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International Human Resource Management: Managing People in A Multinational Context
International Human Resource Management: Managing People in A Multinational Context
v IHRM Chapter 7 2
Terms
HRIS allowances: COLA
repatriation housing
base salary home leave
education
benefits relocation
Tax equalization spouse assistance
Tax protection
global corporate culture
International base pay
going rate approach
balance sheet approach
v IHRM Chapter 7 3
Issues when considering benefits
1. Whether or not to maintain expatriates in
home-country programs, particularly if the
firm does not receive a tax deduction for it.
2. Whether firms have the option of enrolling
expatriates in host-country benefit programs
and/or making up any difference in coverage.
3. Whether expatriates should receive home-
country or host-country social security
benefits.
v IHRM Chapter 7 4
Table
7-1
Going Rate Approach
v IHRM Chapter 7 5
Table Advantages and disadvantages of the Going Rate Approach
7-2
Advantages Disadvantages
v IHRM Chapter 7 6
Table
7-3
The Balance Sheet Approach
v IHRM Chapter 7 7
Four Balance Sheet Approach categories
1. Goods and services – home-country outlays for
items such as food, personal care, clothing,
household furnishings, recreation, transportation
and medical care.
2. Housing – the major costs associated with housing in
the host country.
3. Income taxes – parent-country and host-country
income taxes.
4. Reserve – contributions to savings, payments for
benefits, pension contributions, investments,
education expenses, social security taxes, etc.
v IHRM Chapter 7 8
Table
7-4
Expatriate compensation worksheet
v IHRM Chapter 7 9
Table Advantages and disadvantages of the Balance Sheet Approach
7-5
v IHRM Chapter 7 10
Table
7-6
Maximum marginal federal tax rates
Country Maximum marginal
rate (%)
Argentina 35.00
Australia 47.00
Belgium 50.00
Brazil 27.50
Canada 29.00
China (Hong Kong) 20.00
China 45.00
France 48.09
Germany 42.00
India 33.66
Italy 43.00
Japan 37.00
Malaysia 28.00
v IHRM Chapter 7 11
Some issues when considering benefits
1. Keep expatriates in home-country programs, particularly if
the company does not receive a tax deductions for it?
2. Enroll expatriates in host-country benefit programs and/or
making up coverage differences?
3. Does host-country legislation regarding termination affects
benefit entitlement?
4. Do expatriates receive home-country or host-country social
security benefits?
5. Should benefits be maintained on a home-country or host-
country basis? Who is responsible for the cost? Should other
benefits offset any shortfall in coverage? Should home-
country benefit programs be exported to local nationals in
foreign countries?
v IHRM Chapter 7 12
Table Social security contributions by employers and employees
7-7
v IHRM Chapter 7 13
Table
7-8
Range of working times required to buy one Big Mac
v IHRM Chapter 7 14
Figure
7-1
Complexity, challenges and choices in global pay
v IHRM Chapter 7 15
Discussion Questions
1. What should be the main objectives for a multinational
firm with regard to its compensation policies?
2. Describe the main differences in the Going Rate and
Balance Sheet Approaches to international compensation.
3. What are the key differences in salary compensation for
PCNs and TCNs? Do these differences matter?
4. What are the main points that MNEs must consider when
deciding how to provide benefits?
5. Why is it important for MNEs to understand the
compensation practices of other countries?
6. Explain how balancing the interests of global and local,
occupational and functional perspectives might play out in
a compensation decision scenario.
v IHRM Chapter 7 16