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

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Presentation on theme: "Compensation and Benefits for American Expatriates Sarah Brady Deanine Estes Shannon Johnson Kate Robertson."— Presentation transcript:

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

3 CAUTION… What is an American expatriate? What is an American expatriate? There is not “one correct method” to create a compensation package. 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. 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% Many expatriate assignments fail each year ~30% Family dissatisfaction Family dissatisfaction Cultural issues Cultural issues Feeling of isolation from home company Feeling of isolation from home company Financial dissatisfaction Financial dissatisfaction High costs associated with failures High costs associated with failures

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

6 Monetary Factors: Base Salary Base Salary Base Salary Comparable to home country Comparable to home country Serves as a reference point for establishing additional benefits Serves as a reference point for establishing additional benefits Greatest point of flexibility Greatest point of flexibility Choose method Choose method Home country-based Home country-based Host country-based Host country-based Headquarter-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 Incentive: persuade acceptance of international assignments Environmental or hardship premiums Environmental or hardship premiums Mobility premiums Mobility premiums

8 Monetary Factors: Tax Considerations Tax burden depends on location of assignment Tax burden depends on location of assignment Solution: Tax Equalization Solution: Tax Equalization Simple and easily understood Simple and easily understood Benefits both employee and employer Benefits both employee and employer Employee will not receive the tax burden Employee will not receive the tax burden May be high cost to Employer May be high cost to Employer

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

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

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

12 Non-Monetary Factors: Housing Housing and utilities allowance Housing and utilities allowance Goods and services allowance Goods and services allowance Cost of housing differences Cost of housing differences Expatriates discouraged from selling their American home Expatriates discouraged from selling their American home American communities in foreign lands American communities in foreign lands

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

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

15 Non-Monetary Factors: Repatriation Employees forfeit “special” compensation Employees forfeit “special” compensation Re-assimilation problems Re-assimilation problems Difficult to collaborate Difficult to collaborate Resentment Resentment Solutions Solutions Re-assimilation courses offered Re-assimilation courses offered Promotion offered Promotion offered Career development programs Career development programs Capitalize on foreign experiences Capitalize on foreign experiences

16 Political Implications: Attack on September 11 th Fear of domestic and international air travel Fear of domestic and international air travel Safety became top priority Safety became top priority Travel restrictions to certain regions Travel restrictions to certain regions Extra approvals and precautionary measures Extra approvals and precautionary measures “After September 11 th 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 Large impact on expatriates in Middle-Eastern region Fear for lives Fear for lives Opinionated with respect to business implications Opinionated with respect to business implications

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

19 Conclusion Many factors in sending expatriates abroad Many factors in sending expatriates abroad Every company compensates differently Every company compensates differently TOP PRIORITY: MAKE THE EXPATRIATE HAPPY!! 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… QUESTIONS FOR YOU… If you were an expatriate, what would you perceive as being the most important benefits? Why? 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 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? 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…? QUESTIONS FOR US…?

21 References Bibliography Bibliography Anonymous. “Worker safety is top priority”. Business Insurance, Chicago, (Mar 24, Anonymous. “Worker safety is top priority”. Business Insurance, Chicago, (Mar 24, 2003). 2003). Anonymous. “Shell Oil, CIGNA winners of IFEBP awards”. Employee Benefit Plan Anonymous. “Shell Oil, CIGNA winners of IFEBP awards”. Employee Benefit Plan Review, Chicago,(Jan 1999). Review, Chicago,(Jan 1999). Balkin, Cardy, and Gomez-Megia. Managing Human Resources III edition Balkin, Cardy, and Gomez-Megia. Managing Human Resources III edition Cairncross, Francis. “Survey: No Man is an Island.” The Economist, 351. May Cairncross, Francis. “Survey: No Man is an Island.” The Economist, 351. May Cummins, Chip. “Expatriate Iraqis Say Oil Fields Should Be Opened --- U.S, -Backed 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) 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 Feinstein, Selwyn. “A Special News Report on People and Their Jobs in Offices, Fields and Factories”. Wall Street Journal, (May 3, 1998) and Factories”. Wall Street Journal, (May 3, 1998) Geber, Beverly. “The Care and Breeding of Global Managers” Training,29. July Geber, Beverly. “The Care and Breeding of Global Managers” Training,29. July “How U.S. Companies Are Responding --- Most Are Curtailing Travel and Cautioning “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). Employees, But No Exodus Is Under Way”. Wall Street Journal, NY, (Jun 3, 2002). Howe, Kenneth. “Salary Negotiating Tips for Expat Assignments.” The Wall Howe, Kenneth. “Salary Negotiating Tips for Expat Assignments.” The Wall Street Journal Interactive Edition Street Journal Interactive Edition Hunt, John. “Fewer Foreign Criticisms: Companies, it seems, have been dealing with Hunt, John. “Fewer Foreign Criticisms: Companies, it seems, have been dealing with The complaints of disgruntled expatriates.” Financial Times. London, The complaints of disgruntled expatriates.” Financial Times. London, July July Janush, Erwin. “Developing Expatriate Remuneration Packages.” Employee Benefits Janush, Erwin. “Developing Expatriate Remuneration Packages.” Employee Benefits Journal. June Journal. June 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). 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 LeClaire, Jennifer. “Managing Employees in a Global Marketplace.” L2S, Inc. May Payne, Beatrix. “Luxembourg Builds Multinational Model for Pension Plans.” Payne, Beatrix. “Luxembourg Builds Multinational Model for Pension Plans.” Pensionsand Investments, 28 June Pensionsand Investments, 28 June Peach, Robert. “Expatriates and Qualified Plans”. Benefits Quarterly Peach, Robert. “Expatriates and Qualified Plans”. Benefits 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 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 Slater, Jeremy. “Compensation Surveys: The Basics.” Slater, Jeremy. “Compensation Surveys: The Basics.” HYPERLINK "http://www.expatica.com" March HYPERLINK "http://www.expatica.com" March Solomon, Charlene Marmer. “Global Operations demand that HR Solomon, Charlene Marmer. “Global Operations demand that HR rethink diversity.” Personnel Journal, 73. July rethink diversity.” Personnel Journal, 73. July 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 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 “Tax Planning For Expatriates.” The Tax Adviser. New York, April “Tax Planning For Expatriates.” The Tax Adviser. New York, April Thaler-Carter, Ruth E. (1999). “Vowing to Go Abroad.” HR Magazine, 44. November Thaler-Carter, Ruth E. (1999). “Vowing to Go Abroad.” HR Magazine, 44. November


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