Did you know?
1. Traditional incentives do not work well in some cultures? Most incentive plans implemented in the U.S. are based on individual performance. In some Asian countries such as Korea and Japan this practice goes against their culture which is more team based. Using team based incentives work better in these countries.
2. The cost of sending an American overseas on an extended work assignment can cost 3-4 times his/her base salary per year? Extended expatriate assignments are very costly. The components of a typical expatriate package typically include housing, international school for children, cost of living allowances and perhaps a leased car. But the majority of the cost is the tax. Foreign taxes must be paid for expatriates working in a foreign country.
3. Most countries have mandated national health and retirement plans? Most countries outside the U.S. have government mandated benefits plans for at minimum medical and retirement (similar to U.S. social security). Because these plans typically supply minimal coverage, most companies add “supplemental” benefits such as insured medical, life, AD&D (accidental death and dismemberment), defined contribution plans, etc. Companies need to review third party benefits surveys to understand what the market practice is regarding supplementary plans.
4. Employees in some countries cannot hold stock in a foreign owned company? Countries such as India allow stock options to be granted, but the employees cannot exercise and hold stock — if they exercise it must be done through a cashless exercise procedure.
5. The U.S. is only one of a handful of countries that taxes its citizens regardless of what countries they work in? If an expatriate has full-time residence abroad for a full calendar year (bonafide residence test) or does not return to the U.S. for more than 35 days in a consecutive 12 month period (physical present test), he/she can exclude up to $92,900 of earned income from U.S. taxes for 2010. So if an expatriate earns less than $92,900 from the U.S. he/she will pay no U.S. taxes. This is called “earned exclusion.” All other industrialized countries do not tax their expatriates working abroad. Some American expatriates have renounced their U.S. citizenship in order to avoid paying U.S. taxes.
6. “Employment at Will” is a U.S.-only practice?
7. Two-thirds of Americans returning to the U.S. from an extended overseas work assignment leave their company within 12-18 months? Expatriates returning to the U.S. to their parent company many times leave after 12-18 months. The reasons vary but the most common are:
- New job does not take advantage of the new learning/experience learned from the overseas assignment.
- New job does not provide the latitude or responsibility the foreign assignment did – i.e. representing the company in the host country, dealing with high level officials in the host country government, being responsible for legal matters, etc.
Unfortunately these expatriates often leave to go work for a company that is very happy to hire a person with international experience.
8. Employee compensation and benefits plans in some countries cannot be terminated once put in place? Companies need to check to see if plans have legal ramifications before implementing. The Philippines, for example, is one country in which a compensation and/or benefits plan put in place can never be terminated. One possible way around this is to put a “sunset clause” in the terms of the plan.
9. In some countries employees are paid and promoted based on their age and the status of the university they attended instead of performance? This is not usually the case anymore in U.S. multinationals that are strong believers in “pay for performance.” However Korea and Japan have long practiced this and may still be uncomfortable giving an employee from a first-rate university an unsatisfactory performance rating.
10. The development and use of employee handbooks should be discouraged in countries outside the U.S? Employee handbooks are taken for granted in the U.S. and therefore most companies believe the same is necessary in their operations overseas. However, they are redundant overseas can actually cause legal repercussions. Lengthy employment contracts, union type organizations and country laws may conflict with handbook information. At the very least handbooks are difficult to keep up-to-date.