated with respect to business implications

Current Economic Conditions

Companies are decreasing number of expatriates Localization is a more cost efficient option

Conclusion

Many factors in sending expatriates abroad Every company compensates differently TOP PRIORITY: MAKE THE EXPATRIATE HAPPY!!
employees perceive the international human resources policy youve put in place and why you have relocated them. It is necessary to make sure they feel good about the programs that are underway to facilitate their international assignment. You want to know you are meeting their needs. - John Fadel, Deloitte & Touche

It is important to get an understanding of how your

QUESTIONS FOR YOU

If you were an expatriate, what would you perceive as being the most important benefits? Why? Would you let the current social and political events affect your decision to go abroad? If not, what extra compensation would you deem necessary? Would you fear coming back to the U.S. after working abroad? What types of repatriation programs would you like to see implemented within your company?

QUESTIONS FOR US?

References

Bibliography Anonymous. Worker safety is top priority. Business Insurance, Chicago, (Mar 24, Insurance, 2003). Anonymous. Shell Oil, CIGNA winners of IFEBP awards. Employee Benefit Plan Review, Chicago,(Jan 1999). Review, Balkin, Cardy, and Gomez-Megia. Managing Human Resources III edition Cairncross, Francis. Survey: No Man is an Island. The Economist, 351. May 1999. 351. Cummins, Chip. Expatriate Iraqis Say Oil Fields Should Be Opened --- U.S, -Backed Panels Embrace of Investment Isnt Surprise, But It Gives Hope to Firms. Wall Street Journal NY, (Mar 3, 2003) NY, Feinstein, Selwyn. A Special News Report on People and Their Jobs in Offices, Fields and Factories. Wall Street Journal, (May 3, 1998) Journal, Geber, Beverly. The Care and Breeding of Global Managers Training,29. July 1992. Training,29. How U.S. Companies Are Responding --- Most Are Curtailing Travel and Cautioning Employees, But No Exodus Is Under Way. Wall Street Journal, NY, (Jun 3, 2002). Howe, Kenneth. Salary Negotiating Tips for Expat Assignments. The Wall Street Journal Interactive Edition. 2002. Hunt, John. Fewer Foreign Criticisms: Companies, it seems, have been dealing with The complaints of disgruntled expatriates. Financial Times. London, London, July 2001. Janush, Erwin. Developing Expatriate Remuneration Packages. Employee Benefits Journal. June 2001. Journal. Jordan, Miriam. Your Career Matters: Have Husband, Wil Travel --- World of the Trailing Spouse Isnt Wives-Only Anymore; Its the Best Job I Ever Had. Wall Street Journal, (Feb. 13, 2001). LeClaire, Jennifer. Managing Employees in a Global Marketplace. L2S, Inc. May 17 Inc. 2000. Payne, Beatrix. Luxembourg Builds Multinational Model for Pension Plans. Pensionsand Investments, 28 June 2000. Peach, Robert. Expatriates and Qualified Plans. Benefits Quarterly. 1996. Quarterly. Riki, Takeuchi.An Examination of Crossover and Spillover Effects of Spousal and Expatriate Cross-Cultural Adjustment on Expatriate Outcomes,, Journal of Applied Psychology, Volume 87, Issue 4, August 2002, Pages 655-666 Outcomes,, Slater, Jeremy. Compensation Surveys: The Basics. HYPERLINK "http://www.expatica.com" March 2003. Solomon, Charlene Marmer. Global Operations demand that HR rethink diversity. Personnel Journal, 73. July 1994. 73. Sussman, Nan. Repatriation transitions: psychological preparedness, cultural identity, and attributions among Repatriation American managers, International Journal of Intercultural Relations, Volume 25, Issue 2, March 2001, Pages 109-123 Tax Planning For Expatriates. The Tax Adviser. New York, April 2001. Thaler-Carter, Ruth E. (1999). Vowing to Go Abroad. HR Magazine, 44. November 44. 1999.