Globalization Sparks Need for Expatriate Programs/ Kefgen / Sept. 1996

Globalization Sparks Need for Expatriate Programs By Keith Kefgen and Rosemary Mahoney, September, 1996

Advances in communication, transportation and trade policies have made business a truly global endeavor, which is why a well defined expatriate compensation, relocation and indoctrination program has become vital to a company’s success abroad. Expatriate compensation has traditionally cost more than three times the total of one’s United States salary, allowances and taxes. As globalization increases, lodging companies need to implement expatriate policies that contain costs, but at the same time offer attractive job opportunities.

Expatriate Salaries
Position	Average Base Salary ($) Tax Free US Dollars	Average Bonus (%)
General Manager	$123,450	29%
Resident Manager	$81,634	22%
Director of F&B	$70,890	24%
Executive Chef	$65,832	16%
Source: HVS Executive Search

- Compensation Package

There are two primary methods that an organization can employ in constructing a compensation package for expats:

the home-based approach and
the host-based approach.

The home-based approach attempts to keep overseas executives on a financial par with their domestic peers. This system is designed to equalize the purchasing power of employees at comparable positions home and overseas. However, maintaining this purchasing power can be very expensive. For example, employing an American manager in Ireland and in Tokyo is respectively, three and six times the cost of maintaining the executive in a comparable U.S. position.
Today, more multinationals are turning to the host-based approach, often called the destination pricing model. This model treats employees as a citizen of the host country. By finding employees who want to work overseas, and by implementing a destination pricing model, the National Foreign Trade Council estimates that corporations can trim a minimum of 20% off the cost of sending an executive abroad. Relocation Relocation can be a significant up-front expense for multinationals, costing approximately $35,000 to $40,000. This can become a driving force in the move to a host-based compensation approach. More companies are also requiring employees to sign commitment letters with reimbursement clauses to guard against executives leaving in the first year.

Living in a culturally unfamiliar or climatically harsh locale can cause stress for an employee. Companies should incorporate into their expatriate policy, a guidance program for the employee and his/her family. The program should include cultural and language training, geographical familiarization, schooling options, and customs. Developing a detailed expatriate program is essential for
overseas success. Companies that implement a structured program will win the race for global supremacy in the lodging industry.

For additional information contact the firm at:

HVS Executive Search 372 Willis Avenue Mineola, NY 11501 Phone: 516-248-8828 Fax: 516-742-1905 or Email Mr. Kefgen at kxk@hvs-intl.com

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