Is It Just About the Money? New Perspectives on Expatriate Compensation

Expatriate compensation is often regarded as a key component of effective international assignment management (Bonache & Fernandez, 1997; Harvey & Moeller, 2009), yet it has long been a source of frustration for many multinational companies (MNCs) (Chen, Choi, & Chi, 2002; Foote, 1977; Harvey, 1993; Suutari & Tornikoski, 2001). Compensating expatriates is undoubtedly complex, complicated by fluctuating exchange rates, inflation, challenging locations in emerging markets, variable income tax rates, and a range of new compensation practices (Dwyer, 1999; Phillips & Fox, 2003). A survey by Ernst & Young (2010) found that 67 percent of mobility managers report “compensation packages” as the biggest area where international assignee expectations are not met. Yet prior research suggests that expatriates do not seek or accept international assignments purely for financial reasons (Borstorff, Harris, Feild, & Giles, 1997; Dickmann, Doherty, Mills, & Brewster, 2008). Indeed, there is compelling evidence that expatriates have many non-financial reasons for engaging in global mobility, with career enhancement and progression, seeking a personal or family adventure, and fulfilling a lifelong dream among them (Hippler, 2009; Selmer & Lauring, 2012). Why then is expatriate compensation such a challenge?

A successful compensation strategy involves keeping expatriates motivated while maintaining a competitive advantage through the meeting of MNC corporate goals and budgets (Latta, 1998; Morris, Clark, & Pennings, 1997). There is also the challenge of allaying compensation disparity between expatriates and local employees, which has been identified as a key determinant of dissatisfaction and lower morale among host-country nationals (HCNs) that work directly with international assignees (Leung, Wang, & Hon, 2011). Moreover, the fierce competition for foreign talent has caused issues in executive compensation (Carpenter, Sanders, & Gregersen, 2001), not because it is driving salaries up as one would logically expect, but because it is driving salaries down. Consider, for example, that global mobility bears considerable costs that are prohibitive for many companies, the response to which is to engage in cost-cutting. Whereas in years gone by, MNCs used ‘rich’ compensation packages to create a “home away from home” as an incentive to relocate (predominantly the balance sheet or full package approach; see Sims & Schraeder, 2005 for an overview), the availability of more expatriates willing to accept reduced packages such as local-plus and to localise in the host-country has caused a decline in the need for home-country compensation approaches (McNulty & Aldred, 2013), particularly in Asia (Diez & Vierra, 2013; ORC Worldwide, 2008). Local-plus is an approach in which expatriate employees are paid according to the salary levels, structure, and administration guidelines of the host location, as well as being provided, in recognition of the employee’s foreign status, with special expatriate benefits such as transportation, housing, and the costs of dependents’ education. It is worth noting that not all expatriates on local-plus receive the full range of additional benefits, these being at the discretion of the employing organization and largely determined by the location of the assignment (e.g. hardship versus non-hardship location), among other factors (Stanley, 2009). Thus, while the traditional reasons for needing expatriates (e.g. knowledge and skills transfer, global control and culture, career development) remain valid, more localised and local-plus expatriates now have a level of managerial talent that they can often compete for jobs with “full package” expatriates.

But, there are opportunity costs associated with expatriate compensation as a result of these new approaches: changes in the assignee profile in terms of the types of employees that are willing to engage in global mobility (McNulty & Aldred, 2013); increases in turnover when expatriates leave their job during an assignment and join a competitor (Brookfield Global Relocation Services, 2013); and an increasing number of third-country nationals and self-initiated expatriates that are willing to accept localized employment, thereby reducing MNCs’ reliance on parent-country nationals. Yet, our understanding of these issues is scant, with only a limited number of studies exploring, for example, global versus expatriate compensation approaches (e.g., Gomez-Mejia & Welbourne, 1991; Salimaki & Heneman, 2008), and few studies of an empirical nature (e.g., Harvey, 1993; Leung et al., 2011; Lowe, Milliman, De Cieri, & Dowling, 2002; Stone, 1995; Welch, 1994).

In this special issue, we provide a platform for new approaches to expatriation compensation with a view to extending the very limited knowledge about this under-researched and under-developed, yet highly relevant, topic. We invite submissions focused on any of the following themes, noting this is not an exhaustive list and other topics are welcome:

• What are new approaches to expatriate compensation? What are the drivers for their implementation?
• How important is expatriate compensation to expatriates? What are the “hygienic” versus “motivator” factors pertaining to expatriate compensation? What is really “important” to (a) MNCs, and (b) expatriates?
• What are the implications of the rapid increase in “local-plus” and other host-based packages such as localization? In what regions of the world are these compensation approaches taking hold, and why?
• How can managers deal with expatriates’ compensation concerns and develop packages that motivate and reward for optimum return in terms of ROI, assignee satisfaction, and global performance success?
• What are the advantages and disadvantages of traditional versus new approaches to expatriate compensation?
• How should the various types of assignees be compensated (i.e., PCNs, TCNs, SIEs, among others)? What are the implications arising from differences in compensation approaches among different types of assignees?
• To what extent are changes to compensation and the process through which companies manage compensation as important as the remuneration itself?
• What implications arise when expatriates are transitioned from “legacy” (i.e., initially deployed) compensation plans to new approaches?
• Should compensation approaches be different for male versus female expatriates?  For parent country nationals versus third country nationals? For traditional versus non-traditional expatriates? For inter-regional versus intra-regional assignees?
• How do expatriate compensation policies and practices affect host country nationals?
• When expatriates receive reduced compensation packages such as local-plus, do career benefits as a form of non-financial compensation mitigate salary losses?

Submission Process and Timeline

To be considered for the special issue, manuscripts must be submitted no later than 30 April, 2015, 5:00pm Eastern Standard Time. Papers may be submitted prior to this deadline as well. We welcome quantitative, qualitative (including case studies) and conceptual papers that provide unique insights into expatriate compensation and its practice. Findings and/or conceptualizations should have theoretical and policy implications, and seek to inform management practice. The editors of the Special Issue will be pleased to discuss initial ideas for papers via email.

Submitted papers must be based on original material not under consideration by any other journal or publishing outlet. The editors will select up to 5 papers to be included in the special issue, but other submissions may be considered for other issues of the journal. All papers will be subject to a double-blind peer review in accordance with the journal guidelines and will be evaluated by at least two reviewers and a special issue editor. The final acceptance is dependent on the review team’s judgments of the paper’s contribution on four key dimensions:

1. Theoretical contribution: Does the article offer novel and innovative insights or meaningfully extend existing theory in the field of global mobility?
2. Empirical contribution: Does the article offer novel findings and are the research design, data analysis, and results rigorous and appropriate in testing the hypotheses or research questions?
3. Practical contribution: Does the article contribute to the improved management of global mobility?
4. Contribution to the special issue topic.

Authors should prepare their manuscripts for blind review according to the Journal of Global Mobility author guidelines, available at www.emeraldinsight.com/jgm.htm. Please remove any information that may potentially reveal the identity of the authors to the reviewers. Manuscripts should be submitted electronically at: http://mc.manuscriptcentral.com/jgmob. Authors should select the special issue title New Perspectives on Expatriate Compensation from the drop down menu.

For enquiries regarding the special issue please contact either of the two Guest Editors, Yvonne McNulty at ymcnulty@expatresearch.com or Michael Harvey at mharvey@bus.olemiss.edu.

References

Bonache, J., & Fernandez, Z. 1997. Expatriate compensation and its link to the subsidiary strategic role: A theoretical analysis. International Journal of Human Resource Management, 8(4): 457-475.

Borstorff, P., Harris, S., Feild, H., & Giles, W. 1997. Who'll go? A review of factors associated with employee willingness to work overseas. Human Resource Planning, 20(3): 29-40.

Brookfield Global Relocation Services. 2013. Global relocation trends survey report. Woodridge, IL.

Carpenter, M. A., Sanders, W. G., & Gregersen, H. B. 2001. Bundling human capital with organisational context: the impact of international assignment experience on multinational firm performance and CEO pay. Academy of Management Journal, 44(3): 493-511.

Chen, C., Choi, J., & Chi, S. 2002. Making justice sense of local-expatriate compensation disparity: mitigation by local references, ideological explanations, and interpersonal sensitivity in China-foreign joint ventures. Academy of Management Journal, 45(4): 807-817.

Dickmann, M., Doherty, N., Mills, T., & Brewster, C. 2008. Why do they go? Individual and corporate perspectives on the factors influencing the decision to accept an international assignment. International Journal of Human Resource Management, 19(4): 731-751.

Diez, F., & Vierra, K. 2013. Why companies in Asia are changing their approach to pay, WorldatWork. Scottsdale, AZ: WorldatWork.

Dwyer, T. 1999. Trends in global compensation. Compensation and Benefits Review, 31(4): 48-53.

Ernst & Young. 2010. Global Mobility Effectiveness Survey. London, UK.

Foote, M. R. 1977. Controlling the cost of international compensation. Harvard Business Review, 55(6): 123-132.

Gomez-Mejia, L., & Welbourne, T. 1991. Compensation strategies in a global context. Human Resource Planning, 14(1): 29-41.

Harvey, M. 1993. Empirical evidence of recurring international compensation problems. Journal of International Business Studies, 24(4): 785-799.

Harvey, M., & Moeller, M. 2009. Expatriate managers: A historical review. International Journal of Management Reviews, 11(3): 275-296.

Hippler, T. 2009. Why do they go? Empirical evidence of employees' motives for seeking or accepting relocation. International Journal of Human Resource Management, 20(6): 1381-1401.

Latta, G. W. 1998. Expatriate incentives: beyond tradition. HR Focus, 75(3): S3.

Leung, K., Wang, Z., & Hon, A. H. Y. 2011. Moderating effects on the compensation gap between locals and expatriates in China: A multi-level analysis. Journal of International Management, 17(1): 54-67.

Lowe, K., Milliman, J., De Cieri, H., & Dowling, P. 2002. International compensation practices: A ten-country comparative analysis. Human Resource Management, 41(1): 45-66.

McNulty, Y., & Aldred, G. 2013. Local plus: Winning the compensation battle but losing the talent war. Strategic Advisor 4(9): 1-5.

Morris, R. W., Clark, S. W., & Pennings, J. M. 1997. The changing overseas assignment: Managing for competitive advantage. Compensation and Benefits Review, 29(2): 49-56.

ORC Worldwide. 2008. Survey on local-plus packages in Hong Kong and Singapore. New York.

Phillips, L., & Fox, M. 2003. Compensation strategy in transnational corporations. Management Decision, 41(5/6): 465-476.

Salimaki, A., & Heneman, R. 2008. Pay for performance for global employees. In L. Gomez-Majia, & S. Werner (Eds.), Global Compensation: Foundations and Perspectives: 158-168. Milton Park, UK: Routledge.

Selmer, J. & Lauring, J. 2012. Reasons to expatriate and work outcomes of self-initiated expatriates. Personnel Review, 41(5): 665-684.

Sims, R., & Schraeder, M. 2005. Expatriate compensation: An exploratory review of salient contextual factors and common practices. Career Development International, 10(2): 98-108.

Stanley, P. 2009. Local-plus packages for expatriates in Asia: A viable alternative. International HR Journal, 3: 9-11.

Stone, R. 1995. Expatriation remuneration practices: A survey of Australian multinationals. International Journal of Management, 12(3): 364-372.

Suutari, V., & Tornikoski, C. 2001. The challenge of expatriate compensation: The sources of satisfaction and dissatisfaction among expatriates. International Journal of Human Resource Management, 12(3): 389-404.

Warneke, D., & Schneider, M. 2011. Expatriate compensation packages: What do employees prefer? Cross Cultural Management: An International Journal, 18(2): 236-256.

Welch, D. 1994. Determinants of international human resource management approaches and activities: A suggested framework. Journal of Management Studies, 31(2): 139-164.

 

Professor Jan Selmer, Ph.D.

Founding Editor-in-Chief

Journal of Global Mobility (JGM)

The Home of Expatriate Management Research (Emerald)

www.emeraldinsight.com/jgm.htm

Department of Business Administration

School of Business and Social Sciences

Aarhus University

E-mail: selmer@badm.au.dk

Web: http://au.dk/en/selmer@asb.dk