Expatriate Compensation

LONG-TERM INTERNATIONAL ASSIGNMENT

Companies may choose to send a new hire or current employee on a long-term international assignment for a number of reasons:

• Fill a key management role for a country or region
• Manage new business or start-up operations
• Manage acquisitions/divestitures
• Manage succession or career planning
• Transfer critical knowledge and/or corporate culture
• Undertake a long-term project-based assignment
• Respond to an employee request (self-initiated)
• Train employees

Assignment Period

A decision over the length of the international assignment can be critical to the overall cost of the program. Can the business requirement be managed by local hires, business trips, extended business travel, or even a short-term assignment? Typically, an assignment of less than 6 months in duration can be much more cost effective than a long-term international assignment.

Long-term international assignments are over 1 year in length and may last upwards of 5 years. They are typically 2-3 years in duration. They commonly can cost upwards of 3 times the amount of the regular compensation due to the cost of the assignee and family relocation, housing, allowances, private education, and the compounding effect of tax equalization.

Long-term international assignments represent the most complex and costly of compensation programs for foreign assignments.

A long-term international assignment compensation package is typically managed to keep an assignee’s standard of living as close to the home country norm (“keeping the employee whole”) as possible. Fairness and equity are maintained based on the different home and host country living conditions. The basic parts of expatriate compensation are like most compensation: base pay, variable pay, and benefits. However, relocation, foreign housing, various allowances, and tax considerations are added to this.

Once the assignment has been completed, or after 5 years, long-term international assignments should be reviewed for repatriation or even localization. Discussions should take place approximately 6 months prior to the end of an assignment.