International
Compensation
Nancy Johnson
April 2005
Definitions
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Host country nationals (HCN)
• Local citizens working for a foreign company
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Expatriates
• People working for a company from their
native country but in another country
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Third party nationals
• People working for a company with ownership
and at a location which is different than their
own country
Set Expatriate Pay Level
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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:
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London, England
Beijing, China
Cairo, Egypt
Montreal, Canada
San Palo, Brazil
Sydney, Australia
Baghdad, Iraq
Describe what factors you would consider in deciding how
and what types of factors are important to your relocation?
Exchange Rate
Financial
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Currency
Inflation
Foreign Service Premiums
Hazard Premiums
Mobility Pay – incentive to change
assignment
Taxes
Fringe
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Housing allowances
Tax
Local customs
Education
Security
Extra paid time off to return home
Rest & relaxation leave
Balance Sheet Approach
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Standard of living comparable to US
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Ties to US
Don’t want to assimilate into local culture
Short assignment
Return home to US following assignment
Income protection
Try to stay comparable in housing, goods &
services, discretionary income, & taxes
Considerations for Other
Employees
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What is the proper role for the
balance between HNCs and TCNs?
Strategies
• Think global, act local
• One size fits all
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Facilitates moving between countries
• Think & act globally & locally
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Legal differences
Cultural differences
Summary
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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