In order for US companies to succeed abroad, expatriate compensation must be able to help ensure that remuneration is fair, but it must also be cost effective in the global marketplace. Smart companies balance business objectives abroad with the compensation package that they offer to their expatriates. These packages tend to include base salary, taxes, allowances, COLAs, housing and reimbursable expenses (Solomon, 70-76). Expatriates need extra energy to perform their duties. In order to induce competent people to carry out overseas operations, a company has to develop an effective expatriate compensation program. This program must provide adequate incentive to encourage people to work outside the country, and it must pay well enough to offset the inconvenience and hardship of maintaining an American standard of living in a new environment. Programs such as these must also take into consideration the needs of an individual to keep in contact with friends, family, and business associates who remain in the native country (Mendenhall, 394-404).
There are several difficulties when it comes to dealing with the compensation and benefit issues of expatriates. Transportability of a pension plan, medical coverage, and social security benefits are very difficult to normalize. Firms need to address the following issues when considering the benefits of expatriates. They first need to determine whether or not to maintain expatriates in their home-country programs. This is particularly important it a firm does not receive a tax deduction for maintaining them in the home country. A second consideration is whether firms have the option of enrolling their expatriates in host-country benefit programs. After this is determined they also have to decide if they will make up the differences in coverage between the host-country and the home country that may exist. The final consideration is whether expatriates should receive home-country or host-country social security benefits.