1. © Prentice-Hall, Inc., 2001 Chapter Twelve International Compensation

2. © Prentice-Hall, Inc., 2001 Table 12-1 U.S. Expatriates’ Compensation Package Components l Core Compensation »Base pay »Incentive compensation –Foreign service premium –Hardship allowance –Mobility premium l Fringe Compensation »Standard benefits –Protection programs –Pay for time-not-worked »Enhanced benefits –Relocation assistance –Educational reimbursement for expatriates’ children –Home leave and travel reimbursement –Rest and relaxation leave allowance

3. © Prentice-Hall, Inc., 2001 Table 12-2 Annual Inflation Rates (%) for Selected Countries, 1995-1999 COUNTRY Germany France Japan Sweden 1.7 -0.1 2.9 1995199619971998 1999 1.4 2.0 0.2 0.8 1.9 1.2 1.7 0.9 1.0 0.7 0.6 0.4 0.6 0.5 ----- 0.3 Source: Consumer Prices in Nine Countries (Washington D.C.: U.S. Bureau of Labor Statistics, 2000).

4. © Prentice-Hall, Inc., 2001 Table 12-4 Relocation Assistance Payments l The relocation allowance or reimbursement provides employees with money for: »Temporary quarters prior to departure because the expatriate’s house has been sold or rented »Transportation to the foreign post for employees and their families »Reasonable expenses incurred by the family during travel »Temporary quarters while waiting for delivery of household goods or while looking for suitable housing »Moving household goods to the foreign post »Storing household goods in the United States

5. © Prentice-Hall, Inc., 2001 Table 12-7 Discretionary Income Expenditures l Pension contributions l Savings and investment l Insurance payments l Equity portion of mortgage payments l Alimony payments l Child support l Student loan payments l Car payments

6. © Prentice-Hall, Inc., 2001 Table 12-8 Cash and Noncash Income Exclusions: IRC Section 911 l Cash »Salaries and wages »Bonuses »Sales commissions »Incentives »Professional fees l Noncash »Housing »Meals »Cars »Allowances for cost of living differentials, education, home leave, tax reimbursements, children’s education, and moving expenses

7. © Prentice-Hall, Inc., 2001 Table 12-15 The Balance Sheet Approach ANNUAL EXPENSE Housing and utilities Goods and services Taxes Discretionary income Total BRUSSELS, BELGIUM (U.S. S EQUIVALENT) ALLOWANCECHICAGO, U.S.A. $35,000 $ 6,000 $22,400 $10,000 $73,400 $ 67,600 $ 9,500 $ 56,000 $ 10,000 $143,100 $32,600 $ 3,500 $33,600 $ 0 $69,700