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InternationalBusiness 1

InternationalBusiness 1

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Published by: Sham on Mar 04, 2012
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07/23/2013

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271

Base Salary

An expatriate's base salary is normally in the same range
as the base salary for a similar position in the home
country. The base salary is normally paid in either the
home-country currency or in the local currency.

Foreign Service Premium

A foreign service premium is extra pay the expatriate
receives for working outside his or her country of origin.
It is offered as an inducement to accept foreign postings.
It compensates the expatriate for having to live in an
unfamiliar country isolated from family and friends,
having to deal with a new culture and language, and
having to adapt new work habits and practices.

Allowances

Four types of allowances are often included in an
expatriate's compensation package: hardship allowances,
housing allowances, cost-of-living allowances, and
education allowances. A hardship allowance is paid
when the expatriate is being sent to a difficult location,
usually defined as one where such basic amenities as
health care, schools, and retail stores are grossly deficient
by the standards of the expatriate's home country. A
housing allowance is normally given to ensure that the
expatriate can afford the same quality of housing in the
foreign country as at home. In locations where housing is
very expensive .

Taxation

272

Unless a host country has a reciprocal tax treaty with the
expatriate's home country, the expatriate may have to pay
income tax to both the home- and host-country
governments. When a reciprocal tax treaty is not in force,
the firm typically pays the expatriate's income tax in the
host country. In addition, firms normally make up the
difference when a higher income tax rate in a host
country reduces an expatriate's take-home pay.

Benefits

Many firms also ensure that their expatriates receive the
same level of medical and pension benefits abroad that
they received at home. This can be very costly for the
firm, since many benefits that are tax deductible for the
firm in the home country may not be deductible out of
the country.

International Labor Relations

The HRM function of an international business is
typically responsible for international labor relations.
From a strategic perspective, the key issue in
international labor relations is the degree to which
organized labor can limit the choices of an international
business.

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