Wednesday, April 15, 2009



One of the most challenging tasks of llHRM is managing the performance of a ftrm's various international facilities. Performance management may be understood as a process that enables an international firm to evaluate
and continuously improve individuals, subsidiary unit, and corporate performance, against clearly defined, preset goals and targets.

An expatriate's performacne needs to be assessed to effect his or her promotions, assess training and development needs, and introduce pay rises.


Any expatriate remuneration package needs to be designed to
achieve the following major objectives:
1. Attract employees who are qualified and interested in international assignments;
2 Facilitate the movement of expatriates from one subsidiary to another, from home to subsidiaries, and from subsidiaries back home;
3. Provide a consistent and reasonable relationship between the pay levels of employees at headquarters, domestic affiliates, and foreign subsidiaries; and
4. Be cost effective by reducing unnecessary expenses
Generally the following problems crop up while designing an international remuneration package:
• Discrepancies in pay between parent, host, and third-country nationals.
• The need to vary expatriate compensation, depending on the 'lifecycle' of the expatriate's family (e.g., young children, children in college, etc.).
• Remuneration issues related to re-entry into the parent country organsiation.
• Using remuneration programmes that had not changed sufficiently over time to deal adequately with the new international business environment.

Factors influencing international compensation: \


1. Base Salary
2. Incentives
3. Taxes


(1) Balance Sheet Approach

In designing an expat's remuneration, fIrms generally follow a number of approaches. The most common is the balance sheet approach, which involves ensuring that the expat is "made whole" and does not lose money by taking the assignment. The basic objective is to maintain home-country living standards, plus offer some fmancial inducement.

(3) Localisation

A second approach is called localisation and involves paying the expat a salary that is comparable to those of local citizens. Also called the going rate approach, in this method, the base salary for international transfer is linked to the salary structure in the host country. The international fIrm usually obtains information from local compensation surveys and decides whether local nationals (HCNs), expatriates of the same nationality, or expatriates of all nationalities will be the reference point in terms of benchmarking.

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