Link update: differing views on expat compensation
Every relocation is different. The individual, the destination, the duration, and the overall objective of the assignment – all these factors can vary. And one of the key challenges of global mobility professionals is to offer a compensation package that best suits the situation, whether this covers the cost of moving, the cost of living or both. As you would expect, there are lots of options – and the following resources and articles may help guide you in choosing the right one for you and your assignees.
Cash is not king
There is an inevitable temptation – especially amongst smaller companies without the resources or time to set out a formal compensation strategy – to simply offer a cash lump sum to cover the cost of relocating employees. This could be a mistake, as David Bradstreet explains. The alternative is often the “managed cap” solution. Garrett Zucker takes a $15,000 budget and details how the two methods might compare. Laura Henneberry delves further into the issue and looks at different ways of handling the “managed cap” approach.
COLA v COHA
Global relocation experts NEI published a recent report on the use of COLA (Cost Of Living Allowance) and COHA (Cost Of Housing Allowance) as formulae to calculate compensation packages for US employees. See how the two systems are used, and the relative merits of each. Elizabeth Hauss, meanwhile, asks why calculating the cost of housing needs to be so complicated – and discusses why some companies would rather avoid the issue altogether.
Coping with unexpected costs
However, we are dealing with real people in real-life situations. When things don’t quite go to plan, how do you compensate expats for unforeseen expenses? Chantal Rowe talks us through the subject of exception management – and suggests how we should be prepared for the unexpected.
Paid from home – or from abroad?
Once the assignee is in place, they can receive their salary in a number of ways. The issue of “compensation delivery” describes whether compensation is delivered via the home country or directly in the host country (or a little of both). Christopher Pollard of GTN explains how factors such as local tax regimes and retirement planning can help guide this crucial decision.
Localization – one rule for everyone
One of the dangers of operating without a formal strategy in place is that inequalities arise. This is particularly important in negotiating “localized” compensation packages, where one employee may end up with a better (or worse) deal than his co-workers. Adam Silver explains the problem in detail – and how a tool called an “affinity matrix” may help companies to avoid it.