To be, or not to be, local-plus

A successful compensation strategy involves keeping expatriates motivated while maintaining a competitive advantage by achieving a company’s corporate goals and budgets. While in theory this seems achievable, in practice there are many challenges with expatriate compensation that cause problems for companies. Many are in a battle to win external talent, and to retain internal talent. At the same time, cost pressures to reduce the expense of international assignments is increasing. The balance-sheet approach is expensive relative to the fact that a very small proportion of a company’s overall total employee workforce (e.g., perhaps 5 percent of employees in total) may be incurring 60 or 70 percent of total salary costs. Not surprisingly, for many years this was a major reason why expatriates agreed to go. There is also the tax equalization expense when assignees relocate from low tax to high tax countries.

“Local-plus is an approach in which expatriate employees are paid according to the salary levels, structure, and administration guidelines of the host location, as well as being provided, in recognition of the employee’s foreign status, with special expatriate benefits such as transportation, housing, and the costs of dependents’ education. It is worth noting that not all expatriates on local-plus receive the full range of additional benefits, these being at the discretion of the employing organization and largely determined by the location of the assignment (e.g. hardship versus non-hardship location), among other factors.”

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