CHAPTER 7
COMPENSATION PACKAGE
| No doubt when you began working for the company that is now proposing to send you abroad, you looked carefully at the details of the compensation package you were being offered. You considered not only salary, but also other forms of compensation such as merit pay opportunities, pension plans, insurance benefits, and vacation and sick leave. It may very well have been one of these non-salary benefits that tipped the balance for you when you chose that company. |
|
Now you are considering accepting an assignment overseas, and it is time
to renegotiate your compensation package. Your living and working
conditions may change dramatically, and the compensation package you
accept should reflect your new responsibilities and your new living
requirements. It is quite possible that your life abroad will involve
expenses you do not incur at home. For example, the exchange rate in
the target country may raise the real cost of living significantly; you
may choose to send your children to a private school while abroad,
requiring substantial tuition payments; you may need to hire servants to
help you manage your household in a very unfamiliar culture; you may
need to take costly security measures for yourself and your family.
Your new compensation package should reflect such new conditions.
Remember that whatever you agree to Stateside is probably what you will
have to live with abroad, so take the time to think carefully about what
you and your family will need to live comfortably and safely. You
should review carefully all aspects of the benefits offered along with
their implications. What you see and what you get could be different.
Take pencil to paper to evaluate all offers on the table to determine if
they make sense financially.
Compensation packages vary widely from company to company; they may even
vary greatly among employees of the same company. The package you
negotiate will also depend on your new responsibilities and the living
conditions in the target country. It is not within the scope of this
book to discuss or evaluate all the possible arrangements you might
make. However, there are some specific categories of compensation that
you should at least discuss in your negotiations. What follows is a
brief discussion of these.
SALARY
Salary overseas is often determined by the comparable local salary range
of the foreign subsidiary. In specific countries in which the local
salary ranges are not acceptable, the salary may be comparable to local
market ranges of compensation for expatriates of comparable
international companies in the host country.
In the determination of the remuneration package, the basis for net
compensation will probably be the salary range for a comparable position
in the US. The comparison of the net compensation will take into
consideration the following: cost-of-living expenses, taxes, social
security, pension, insurance, etc. Your net compensation should not be
lower with an international assignment. Allowances should be made to
adjust for inflation and currency fluctuations. Determine how often
your company reviews the need for these adjustments.
ALLOWANCES
Allowances may be either increased or decreased, depending on changes in
remuneration levels, currency fluctuations, inflation, changes in tax
laws, etc. In countries where inflation is consistently volatile,
reviews by the company should be done frequently. A "location
allowance," designed to offset certain differences between the US and
the host country, may also be included in the package.
RELOCATION ALLOWANCE
Moving a family anywhere, especially overseas, will involve costs that
you haven't considered. Will your company provide additional funding in
the form of an extra moving allowance or bonus?
MOBILITY ALLOWANCE
Because of inevitable inconveniences that arise from each transfer, you
may be entitled to an additional lump sum at the start of the foreign
assignment, and another allowance upon returning to the US.
MEDICAL AND DENTAL PLANS
Will your company provide you and dependents with a medical/dental
program and a supplemental medical/dental program that covers you
abroad? Find out what reimbursement is in order.
SICK PAY
What salary continuation, if any, is available for short-term absences
due to illness?
LIFE AND ACCIDENTAL DEATH OR DISMEMBERMENT
Will you be provided life insurance coverage?
PERSONAL PROPERTY INSURANCE
You will probably be required to purchase a personal property insurance
policy in the host country. This can usually be arranged by the
company, although the costs incurred may not be reimbursed.
PENSION PLAN
Will you be penalized in pension benefits because of the foreign
assignment? As a result, specific arrangements based on your own
individual circumstances should be detailed in the agreement. The
pension benefit level may be based on funds that accrued during the
foreign assignment. The basis for these benefits can also include
contributions and taxes that are either wholly or partially paid by the
foreign subsidiary.
Unless stated otherwise in the agreement, the US base salary should
determine the employee's benefits. In the event that the company
implements a pension plan for the US subsidiary and because of
legislation the foreign subsidiary is obligated to pay contributions to
a designated pension plan, find out whether you might be required to
reimburse the company for these payments.
ARRANGEMENTS FOR PRIMARY RESIDENCE IN THE HOME COUNTRY
If you own your current residence, you will need to decide what to do
with it. Several options are open to you, and you should arrange a
compensation package that will best support the option you choose. If
you:
SELL THE PROPERTY
Determine who pays for realtor fees, closing costs, legal fees, and
carrying charges. The guidelines for such reimbursements are usually
determined by your company. In the event that the property is sold
below the designated fair market price, will you be reimbursed for any
difference? During the time that the property is on the market, who
will pay the following expenses: carrying charges, mortgage interest,
property insurance, real estate taxes, and maintenance costs related to
grass cutting and snow plowing? If the company doesn't buy the house or
is not responsible for its sale, you often become responsible for all
costs after a period of time. Be sure to find out.
RENT THE PROPERTY
The company may provide reimbursement for expenses related to rental
agencies or property management. You might also get reimbursed for any
shortfall between the actual rent received and the actual carrying
costs. Reimbursements may be limited to mortgage interest (net
following applicable tax deductions), property insurance, real estate
taxes, and utilities as long as an appropriate rental fee is charged.
KEEP THE PROPERTY VACANT
If every effort has been made to secure a tenant and this proves
unsuccessful, then how long will you be reimbursed for carrying
charges? Reimbursements are often limited to mortgage interest,
property insurance, real estate taxes, utilities, and maintenance costs
related to grass cutting and snow plowing.
HOUSEHOLD GOODS
The company should absorb the costs of packing and moving household
items. In most cases, you should consult with a company-designated
moving agent when arranging transportation and storage. Find out
whether there are any weight or volume limits and whether your goods
will be insured in transit. Your company should absorb the costs
associated with the door-to-door shipping insurance for household
items. Find out what procedures are followed in the event that a claim
needs to be submitted and who pays for any insurance short fall. Your
company usually does not ship items requiring special attention. The
company does not pay for fines, duties, or other expenses resulting from
undeclared goods. In the event that you choose to place household goods
in storage, who pays the costs associated with storage? Are there any
limits or deductibles? Find out who pays for household cleaning
associated with the relocation.
TEMPORARY ACCOMMODATION AND FURNITURE
You should be reimbursed for appropriate living expenses associated with
accommodations, meals, and necessary living expenses incurred while you
arrange permanent housing or await the arrival of household furniture.
Make sure you understand the time limit before you start paying
personally.
TRANSITIONING FAMILY TO ASSIGNMENT LOCATION
In the event that your accompanying family's relocation schedule can not
coincide with your transfer date, how often will you be allowed to
return home and who pays?
TRAVELING TO HOST COUNTRY
You should be reimbursed for all documented traveling expenses incurred
in relocating to the foreign destination. The same holds true for all
documented expenses incurred during the return to US at the end of the
assignment. Your company may also pay the expenses of a "reconnaissance
trip" to the host country during which you can become familiar with your
new office and make some arrangements for your life there (housing,
schools, etc.).
Travel reservations are usually by air. When the itinerary involves
non-stop flights of more than twelve hours, an overnight stop along with
appropriate accommodations should be acceptable. You should be
permitted to bring an appropriate amount of personal belongings in
addition to the regular baggage.
HOUSING IN HOST COUNTRY
Your company should make sure that you and your family are housed in
appropriate living quarters in the host country. Many a wife has gone
home when the new home has appliances that don't work, no one to fix
them, roofs that leak, heaters that don't heat. What is the true cost
of shipping all the amenities? Housing costs should be based on host
country housing norms as well as "expatriate" host country housing
costs. Include the cost of utilities in your calculations.
Will personnel from the foreign subsidiary assist you in locating an
appropriate apartment or house in the host country? Will the
representatives from the foreign subsidiary also provide you with
guidance regarding rental agreements and so forth?
During the course of the international assignment, it is strongly
suggested that you refrain from purchasing a primary residence in the
host country. In the event that you do proceed with purchasing a
primary residence in the host country, will the company provide any
reimbursement related to the purchase or subsequent sale, investment
loss, real estate taxes or otherwise? The company may classify such a
purchase as a personal investment.
SCHOOLING
Based on the circumstances, you may be provided with funds to defray
education costs at an appropriate school. If so, all matters regarding
school choices should be approved in advance by the company. The funds
provided for education costs are often applicable for preparatory
education only and usually don't include colleges, universities, or
other higher education schooling. Reimbursed educational expenses
usually include books, school fees, and transportation to and from
school. Costs related to school uniforms or activities outside of the
general school curriculum (sports, music, school trips, etc.) may or may
not be covered.
In the event that sufficient educational facilities cannot be provided,
you may decide to have the children attend a boarding school in a
separate location. Under such circumstances, you should be reimbursed
for tuition, books, registration, and boarding. You should receive
advance approval from the company in order to qualify for
reimbursement. Further, you may be reimbursed for an annual trip to the
location of the boarding school. Check whether college students will be
eligible for air fare reimbursement back to the foreign assignment.
VACATION
If your assignment is outside the US, you should be entitled to an
annual vacation. Find out requirements and guidelines. Your vacation
time may be based on the number of months worked. Will your corporate
seniority be considered by the foreign subsidiary?
HOME LEAVE
Will you be eligible for home leave and accompanying airfare and auto
rental? Is there reimbursement for unused home leave time?
PERSONAL MATTERS
You will probably have responsibility for handling all confidential
affairs pertaining to family matters before leaving the US. Depending
on company policy, the legal expenses you incur in this process may or
may not be reimbursed. Also, see how much time off from your regular
work schedule is permitted to handle arrangements relating to moving,
visas, etc. This time off should not be deducted from your regular
vacation time.
Your company should provide you with all pertinent information regarding
the host country. Prior to leaving the US, you and your family should
receive some cross-cultural training. Upon arrival in the host country,
the foreign subsidiary may or may not provide an introduction program
for you and your family.
Before departure, you and your family may be required to have a physical
and dental examination, including any necessary vaccinations and
inoculations. All related medical costs should be reimbursed. When
assignments are located in regions that are hampered by intense weather
climates or questionable hygienic standards, you and family members
should have a complete physical on an annual basis. All costs incurred
should be reimbursed.
SALE OF AUTOMOBILE
You may or may not want to take your car. What do you do for parts in a
small foreign town that doesn't service an American automobile? If you
sell your car, are you entitled to an appropriate cash adjustment in the
event that the automobile is sold for a sum below the designated market
value? Does your spouse's vehicle qualify for this coverage? What if
you have a company car at home?
COMPANY AUTOMOBILE
Determine whether you will be entitled to a company automobile. Who
pays if you aren't entitled?
CLOSE RELATIVE'S ILLNESS OR DEATH BACK HOME
If there is severe illness or death in your immediate family, will the
company pay for necessary travel costs?
DEATH
What happens if you or a member of your accompanying family dies during
the foreign assignment? Where will the body be shipped and who will pay
for preparation and transportation?
CLUB MEMBERSHIP
Will fees related to club memberships be reimbursed?
SERVANTS
Will you be entitled to (and/or expected to) employ servants in your new
foreign residence? You may or may not be expected to provide for their
health and well-being.
