Expatriate Compensation

Variable Pay

Variable pay plans for long-term international assignees can be similar to those for the home country or be based on those for global programs. Goals and objectives should be reviewed and revised, if necessary, to reflect the new role. Depending on the plan design, the payout triggers may also be updated to reflect the new role.

There are three concerns connected with implementing variable pay plans for these assignees:

• The supervisor may be far away and may not be fully apprised of the expatriate's performance.
• Goals and performance standards for expatriate assignments are often not as clear as in other work environments.
• Some expatriates do not maintain adequate contact with the home office or their manager to be fully recognized for their performance.

An international assignee should take proactive steps in maintaining visibility and contact with the home office, manager, and key contacts.

Assignment Bonuses

To incent an employee into accepting a long-term international assignment, an assignment bonus may need to be offered, especially if the assignment is in a developing country or hardship location.

Assignment bonuses can take a number of forms:

• Percentage added to base pay
• Lump sum payment at the beginning of the assignment
• A schedule of bonus payments – clearly separated from base pay

Percentage added to base pay. This approach adds a percentage of base pay. The difficulty with this approach is that expatriates may come to see this as a permanent part of base pay; then when employees are repatriated, this bonus disappears and is seen as a pay cut.

Lump sum payment at the beginning of the assignment. The advantage of the lump sum payment is that it provides cash to expatriates at a time when their expenses are high. The disadvantage to this approach is that it can increase the employee's income in the first year and raises the tax rate when paid at the beginning of the assignment.

A schedule of bonus payments – clearly separated from base pay. These bonus payments are weighted to the beginning of the assignment and are all distributed before the expatriate is brought home.