Introduction
In practice, there are basically three international pay systems: the home country-based pay, headquarters-based pay, and host country-based pay. These systems are determined on the basis of standard of living, and the tax scheme used in the host country of a company. For this assignment I will consider theoretical company, John motors, which have its headquarters in Nigeria and other offices in Kenya and Algeria. The home country-based pay is an approach that leaves an employee’s salary unchanged even after relocation. For instance, if an employee from John motors is relocated from Kenya to Algeria, he is still entailed to receive a pay from Kenya. The employee will be expected to continue paying taxes as well as social security to the respective countries. However, the company may decide to increase the employee’s salary if it deems that, he is incurring additional expenses (Infante, 2001).
Main text
The headquarters based pay is an approach to international pay that allots all shuffled employees a comparable salary as that paid to employees operating in the company’s headquarters. For instance, if an employee from John motors is shuffled from Algeria to Kenya, (under headquarter based pay) he is entailed to receive payment according to Nigeria’s pay scale. One advantage of this approach is that, it treats all employees equally irrespective of the country they are working from.
The host county-based pay is an approach in which employees’ pay is determined on the basis of the pay scale in the host country. This is to mean that, any employee working in Kenya (for example) is supposed to receive an equivalent pay as that received by another employee in the same country, who is performing the same work (Infante, 2001). The advantage of this approach is that, it treats all employees working in the same profession equally in the same country. However, this approach becomes disadvantageous if an employee is relocated from a higher paying country to that with low pays. The appropriate international pay method is determined by the company depending on its principles and the law governing it.
Many businesses have been growing internationally leading to increased repatriation of employees. This depends on a company’s culture and availability of skilled employees and the business operations. However, this normally stands as an obstacle for organizations in balancing host-country income tax differentials. There is no standard format on how income tax is collected and this depends on each country. For example in the United States, all employees are expected to pay their income tax even if they are relocated to other countries whereas in other countries for example Kenya, an employee is exempted from paying taxes once he changes his residence.
Conclusion
Compensation plans work as a motivators by encouraging employees to accept foreign assignments. If employees are compensated for any additional expenses incurred in the process of relocation, then there are more often than not, likely to accept the foreign assignments. In the United States, every citizen is entitled to receive unemployment benefits for a specific period of time if he remains unemployment after completing studies. There is also a minimum wage rate that all employers are supposed to pay their employees at any given time. On the other hand, all employees are expected to pay income taxes and social security even after changing their residence. In Mexico, employees are normally paid higher than the standard full amount of cash compensation. This includes base pay, bonuses, commission, and overtime. There are no unemployment benefits although the government has set some minimum wage rate that employers are supposed to comply with. Unlike in the United States, in Mexico, citizens do not pay taxes to their home country after changing their residence but are expected to comply with the laws in the host country (US Bureau of labor statistics, 2010).
Reference list
Infante, V. D. (2001). Three ways to design international pay: headquarters, home country, host country- human resources employment abroad strategies. Web.
US Bureau of labor statistics (2010). Workers compensation & hours worked. Web.