Global Compensation, Benefits, and Taxes

Global compensation, benefits, and taxes

Learning objectives After considering this chapter, the reader will be able to describe or explain:

■ The basic objectives of global compensation

■ The seven options available for design of a compensation system for expatriates

■ The most commonly used system for expatriate compensation: the balance sheet approach

■ The two major components of the balance sheet approach: incentives and adjustments

■ The major approaches to managing taxes

■ Major problem areas with managing compensation and taxes

■ Design of a global compensation system

■ A number of critical components of compensation and benefits for the global workforce

Key terms

■ Balance sheet approach, localization, lump sum

■ Cost of living allowance (COLA)

■ Stock options, employee ownership

The design and maintenance of an enterprise's compensation system is always a critical responsibility for human resource managers. The conduct of international business makes this responsibility much more complex and difficult. The determination of individual and organizational pay and benefits on an international basis becomes extremely complicated because of considerations such as pay and benefits for international assignees, subsidiary workforces in multiple countries, employees from many different countries (such as inpatriates, HCNs, and TCNs), varying country approaches to and levels of pay and benefits, and problems such as dealing with multiple currencies, exchange rates, inflation rates, tax systems and rates, and differing standards and costs of living.Even though much space in this text has already been devoted to many other IHRM responsibilities, the majority of the time of headquarters-based international HR managers is spent creating and managing compensation packages for expatriates. 1 When development of compensation systems