Thinking back on the material you learned in this course, how can you apply what you learned to your current or future work?
Your journal entry must be at least 200 words. No references or citations are necessary.
Textbook:
Martocchio, J. J. (2017). Strategic compensation: A human resource management approach (9th ed.). Hoboken, NJ: Pearson.
MHR 6901, Compensation Management 1
Course Learning Outcomes for Unit VIII
Upon completion of this unit, students should be able to:
5. Explain workers’ compensation.
5.1 Describe considerations that must occur when developing international compensation
packages.
5.2 Outline the main components of international compensation packages.
Course/Unit
Learning Outcomes
Learning Activity
5.1 Final Exam, Short Essay Pool 2
5.2 Final Exam, Short Essay Pool 2
Reading Assignment
Chapter 13:
Compensating Expatriates
Chapter 14: Pay and Benefits Outside the United States
In order to access the following resource, click the link below:
Please read the following article that outlines various factors that can cause issues with expatriate
compensation.
Haile, S., & Williams, D. (2011). Factors that influence expatriate compensation problems. Academy of
Business Journal, 1, 25-32. Retrieved from
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc
t=true&db=bth&AN=66172650&site=ehost-live&scope=site
Unit Lesson
In this unit, we will address compensation issues as they pertain to those employees who choose to go
overseas for the organization—the expatriates. Most organizations are challenged with developing a
compensation package that attracts, motivates, and retains expatriates while, at the same time, not offending
the host nation.
When developing an expatriate compensation package, it is good to start by considering issues such as
taxation, visas, family, culture, housing, financial incentives, and other concerns. These issues should align
with the expatriate’s expectations.
Technical competency and industry knowledge are the primary reasons to use expatriates, especially when
local talent is not available. It would be easier to send someone who is familiar with corporate expectations
and has the technical competency to train local nationals rather than hope the local nationals can catch on.
Also, some countries have a limited talent pool who will need to be trained and developed by the home
country experts.
Expatriates are typically offered monetary and non-monetary rewards. Compensation packages usually
include supplementary salary for additional duties. Bonuses and group incentives are often offered. Children’s
tuition and spousal employment are often considerations as well. Security, insurance, education,
transportation, accommodation, relocation, and displacement are other important issues used to attract
UNIT VIII STUDY GUIDE
Compensating Expatriates
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=66172650&site=ehost-live&scope=site
https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=66172650&site=ehost-live&scope=site
MHR 6901, Compensation Management 2
UNIT x STUDY GUIDE
Title
expatriates as well as leave time, quality medical facilities, and elderly or child care. It is important to consider
healthcare evacuation coverage in countries where health care is limited in case it becomes necessary to
evacuate to the nearest country with adequate medical facilities. Evacuation coverage is also necessary in
countries experiencing political and social instability. Those working in challenging countries are often offered
honorariums and hardship allowances.
Typical components of expatriate compensation include the following items:
base salary,
foreign services or hardship allowances,
allowances, and
benefits.
Base salary is a little different for expatriates as it can be paid in home or local-country currency, and it is the
primary component in the compensation package. Foreign service or hardship premium is usually a percent
of the base salary, and it is based on the actual hardship, tax consequences, and length of the hardship.
Usually, an assignment in a third-world country will include a hardship allowance.
Allowances often consist of things such as cost of living, housing, home leave, education allowances,
relocation allowances, automobile allowances, and spouse assistance. Cost of living is meant to cover the
differences in expenses between the home country and the foreign country in terms of food, utilities, and
transportation. The housing allowance compensates for home country housing and foreign country housing
so that the expatriates can maintain their home country living standards. Home leave allowance refers to the
cost of sending the expatriate home to visit his or her family or the corporate office while overseas. Education
allowance covers the cost of tuition, enrollment fees, books and supplies, transportation, room and board, and
even uniforms where appropriate. It is not uncommon to find boarding schools with an all-year curriculum as
opposed to local schools in foreign countries. Relocation allowances cover moving, shipping, and storage-
related charges. Sometimes, it also covers temporary living expenses until a more permanent living
arrangement can be secured. An automobile allowance can include a company vehicle or a monthly sum to
purchase an automobile. The stipend can also cover insurance, a local driver, and fuel for the vehicle. Some
companies also provide assistance in securing employment for the expatriate’s spouse or significant other.
Taking an overseas assignment can be a challenge for some employees. An organization can offer the
following as potential benefits:
potential for career progression;
increased compensation (as outlined in the benefit and allowances above);
development of professional skill;
opportunity for travel abroad that otherwise might not be available, particularly for family members;
learning opportunity with meeting new people and learning different customs and traditions;
family members being able see and learn a new language and a new country; and
added value to the company from the overseas assignment.
Having an expatriate in a foreign subsidiary allows the same management style and preferences as the home
country. It allows for consistency and continuity. Expatiates can break down any barriers that might exist
between the home and host country, thereby reducing risk and technical problems. Expatriates can also build
relationships with suppliers and improve supply chain relations. While there are advantages associated with
employing expatriates, there are also disadvantages. One disadvantage can occur if there is a
misunderstanding concerning a political situation, which can result in expulsion or imprisonment. The
language barrier can also create issues with the local staff or local community. An organization should
recognize the disadvantages and mitigate the risks where possible.
Many Fortune 500 companies prefer at least one substantial overseas assignment to climb the executive
ladder, but not everyone is successful overseas. It requires someone with knowledge of the overseas
assignment and business requirements; someone who can quickly absorb information; someone with an open
mind to other cultures, customs and more; and someone who can bring people together.
An opportunity to take an overseas assignment is a good opportunity for the expatriate and his or her family.
Having said that, the number one cause of failure overseas is the family. Expatriates and their families need
to have an in-depth understanding of the country, the language, and its customs, traditions, and values before
MHR 6901, Compensation Management 3
UNIT x STUDY GUIDE
Title
taking the assignment. Cultural awareness training is essential prior to departure in order to avoid culture
shock and failure. Expatriates experience failure mainly because they or their spouses fail to adapt to the
local culture, which can cause issues within the family. This can lead to a lack of motivation to remain within
the overseas assignment.
Burnout is also a problem with expatiates. Often, the expatriate will experience too much stress while
overseas. This can be a result of language barriers, being away from friends and family, dealing with a new
culture and way of life, or feeling a sense of isolation. Stress can also come from the visa and work permit
requirements that are familiar in the United States. If an expatriate comes home before their contracted time
and does not achieve their goals, business can be lost, personal and professional relationships can be
damaged, and an expatriate’s career might be over.
Going overseas is a tough choice and one neither the organization nor the employee should take lightly. An
employee should also ensure they have a job when returning from the overseas assignment. That
consideration should be included in the overseas contract.
Learning Activities (Nongraded)
Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.
Each chapter of your textbook contains a case study related to the main theory or concept within the chapter.
Review the case studies to gain a better understanding of the course materials as they relate to
compensation considerations. Feel free to discuss the chapter case studies with your classmates in the
Student Break Room forum.