This is an example of which international compensation approach?

An employee from an organization’s headquarters in the United States accepts a position at a subsidiary in Hong Kong. The headquarters’ assignee will receive the same pay as Hong Kong citizens working in equivalent positions.

This is an example of which international compensation approach?
A . Tax equalization
B . Headquarters-based balance sheet
C . Pure localization
D . Home-country-based balance sheet

View Answer

Answer: C

Explanation:

Pure localization pays an assignee exactly what local nationals in equivalent positions in the host country are paid. Also, called the going rate approach, ‘localization’, ‘destination’ or ‘host country based approach’. The core of this approach lies in linking the expatriate compensation to the salary structure of the host country, taking into account local market and compensation levels of local employees.

The balance sheet approach to expatriate compensation is used to ensure employees are able to maintain their home purchasing power while on a temporary international assignment – In this approach, employees continue to be paid their home salary, maintain the link to home benefits, and receive a series of allowances to balance host vs. home costs for income taxes, goods and services, and housing. A local plus compensation approach is usually defined as an approach whereby companies pay their foreign employees according to the local (host country) salary structure plus additional compensation elements that are not typically provided to local nationals (such as transportation, housing, dependents’ education, etc.