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Local colleagues of the expatriate, they are valuable socializing agents, sources of social support, assistance, and friendship to expatriates. Expatriates are more likely to adjust when HCNs engage in this behavior.

HR managers focus on their strategic objectives to develop a comprehensive compensation plan, in terms of considering base pay, short and long-term incentives, benefits and growth opportunities. The objective of this kind of strategy is to ensure that both TNC/MNCs’ long and short-term objectives coexist in the compensation system without overlap, which would duplicate a single pay plan for the same objectives. The purpose of the planning is also designed to ensure that the compensation system attracts and retains the desired employees and that it motivates them to do those things that support the business plan.

KEY COMPONENTS OF AN INTERNATIONAL COMPENSATION

PROGRAM

The area of international compensation is complex primarily because multinationals must cater to three categories of employees: PCNs, TCNs and HCNs.

Key components of international compensation are as follows:

COMPONENTS OF MNC’S COMPENSATION

BASIC SALARY

ALLOWANCES

OTHER BENEFITS

1. Base Salary

In a domestic context, base salary denotes the amount of cash compensation serving as a benchmark for other compensation elements (such as bonuses and benefits).

For expatriates, it is the primary component of a package of allowances, many of which are directly related to base salary (e.g. Foreign Service premium, cost-of-living allowance, housing allowance) and also the basis for in-service benefits and pension contributions. It may be paid in home or local-country currency.

The base salary is the foundation block for international compensation whether the employee is a PCN or TCN. Major differences can occur in the employee’s package depending on whether the base salary is linked to the home country of the PCN or TCN, or whether an international rate is paid.

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