11 Critical success factors when managing expatriate compensation

By Dr Mark Bussin

Working in the field of expatriate compensation is extremely complex. Designing and administering appropriate pay levels and rewards for a globally mobile workforce present multi-faceted difficulties and challenges for all organisations and international consultants. And as important as international assignment remuneration is to an organisation, management often continue to undervalue the impact it has on assignees’ morale, motivation and financial performance.

In writing and collaborating with contributors for my latest book: Expatriate Compensation, I identified several common critical success factors that are vital to designing a good international assignment package. They are:

  1. Include current and former assignees in the design process.
  2. Make use of research information and current best practice.
  3. Make use of tax experts regarding tax in both host and home countries (reciprocal tax agreements make this essential).
  4. Research shows that three- to five-year assignments provide optimum ROI.
  5. Candidates’ soft-skill abilities (EQ) should be assessed before the candidates are assigned.
  6. Typically utilise international assignments as developmental opportunities for high-potential employees.
  7. Companies should invest time and effort in managing employee and spouse expectations.
  8. Companies should track employee career development over 10- to 15-year horizons.
  9. Most international companies use home country base salary to calculate the international assignment package.
  10. Increasingly, companies try to outsource the international assignment administration function.
  11. Companies should double their repatriation efforts, as many assignees stay longer than required on high levels of assignment remuneration.

Benchmark findings and lessons learnt

When doing the research on best-of-breed schemes, one often comes across the following as typical benchmark findings. This could serve as a lessons-learnt checklist for your scheme design:

  • Companies generally assist with tax compliance.
  • Companies strive to put international assignee on equal footing with that at home.
  • Most companies use external consultants for overall design, COL and parity.
  • Half the companies allow international assignees to complete “location ranking questionnaires” (typically 16 to 20 factors).
  • Conversion to local conditions ranges from immediate to three years.
  • The parent organisation is still responsible for the international assignee’s career.
  • Equity is managed by home base and job.

Other important design considerations include:

  • Soft issues such as the spouse’s loss of employment, repatriation, and re-skilling
  • Volatile currency such as the and against the major currencies in the past
  • Selling houses in the home country at a loss
  • Provision of a car benefit in the host country
  • COL index, particularly in high inflation countries

I would like to hear your views on expatriate remuneration, especially success stories that we could include as a case study in future versions of this book. Please e-mail me on drbussin@mweb.co.za. If you would like to learn more about Expatriate Compensationcick here now.

Or to learn more about my upcoming Expatriate Compensation Workshops in Cape Town and Johannesburg please contact KATIE VAN DER SCHYFF on + 27 11 706 6009+ 27 11 706 6009 or at katie@knowres.co.za.

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