Compensating expatriate employees presents many challenges. Deciding what and how to pay in the home or host country depends on many factors. Many times the expatriate needs to have funds available in both countries to meet financial obligations. Currency restrictions, governmental policies, and the current political environment in the host country, as well as the employer’s payroll structure and capacities are also considerations.
Three common approaches to expatriate compensation delivery include:
- Pay total compensation in the home county
Some advantages to this method would include ease of administration and one centralized payroll. The major disadvantage of this method is that the employee would not be provided foreign currency.
- Pay total compensation in the host country
Advantages of this method include centralized pay and access to foreign currency. Disadvantages however, are many, and include difficulty for the employee to contribute to home benefit programs, not having home currency to meet home financial obligations, and foreign exchange issues in moving funds to the home country. In addition, the employee may not be able to move their funds out of the host country due to restrictions.
- Split Pay
This option has several advantages. Among them the employee would receive a consistent amount each pay cycle. There would be minimal issues with foreign exchange, and the employee would receive funds in both the home and host country. The major disadvantage is that the process may be difficult to administer and there would need to be extensive follow up to ensure timely and correct delivery.
There are many available options to deliver expatriate pay. Deciding how to administer payments will depend on the host country, the employer, the employee, and all parties willingness to work together to find the best possible solution.