Employees accept job offers not only upon the salary, but on the benefits that accompany many positions. Employee benefits are a "job perk" that may convince a potential employee to join a specific company. Evaluate what benefits are valuable to you when looking for a package.
To convince an employee to go abroad, there may be additional benefits to help ease the transition. The most common is an increase in salary.
However, these packages are not as cushy as they once were. An ability to understand what exactly is being offered for what price is essential.
The most common approach is the Balance Sheet (or buildup system). An estimated 83 percent of companies use this method for their long-term expatriate compensation. It is designed to or ensure an employee is "no worse off" during the assignment than they were at home. The employee should retain the same amount of purchasing power and savings of the same capacity as his country of origin. The expatriate neither gains nor loses from a financial perspective.
To establish compensation, the package must
Establish Home Spendable Income - A balance sheet starts by establishing how families spend their money at home. This is done by using statistical averages based on each national government's consumer expenditure survey.
Compare Prices - The next step is to compare prices collected at the host location and compare the cost of that lifestyle in the last location. Of course, a family's lifestyle will never be exactly the same and elements like international telephone calls, domestic help, etc. should be calculated. This is more than establishing simple price differences and takes a bit of art as well as science.
Evaluate Cost of Living Index - The "cost of living index" represents the difference in the cost between comparable goods and services at the home and host location at a particular exchange rate. A cost of living index above 100 indicates the host location is more expensive, whereas an index below 100 indicates it is less expensive. To determine the amount paid to the employee, the cost of living index is applied to the home spendable income with the resulting "cost of living allowance" (COLA) determining what supplement is required to make the employee "whole". The package should provide enough for both the home spendable income, plus the COLA.
Changes to pay over time are necessary to keep up with inflation and changes in exchange rate. Calculations are usually based on studies like Mercer's cost of living. Most companies change the COLA every six months to reflect these economic changes.
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