Managing reward: International assignments

Section eight of the Personnel Today Management Resources one stop guide on managing reward, covering: international assignment policies; assignment compensation; and home country, host country and hybrid approaches. Other sections .

International assignment policies

Any organisation which temporarily seconds more than a handful of employees overseas tends to have a formal assignment policy. If the mindset and behaviour of the company is to send employees overseas predominantly from the mother country (ie, the country in which the company is headquartered) then the language used may be that of "expatriate". In those truly international businesses possessing a global mindset the more modern (and perhaps less colonial) approach is to express the policy in terms of international assignees.

An international assignment is differentiated from a permanent transfer overseas by the fact that the home country employer expects, and in fact usually requires, that the employee will return after their period of temporary overseas employment. The assignment may be a short term assignment (something more than an extended business trip, which requires the employee to live overseas for typically up to one year) or, a long-term assignment, whereby the period of overseas employment is likely to be greater than 12 months.

Research from ECA International (www.eca-international.com ) reveals that the most important business reasons cited when sending an employee overseas (in descending order of importance) are to:

Assignment compensation

The three mainstream alternative approaches to assignment compensation are:

Host country approach: sometimes called 'market rate' whereby the employee assigned to a particular country participates in the employment conditions (eg, salary structure and benefit plans) of that country on similar terms to local employees

Home country approach: often referred to as a 'balance sheet build-up' approach, this methodology seeks to preserve purchasing power by taking home country salary and stripping out tax, social security and housing spend to leave a residual 'spendable amount'. The company then ensures that the employee pays no more tax and social security than had they remained at home, provides accommodation in the host country and applies a cost of living allowance to preserve purchasing power.

Hybrid approaches: can take many forms but often apply 'higher of home or host' principles when calculating assignment compensation or may take the form of a host country approach with the additional of certain allowances special to the period of secondment, or that particular location.

Home, host and hybrids

ECA research reveals that the following assignment compensation trends among companies seconding employees overseas:

Each of these approaches is illustrated below together with an analysis of pros and cons of each method.

Home Country Approach