Table 8.4 Paid Days Off Provided by Firms in Countries
around the World (continued)
Country/Region
Paid Vacation Days
(Minimum)
Public Holidays
(with Pay) Total Days Off
Europe/Scandinavia
Belgium 20 10 30
Germany 24 10 34
Greece 25 12 37
Hungary 23 (if > 21 yrs. old) 10 33
Ireland 20 929
Italy 20 11 31
Table 8.4 Paid Days Off Provided by Firms in Countries
around the World (continued)
Country/Region
Paid Vacation Days
(Minimum)
Public Holidays
(with Pay) Total Days Off
Middle East/Africa
Egypt 21 16 37
Israel 24 16 (avg.) 40
Explaining Compensation Differences
across Countries
•Cultural Groupings
➢Countries with similar cultures (e.g., Asian, Latin, and
European) tend have similar compensation practices.
➢Cultural values and pay pattern customs can conflict
with the attempts of international firms to implement
Table 8.5 Selected Compensation Practices across Cultures
and Countries
Cultural Dimension Sample Countries Characteristics of Compensation System
Strong individualism United States, Canada,
New Zealand, United
•Performance based
•Equity used to distribute compensation
High power distance Malaysia, Mexico,
Philippines, Spain
•Compensation tied to place in the social structure
•Large salary gap between workers and
management
The Challenges of Expatriate Compensation
•Grappling with Expatriate Costs… and
Employee Comparisons
➢High costs of expatriate relocation, provision of
benefits, and on-station expenses
➢Cross-national differences such as laws, taxes, and
compensation practices
Table 8.6 Potential Sources of Costs Associated with Expatriation
Direct Payments/
Reimbursements
Support for Adjustment
to Global Assignment
Tax reduction/equalization Home leave (4–6 weeks)
Hardship/foreign service premium Domestic help
Currency protection Spouse employment
Goods and services differential Child-care provider
Temporary living allowance Language/translation services
Creating an Effective Compensation Plan
for Expatriates
Compensation
Incentive(s) to
accept a foreign
assignment
Methods for Compensating Expatriates
Length of the
assignment
Where and why the
expatriate is going
The expatriate’s
level within the firm
Methods for Compensating Expatriates:
The Ad Hoc Approach
•Advantages
➢Allows for quick responses to problems abroad
•Drawbacks
➢Unfair treatment of expatriates who are not properly
compensated for assignments
Methods for Compensating Expatriates:
The Localization Method
•Advantages
➢Avoids problem of local employee pay comparisons
to expatriate compensation packages.
•Disadvantages
➢Works best when expatriate’s assignment is to a
location with a higher standard of living.
Methods for Compensating Expatriates:
The Balance Sheet Model
•Advantages
➢Protects expatriates from losses as a result of an
international assignment.
•Drawbacks
➢Escalation of foreign assignment costs
Cost of Living and Tax Differences
Savings and
Expense
Categories
The Balance Sheet Model:
Incentives and Expenses
Ensuring similar
Housing
Foreign service
premiums, hardship,
and danger pay
Expatriate
Figure 8.1 The Balance Sheet Approach to Expatriate Compensation:
Keeping Employees “Whole”
The Balance Sheet Model:
Cost of Living and Tax Differences
•Housing Costs
➢Firms typically pay the cost of foreign housing for
expatriates, or
•Tax Expenses
➢Tax equalization is practiced by international firms
in cooperation with national governments such that
The Balance Sheet Model:
Goods, Services, and the Balance Sheet
•Cost-of-Living Allowance
➢Determined by comparing the cost of a “market
•The Balance Sheet on Balance
➢The main goal of the balance sheet method is to treat
Table 8.8
Top Personal Income
Tax Rates for Selected
Countries by Region
and Year
Region/Country
2003 Top Personal
Income Tax Rate
2009 Top Personal
Income Tax Rate
Europe
Czech Republic 32% 15%
Denmark 59% 62.3%
Netherlands 52% 52%
Norway 47.5% 40%
Poland 40% 32%
Middle East/Africa
Bahrain 0% 0%
Egypt 34% 20%
Table 8.8
Top Personal Income
Tax Rates for Selected
Countries by Region
and Year (continued)
Region/Country
2003 Top Personal
Income Tax Rate
2009 Top Personal
Income Tax Rate
North America
Canada 29% 29%
Mexico 34% 28%
Brazil 27.5% 28%
Chile 40% 40%
Venezuela 25% 34%
India 30% 30%
Indonesia 35% 30%
Table 8.9 Do You Want Fries with That Foreign Assignment?
The Big Mac in Various Countries
Country
Cost of
Big Mac in
Local
Currency
Cost of
Big Mac in
U.S. Dollars
United States USD $3.73 $3.73
Argentina Peso 14.0 $3.56
Canada C$4.17 $4.00
Chile Peso 1,750 $3.34
China Yuan 13.2 $1.95
Country
Cost of
Big Mac in
Local
Currency
Cost of
Big Mac in
U.S. Dollars
Mexico Peso 32.0 $2.50
Norway Kroner 45 $7.20
South Africa Rand 18.5 $2.45
South Korea Won 3,400 $2.82
Sweden SKR 48.4 $6.56