Multiple Country Compensation Programs

EXPATRIATES, INPATRIATES, AND THIRD COUNTRY NATIONALS

Let’s first look at how to manage total rewards for expatriates, inpatriates and third country nationals. The Balance Sheet approach is the most common method of compensating these employees and is designed to protect them from cost differences between the home country and the host country. Occasionally, a Headquarters Method will be used for highly mobile employees who rarely return to headquarters but continue with another assignment and are considered to be global nomads.

Compensate to Where?

The basic difference between total rewards plans for expatriates, inpatriates, and TCNs is the question of "compensate to where?"

There are typically three alternatives:

• Host Country Method (typically used for employees on local packages)
• Headquarters Method (typically used for global nomads)
• Home Country Method (typically used for employees on short-term, expatriate, inpatriate, and third country national assignments)

Most global organizations apply the balance sheet approach to expatriate, inpatriate, and TCN assignments since most of them will have a talent management strategy that requires employees to return to the home country. This enables the employee and company to reconnect, facilitate knowledge transfer, manage taxation, and more broadly learn about new developments in the business.

Host Country (Local) Method

Host country (local) method means the international assignee remuneration is managed similar to local nationals who are considered equal peers in the host country.

Shadow Payroll. On a rare occasion, it may be necessary to maintain a shadow payroll based on the home country salary, to calculate benefits, like pension values, and to determine what salary the TCN will earn upon returning home.

Headquarters Method

The headquarters method manages an international assignee according to the compensation program of the headquarters' country.

Advantages: Although rarely used, the headquarters method has the advantage of internal consistency. This method is more likely used for global nomads. This method is more likely used for global nomads. The headquarters method can utilize retirement and health and welfare programs especially designed for global nomads.

Disadvantages: It may be difficult to manage taxes for global nomads. This can produce cash flow substantially above or below the TCN's current package, making either recruitment or repatriation difficult.

Home Country Method

This is the most common approach. Home country method consists of keeping international assignees on their regular home country total rewards package. A Balance Sheet approach is common for managing this type of assignment.

Typically, cost of living and housing allowances are granted if the cost-of-living is higher in the country where the employee is being transferred.