Question

What are the main approaches to compensate expatriate employees? Under what conditions should a multinational company use the balance sheet approach? Under what conditions should a multinational company use the going rate?

Answer 1

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Main approaches to compensate expatriate employees are:

•   Home-based approach

•   Host-based approach

•   Global market approach

Multinational companies use the balance sheet approach to ensure that employees are able to maintain their home purchasing power while on a temporary global project.

The multinational company uses the going rate if the company is running in losses or don't have sufficient funds, so these companies try to find out the perfect location that have cheaper rent and from where to buy the raw material at a cheaper rate.