Compensation Management

The advantages and disadvantages of different approaches to the design of structural compensation packages are discussed below:?The Balance sheet ApproachAccording to Webb (2005):
“ the balance sheet approach ensures that an expatriate has enough money to buy exactly the same basket of goods in the host country that he or she could buy in the home country that is the same purchasing power. She further emphasized that this approach seeks to ensure that the expatriate can live at more or less the same standard in the host country.”Advantage: When an expatriate employee continues to identify himself with his peers at home it gives the company the chance to assign employees without having to think about making changes to their pay.Disadvantages:International staff members from different countries who are established overseas will be paid different amounts for doing the same job. There will also differences that exist with local staff doing the same job. These inconsistencies will affect staff morale negatively.International Citizen’s ApproachFreeman & Kane (1995) stated that:
“this approach to expatriate compensation uses an international basket of goods to determine cost of living allowances for all expatriates regardless of their country of origin.”
The basket consists of food, clothing, housing and other necessities. They further emphasized that expatriates are not offered pay changes that would permit them to buy precisely the same item in the host country as in the home country. Instead they would obtain changes that would permit them to buy equivalent local items. Advantages:It assists to attract and retain good international managers.
It decreases the luxury features of most foreign assignments thus making it simpler for global companies to move staff from one p to another.
The decrease of luxury compensation packages assist in lessening repatriation problems that takes place when expatriates are unwilling to…

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