Compensation Expatriate - Edited

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Introduction
Java Corp. is setting up a new office in London, England, and it seeks to fill an executive-level
position with a citizen from the US but is already an employee of the company. The initial
contract will run for two years, subject to renewal. In determining an appropriate
compensation plan for the executive, the factors to be considered include base pay, benefits,
bonuses, and additional incentives to make the life of the new executive tolerable.
London is an international business hub with major companies setting up their global
headquarters here. According to ECA international, it is ranked as the 6 th most expensive city in
the world (Ross,2020). The monthly cost for a single person without factoring in the rent is
$1173.In case a person has a family, the monthly costs without rent balloon to $4153.The
average rent for a one-bedroom apartment ranges between $1212 and $2860.The cheapest
restaurant will cost $20, and a three-course meal will set you back $83.The total monthly cost
for utilities is $249.The cost of living for any professional, especially an executive, is bound to be
very high. More than half of their salaries are spent on living costs such as rent, transportation,
utilities, and groceries. Generally, executives want to be paid as much as possible. Employers
must make sure they pay their workers according to the labor market rates. The average salary
for an executive in the city of London is $125,000.Furthermore, one is required to pay an
annual income tax of 18%. The aforementioned factors have to be considered when developing
the compensation package for the executive.
Base pay/Salary
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The first incentive the Human Resource Manager(HRM) must consider when creating the
compensation package is moving. According to Nurney(2020), a company selects an incentive
package to motivate and influence the behavior of their employees towards accepting the new
offer being offered. When developing the compensation package, the company must be aware
of the employee's challenges while moving to the new location. Furthermore, the
compensation package must be tied to the employee performance and the company's
objectives(Kassem,2015). Relocating to a new city in a new continent is very overwhelming for
any employee, and the employee must be part of the discussions concerning his compensation
package to make them feel empowered.Java Corp allowing the employee actively participate in
the compensation package negotiations increases employee satisfaction and the probability of
turnover is minimized.
Incentives must be included in the executive pay, and in so doing, Java Corp will motivate the
employee, and the overall performance of the company is improved(Frey et al.,2013). For an
employee moving to work as an expatriate, a foreign service premium is necessary. This is
usually a 15% increase to their base salary, and the primary goal is to motivate them to move to
the new city. The HRM must ensure that this incentive is not left out in the final compensation
package. The US Department of State classifies London as being a medium threat location. It is
a fairly safe location that boasts all the amenities for a modern city in the 21 st century. The need
for a hardship allowance will is unnecessary.
The mobility premium incentive has to be granted to the employee. It is usually awarded as a
lump sum at the start or end of their contract. The mobility premium is awarded to the
employee when they move to the new location and incentivizes the employee to move. The
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Mobility premium is 15% of the employee salary, and for expatriates, it does not attract any tax
charges.
London is a very expensive city. The company must be aware the employee will spend most of
the income on paying utilities and purchasing goods and services. When developing the pay
package, the company includes a cost-of-living allowance that reflects the city of London. The
cost of rent is another critical factor that cannot be ignored. If the employee has a family, there
is a high chance that they would want to move with them. This means there will be additional
costs in breaking their current lease, which their employer will have to cover. Upon moving to
London, they have to look for a house conducive to raising kids; the cost of education must be
considered. It is only fair that the HRM includes relocation costs and education expenses into
the compensation package, which reflect the employee's living standards.
Benefits
The labor laws mandate that certain benefits be granted to employees(Creelman,2017). This is
both in the US and UK. The HRM must retain all the benefits but also include any additional
ones required by the UK government. The most important benefit is health insurance.
Healthcare in the UK is free, but a company can purchase private healthcare plans for its
employees. The cost of health insurance can be subsidized by the company. Another important
benefit is paid holiday and sick leave. The UK requires that an employee receives 28 days of
paid leave annually. In the UK, an employee must receive statutory sick pay for up to 28 weeks
which differs from the US labor market. A retirement plan is also a crucial benefit to consider.
The company must design the retirement plan based on the UK labor laws. Additional benefits
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can include a monthly spousal allowance. Furthermore, they can help them find a job in the
new host country.
References
Kassem, A. (2015). Contextual Factors of Compensation and Benefits Management to Expatriate
Workforce. International Journal of Academic Research in Progressive Education and
Development. 4. 10.6007/IJARPED/v4-i4/1938.
Frey, B., Homberg, F., and Osterloh, M. (2013). Organizational control systems and pay-for-
performance in the public service. Organization Studies, 34(7), 949-972.
Creelman, J. (2017). Pay and performance drive human resource agendas. Management
Development Review, 8(3): 6-9.
Nurney, S. (2018, April 11). HR Agenda - Global HR Management. Retrieved June 01, 2020, from
https://www.shrm.org/hr-today/news/hr-magazine/pages/0305nurney.aspx
Ross, S. (2020, May 08). How Much Money Do You Need to Live in London? Retrieved May 31,
2020, from https://www.investopedia.com/articles/personal-finance/091415/how-
muchmoney-do-you-need-live-london.asp.

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for an executive in the city of London is $125,000.Furthermore, one is required to pay an

the compensation package for the executive.

compensation package is moving. According to Nurney(2020), a company selects an incentive

objectives(Kassem,2015). Relocating to a new city in a new continent is very overwhelming for

employee moving to work as an expatriate, a foreign service premium is necessary. This is

for a hardship allowance will is unnecessary.

the compensation package, which reflect the employee's living standards.

new host country.

Kassem, A. (2015). Contextual Factors of Compensation and Benefits Management to Expatriate

Workforce. International Journal of Academic Research in Progressive Education and

performance in the public service. Organization Studies, 34(7), 949-972.

Development Review, 8(3): 6-9.

2020, from https://www.investopedia.com/articles/personal-finance/091415/how-

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