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Compensation and Benefits for American Expatriates

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

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Compensation and Benefits for American Expatriates

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  1. Compensation and Benefits for American Expatriates Sarah Brady Deanine Estes Shannon Johnson Kate Robertson

  2. 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

  3. 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 discussed…we choose the main issues.

  4. 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

  5. Overview • Monetary Factors of Expatriate Compensation • Non-monetary Factors • Political Implications • Current Events

  6. Monetary Factors: Base Salary • Base Salary • Comparable to home country • Serves as a reference point for establishing additional benefits • Greatest point of flexibility • Choose method • Home country-based • Host country-based • Headquarter-based “Base salary is the greatest point of flexibility. Companies set a maximum that’s not a maximum, to be honest” -David Kohtynski, Nike

  7. Monetary Factors:Assignment Premium • Incentive: persuade acceptance of international assignments • Environmental or hardship premiums • Mobility premiums

  8. 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

  9. Monetary Factors:Payroll • Not placed on foreign location’s payroll • May accrue Social Security benefits • Consider exchange rates and inflation

  10. Non-monetary Factors:Family Considerations • Assimilation programs • Support programs • Call centers • Language programs • Cultural awareness

  11. Non-monetary Factors:Medical Coverage • 27% of expatriates are dissatisfied • Employers provide full coverage • 2 plans may be necessary • Supplemental plans are necessary

  12. 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

  13. Non-monetary Factors:Education • Match American standards • Tuition reimbursement

  14. Non-Monetary Factors:Days Off • Travel Expenses • Children • Employees • Rest and Recreation days

  15. 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

  16. 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 wasn’t any huge exodus.” -Wall Street Journal, 2002

  17. Political Implications:War on Iraq • Large impact on expatriates in Middle-Eastern region • Fear for lives • Opinionated with respect to business implications

  18. Current Economic Conditions • Companies are decreasing number of expatriates • Localization is a more cost efficient option

  19. Conclusion • Many factors in sending expatriates abroad • Every company compensates differently • TOP PRIORITY: MAKE THE EXPATRIATE HAPPY!! ““It is important to get an understanding of how your employees perceive the international human resources policy you’ve 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

  20. 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…?

  21. References • Bibliography • Anonymous. “Worker safety is top priority”. Business Insurance, Chicago, (Mar 24, • 2003). • Anonymous. “Shell Oil, CIGNA winners of IFEBP awards”. Employee Benefit Plan • Review, Chicago,(Jan 1999). • Balkin, Cardy, and Gomez-Megia. Managing Human Resources III edition • Cairncross, Francis. “Survey: No Man is an Island.” The Economist, 351. May 1999. • Cummins, Chip. “Expatriate Iraqis Say Oil Fields Should Be Opened --- U.S, -Backed • Panel’s Embrace of Investment Isn’t Surprise, But It Gives Hope to Firms”. Wall Street Journal NY, (Mar 3, 2003) • Feinstein, Selwyn. “A Special News Report on People and Their Jobs in Offices, Fields • and Factories”. Wall Street Journal, (May 3, 1998) • Geber, Beverly. “The Care and Breeding of Global Managers” Training,29. July 1992. • “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, • July 2001. • Janush, Erwin. “Developing Expatriate Remuneration Packages.” Employee Benefits • Journal. June 2001. • Jordan, Miriam. “Your Career Matters: Have Husband, Wil Travel --- World of the Trailing Spouse Isn’t Wives-Only Anymore; ‘It’s the Best Job I Ever Had’. Wall Street Journal, (Feb. 13, 2001). • LeClaire, Jennifer. “Managing Employees in a Global Marketplace.” L2S, Inc. May 17 • 2000. • Payne, Beatrix. “Luxembourg Builds Multinational Model for Pension Plans.” • Pensionsand Investments, 28 June 2000. • Peach, Robert. “Expatriates and Qualified Plans”. Benefits Quarterly. 1996. • 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 • 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. • Sussman, Nan. “Repatriation transitions: psychological preparedness, cultural identity, and attributions among 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 • 1999.

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