Comparative International Compensation

1824 Words Mar 20th, 2011 8 Pages
Introduction Increasingly, today, globalization is a reality for organizations of almost any size. Only the smallest companies seem unaffected by the disappearance of global boundaries among organizations, markets, and people. Globalization has increased awareness of and concern for creating internationally equitable compensation systems in many companies. The complex nature of international compensation dictates that it receives special attention from organization operating in a multi-national environment. It is crucial that organizations understand the kind of employees employed by international firms, the elements that comprise an international compensation system, and the special problems associated with returning citizens on …show more content…
• Establishing an overall compensation policy can be very challenging, partly because of the various forms of allowances, such as: o Cost-of-living allowance o Housing allowance o Relocation allowance o Education allowance o Home leave allowance o Hardship allowance Cost-of-living Allowances (COLA)
• COLA receives the most attention, to compensate for differences in expenditures between the home country and the foreign country (e.g., to account for inflation differentials, currency fluctuations, etc.).
• The COLA may also include payments for housing and utilities, personal income tax or discretionary items.
• The provision of a housing allowance implies that employees should be entitled to maintain their home-country living standards (or, in some cases, receive accommodation that is equivalent to that provided for similar foreign employees and peers).
• International comparison of cost of living is difficult and can be problematic. Relocation Allowances
• Usually cover moving, shipping and storage charges, temporary living expenses, subsidies regarding appliance or car purchases (or sales) and down payments or lease-related charges. o Allowances regarding perquisites (cars, club memberships, servants and so on) may also need to be considered (usually for more senior positions, but this varies according to location). o These
Open Document