1. International Compensation Nancy Johnson April 2005

2. Definitions Host country nationals (HCN) Host country nationals (HCN) Local citizens working for a foreign companyLocal citizens working for a foreign company Expatriates Expatriates People working for a company from their native country but in another countryPeople working for a company from their native country but in another country Third party nationals Third party nationals People working for a company with ownership and at a location which is different than their own countryPeople working for a company with ownership and at a location which is different than their own country

3. Set Expatriate Pay Level Exercise: You are a Compensation Executive with an American Company making $100,000 per year. You are married with a husband and two children. Your company has asked you to live and work in: Exercise: You are a Compensation Executive with an American Company making $100,000 per year. You are married with a husband and two children. Your company has asked you to live and work in: London, EnglandLondon, England Beijing, ChinaBeijing, China Cairo, EgyptCairo, Egypt Montreal, CanadaMontreal, Canada San Palo, BrazilSan Palo, Brazil Sydney, AustraliaSydney, Australia Baghdad, IraqBaghdad, Iraq Describe what factors you would consider in deciding how and what types of factors are important to your relocation? Describe what factors you would consider in deciding how and what types of factors are important to your relocation? Exchange Rate Exchange Rate Exchange Rate Exchange Rate

4. Financial Currency Currency Inflation Inflation Foreign Service Premiums Foreign Service Premiums Hazard Premiums Hazard Premiums Mobility Pay – incentive to change assignment Mobility Pay – incentive to change assignment Taxes Taxes

5. Fringe Housing allowances Housing allowances Tax Tax Local customs Local customs Education Education Security Security Extra paid time off to return home Extra paid time off to return home Rest & relaxation leave Rest & relaxation leave

6. Balance Sheet Approach Standard of living comparable to US Standard of living comparable to US Ties to USTies to US Don’t want to assimilate into local cultureDon’t want to assimilate into local culture Short assignmentShort assignment Return home to US following assignmentReturn home to US following assignment Income protectionIncome protection Try to stay comparable in housing, goods & services, discretionary income, & taxes

7. Considerations for Other Employees What is the proper role for the balance between HNCs and TCNs? What is the proper role for the balance between HNCs and TCNs? Strategies Strategies Think global, act localThink global, act local One size fits allOne size fits all Facilitates moving between countries Facilitates moving between countries Think & act globally & locallyThink & act globally & locally Legal differences Legal differences Cultural differences Cultural differences

8. Summary Internal, external & individual equity become far more complicated in international compensation Internal, external & individual equity become far more complicated in international compensation Many more comparisons are made and the change in exchange rate and so forth become far more complicated Many more comparisons are made and the change in exchange rate and so forth become far more complicated