IHRM Chapter 8

Question 1

Objective of international compensation?

Answer 1

compensation must be
- consistent
- attain objectives
-structure
-strategies

-Attract
-Retain
-Motivate MNEs staff to stay in areas where they have the greatest opportunities

Question 2

Policies for compensation must be

Answer 2

• competitive
• recognize factors for incentive foreign services
• tax equalization
• reimbursement costs

Question 3

What does an individual expect within their compensation?

Answer 3

• financial stability (salary and benefits)
• issues related to living costs
• educational assistance
• housing and recreation

Question 4

Base Salary

Answer 4

• the amount that an employee is guaranteed to make (hourly wage)
• for expats this is the primary component of their package which includes the base salary

Question 5

Foreign service inducement

Answer 5

• expats are paid if they are in a country that has difficult living conditions
• also known as hardship premium
• depends on the nature of the assignment, the length of the assignment, the actual consequence of the assignment and tax consequences

Question 6

COLA

Answer 6

• cost of living allownces involves a payment to fulfill expenses between the home country and foreign country
• example: transportation, medical care, education, housing
• family size determines the cola and additional allowances are given to each child

Question 7

Maintaining home country standards

Answer 7

• home country living lifestyle is equal or similar to the foreign country
• amount of allowance depends on the family size

Question 8

Fixed housing allowance

Answer 8

• an alternative to provide a fixed allowance across a specific job level and preference according to the expatriate

Question 9

Home leave allowance

Answer 9

• employers will cover expenses for the expat when they decide to visit their home country
• opportunity to renew family and business ties
• minimize adjustment problems
• employees with limited international experience will feel more homesick than others who simply return home for a reality check

Question 10

Educational allowances

Answer 10

• cover expenses for tuition, textbooks, supplies and enrolment
• costs of local and international schools are covered by the employer
• Example: Germany and other Scandanavian universities will charge no costs for students despite their nationalities

Question 11

Relocation allowances

Answer 11

• helping move, ship, and provide service for storage systems
• Example: western countries will have U-haul trucks to make moves

Question 12

Spouse assistance allowances

Answer 12

• provide the spouse with employment opportunities such as job search assistance, cultural orientation, resume preparation
• MNEs generally pay to encourage employees to take on international assignments and retian employees

Question 13

Benefits

Answer 13

• pension plans are difficult based on different nations and their policies
• medical and dental dees can also be difficult to normalize
• provide vacation and special leaves to return to their home country
• rest and rehabilitation leaves

Question 14

MNEs need to address the following issues when considering benefits

Answer 14

• whether or not expatriates stay in the home country programs especially if the multinational does not receive tax deduction
• whether MNEs can enrol expats into the foreign programs and make up for the differences in coverage
• whether expats will receive home or host country security benefits

Question 15

Taxation issues

Answer 15

• time consuming to deal with for expats and the organization
• potentially complex for fly in fly out expats

Question 16

Two approaches to handling international taxation

Answer 16

• tax equalization
• tax protection

Question 17

Tax equalization

Answer 17

• firms withhold an amount equal to the home country tax obligation of the expatriate to pay in the host country

Question 18

Tax protection

Answer 18

• the employee pays the amount of tax they would pay in the home country

Question 19

Ad hoc approach

Answer 19

• the expat is handled differently based on the individuals package

Question 20

Laissez faire approach

Answer 20

• employees are on their own in conforming to the host country and home country tax laws and practices

Question 21

How is one considered an emigrant

Answer 21

• you leave Canada to live in another country
• you sever your residential ties with Canada

Question 22

Sever residential ties with Canada means

Answer 22

• you don’t keep your main ties with Canada due to
• dispose or gave up your home in Canada and established a home in another country
• spouse or common law partner leaves Canada
• dispose personal property and break social ties in Canada and must establish them in another country

Question 23

What makes you a factual resident

Answer 23

• if you leave Canada and keep your ties in Canada

Question 24

What makes you a deemed non-resident

Answer 24

• if you consider yourself to be a resident of another country with which Canada has a tax treaty
• subject to the same rules as an emigrant