10 Compensation and Benefits from an International Perspective A collection of international flags. iStock/Thinkstock Learning Objectives After reading this chapter, you will be able to: Understand how globalization and international competition influence compensation and benefits practices. Differentiate among expatriates, host-country nationals, and third-country nationals in terms of pay practices. Identify the different types of international compensation relationships and the procedures used by companies in setting pay levels. Discuss base pay and benefits in relation to international compensation. Discuss the impact of organizational size in the context of international employment. Introduction Consider the following quotes: A global economy is characterized not only by the free movement of goods and services but, more important, by the free movement of ideas and of capital.— George Soros, business magnate, chairman of Soros Fund Management My guiding principle is that prosperity can be shared. We can create wealth together. The global economy is not a zero-sum game.—Julia Gillard, former prime minister of Australia Instead of saying that globalization is a fact, that it’s inevitable, we’ve also got to demonstrate that while the growing interdependence of the world economy is indeed a fact, it’s not uncontrollable.—Peter Mandelson, British Labour Party politician Now consider the following: Many cars assembled in the United States are made using parts produced in other countries, such as Japan, Germany, or Korea. Many of the American flags for sale in the United States were manufactured in China. McDonald’s® Corporation operates restaurants in over 100 different countries. It is possible to travel from Chicago to Hong Kong, a distance of 7,793 miles, in just 15.5 hours. A common theme among these quotes and facts is that the world is continuing to become more interconnected. It is no longer a time of working and living in the same area you were born with people who are the same as you in terms of appearance, values, personalities, and so on. Even if you yourself do not travel to another country or region, others you interact with have. While geography remains the same (although more quickly traversed), the gaps between countries and regions are getting smaller and smaller. Therefore, the world is becoming more accessible to both individuals and businesses. As aptly said in the Disney song, “It’s a small world after all.” The physical space available for living and working has increased due to the advent of technologies such as improved building and farming techniques as well as air conditioning and heating to counter climate extremes. Improved transportation and safety have opened up areas that were previously inaccessible or very difficult, even dangerous, to access. These improvements have also decreased the time needed to travel between locations. More importantly, improved communications have linked various locations, even remote ones, throughout the world in ways not seen before. This connectivity is causing companies to have to make adjustments in how they conduct themselves. Even companies that are not international in scope must deal with customers, suppliers, and competitors that are. What this means is that, for both good and ill, the modern workplace is truly international. As a result, globalization must be considered when designing compensation and benefit programs and policies. As an example, consider the modern cruise ship industry. Administering a cruise ship involves issues of international compensation, language differences, and the employment of individuals of many different nationalities. In this chapter we will begin with a discussion of globalization and the global economy, including cultural, economic, and language differences across countries. This foundational information will then set up our discussion of types of international compensation arrangements, different roles employees can play in international assignments, techniques for setting base pay, and how international assignments affect the provision of employee benefits. 10.1 The Global Economy As we mentioned in Chapter 8, globalization is the process of opening communication, business, and culture between nations. This integration and exchange of ideas and cultures has helped produce a substantial global economy, which is composed of the overall economic output of the world as a whole. The global economy deals with the interconnected nature of the modern economy such that economic and workplace issues are influenced by international, and not just local, issues. Currency conversion, tariffs, embargos, sanctions, politics, and cultural differences all play a role in influencing the global economy. The global economy takes into account all countries and is composed of national economies, companies, and individuals. While all economic activity contributes in some form to the global economy, there are certain countries, companies, and individuals that account for a substantial share. See Figure 10.1 for a list of the world’s largest economies as of 2013. Figure 10.1: World’s largest economies as of 2013 In some reports, the United States accounts for one-fifth of global gross domestic product (GDP), making it the world’s largest economy. A bar graph that shows the largest economies based on percentage of world GDP. The United States has the highest percentage at 19.31%, followed by China at 15.4%; the rest have much smaller percentages, near 5%. Source: Quandl The United States currently has the world’s largest economy. Some estimates indicate that the United States alone accounts for almost one-fifth of global gross domestic product (global GDP) , or the value of all goods and services produced in the world. This number, of course, has changed over time, with different countries and geographic regions contributing varying amounts to global economic activities. Figure 10.2 illustrates the changing relationship among the major economies from the early 1800s to modern day. Figure 10.2: Changing top economies over time The relationship among economies from the 1800s to today has seen dramatic change. A line graph that plots the changes in the economies of India; China; the United Kingdom, France, and Germany; Japan; and the United States. The United States experienced growth until 1950 and since then has been steadily declining. China has experienced a sharp decline and then rise. As can be seen in the figure, there have been drastic changes in which country or region had the top economy throughout the years. The most dramatic are the sharp decline and then rise of China and the ascent and drop of the United States (even though the United States is still the largest economy in the world). Correspondingly, the largest companies in the world are predominantly based in the countries with the largest economies. The United States and China are home to the greatest number of the world’s largest companies in addition to having the top two economies. Not surprisingly, the largest companies in terms of revenue also tend to have a large number of employees (see Table 10.1). Table 10.1: Largest companies in the world, as of fiscal year 2015 Ranking Name Industry Revenue ($ billions) Employees (in thousands) Headquarters 1 Walmart Stores Retail 486 2200 Bentonville, Arkansas 2 Sinopec Group Oil and gas 447 897 Beijing 3 Royal Dutch Shell Oil and gas 431 94 The Hague; Netherlands 4 China National Petroleum Oil and gas 429 1,637 Beijing 5 ExxonMobil Oil and gas 383 84 Irving, Texas 6 BP Oil and gas 359 85 London 7 State Grid Corporation of China Electric utility 339 922 Beijing 8 Volkswagen Group Automotive 269 593 Wolfsburg, Germany 9 Toyota Motor Automotive 248 344 Toyota, Japan 10 Glencore Xstrata Commodities 221 107 Baar, Switzerland Based on Fortune: Global 500—2015, http://fortune.com/global500 The largest company in the world, Walmart, employs over 2 million workers. Three Chinese companies—Sinopec Group, China National Petroleum, and State Grid Corporation of China—are among the top ten largest employers of the world. Turning to individuals, as of 2015, there are almost 2,000 billionaires in the world. Many of these billionaires acquired or inherited their wealth through business affiliations, often as the founder. Walmart, for example, is responsible for the wealth of four of the top 12 richest people in the world (see Table 10.2). Table 10.2: Top 12 richest people in the world Source of wealth Net worth Nationality 1 Bill Gates Microsoft$79.2 B United States 2 Carlos Slim Helu telecom $77.1 B Mexico 3 Warren Buffet Berkshire Hathaway $72.7 B United States 4 Amancio Ortega Zara $64.5 B Spain 5 Larry Ellison Oracle $54.3 B United States 6 Charles Koch diversified $42.9 B United States 7 David Koch diversified $42.9 B United States 8 Christy Walton Walmart $41.7 B United States 9 Jim Walton Walmart $40.6 B United States 10 Liliane Bettencourt L’Oreal $40.1 B France 11 Alice Walton Walmart $39.4 B United States 12 S. Robson Walton Walmart $39.1 B United States Based on “Forbes Billionaires: Full List of the 500 Richest People in the World 2015,” March 2, 2015 by Chase Peterson-Wlthorn As with the largest companies, most of the world’s richest people are from the countries with the largest economies (only three of the top 12 are from outside the United States). Consider, however, that Carlos Slim Helu (#2 on the list) is from Mexico, a country that is not one of the wealthiest nations nor home to many of the most prosperous companies. Despite this, he has been able to obtain the wealth that he has. He achieved this because of the global economy and interdependence across national borders. He has been able to capitalize on globalization and benefited greatly from it—landing in the number-two spot on the list. What all of this information indicates is that the world is more economically related than ever before. As Mann (2011) details in his book 1493, this is a process that has been building since antiquity, but technological and societal advancements have accelerated integration. Globalization is the result of this integration, and today, events in one country or company around the world may, and often do, have an impact in other areas—even when the direct connection between events is not immediately obvious. In science, this can be explained utilizing chaos theory. Chaos theory proposes that nonlinear relationships exist such that seemingly random events are actually predictable when considering deterministic causes (Gleick, 1987). In other words, seemingly unconnected events often have similar causes. In terms of the global economy, the process by which these relationships spread is via increased trade in conjunction with a reduction in limits on the transportation of goods, services, and individuals across geographic and political borders. Critical Thinking What does it mean when we talk about a global economy? As a result, companies and individuals are able to sell their products and services in virtually any market across the world. Correspondingly, individuals, companies, and governments have access to a larger and more diverse variety of merchandise. All of this variety and interconnectedness results in advantages and disadvantages. Advantages of a Global Economy The positive benefits of a global economy revolve around connections and competition. With a global economy, goods and services can be transported more easily, which promotes an increase in both the quantity and quality of those goods and services, although this doesn’t necessarily occur at the same time. Local manufacturers are forced to compete with a broader range of competitors and must adapt their business strategies accordingly. This can result in higher quality or lower price but rarely both together. Some consumers will value quality while others will prioritize price. The key to capitalizing on consumer desires is to develop a clearly defined strategy that results in performing up to the expectations of customers. Competition means that if an organization fails to deliver, there is probably another company that will happily sell to any disappointed clients. This means companies must constantly stay “on their toes” and be in tune with the global environment and its ever-changing aspects. An advantage to a global economy is increased growth opportunities. A larger market of potential customers means that there are more potential outlets to sell a product or service. Building on the strategy considerations mentioned earlier in the book, this allows companies to develop a niche or area of recognized expertise in which to do business. Compensation practices can then be designed to promote employee behavior that supports this strategy. Global competition also leads to standardization in terms of production and pricing. For example, you can order from any McDonald’s- restaurant anywhere in the world and expect similarities in price and menu. While regional preferences, expectations, and economic considerations will modify specific offerings, an international company will provide a more similar experience than will a competitor that is only local. People crave predictability, so globalization makes it easier to achieve that through set standards for goods and services. This also facilitates trade and reduces the exploitation of workers and resources in less developed areas by holding larger and more advanced countries to a common standard of working arrangements. (Exploitation does—and in all likelihood will continue to—occur, but to a lesser than degree than before, with the hope that it will eventually be eliminated). Disadvantages of a Global Economy The disadvantages of a global economy deal with inequity. The more affluent members of society are typically better positioned to take advantage of opportunities presented via globalization. This can lead to growing income inequality and sharp divisions in standards of living and growth opportunities across socioeconomic classes. As an example, outsourcing involves moving labor from one country to another country where the cost of labor is cheaper. The economic benefits to companies are obvious. Compensation and Benefits in The Real World: Kerr Group Not all outsourcing is from the United States to other countries. The Kerr Group operates textile mills throughout Asia, yet it opened a cotton-processing plant in South Carolina. Labor costs in China are rising with the growth of its middle class at the same time that costs have decreased in parts of the United States. By having a global perspective and not being tied to a local geographic area, the company is able to locate its operations in the place that offers the greatest benefit. With global conditions continually changing, the discussion of outsourcing is not as simple as it used to be. For more information on the Kerr Group’s outsourcing to the United States, see http://www .nytimes.com/2015/08/03/business/chinese-textile-mills-are-nowhiring-in-places-where -cotton-was-king.html?ref=international&_r=1. Companies will announce when building a facility in a different country that one of the goals of the move is to provide economic and employment opportunities to local workers. This may be the case, and business investment can alleviate unemployment as well as represent an economic windfall for individuals and localities. Local workers, however, often do not receive this benefit directly because wages are kept low since companies are following a fundamental business goal of minimizing expenses while maximizing profit. When is this practice exploitation of workers and when is it simply good business sense? Communication, perception, and intentions all play a role in answering this question. Critical Thinking What are the advantages and disadvantages of a global economy? Globalization has the potential to improve the lives of workers and promote business success. Potential downsides, however, must be taken into account and a well-defined and -thought-out business strategy, including compensation and benefits practices, needs to be in place to maximize positive outcomes and minimize potential negative ones. Knowledge of the characteristics of and projected changes in the global workforce can help in developing this strategy. 10.2 A Global Workforce In addition to the economic, social, and technological changes related to globalization, it is also necessary to consider the increasing diversity inherent in the workplace (see House, Hanges, Javidan, Dorfman, & Gupta, 2004; O’Leary & Weathington, 2006) when designing a compensation and benefits plan. The workforce of today is quite different from that throughout much of history. Consider these key findings from a white paper by the Economist Intelligence Unit and sponsored by the Society for Human Resource Management (2015, pp. 5–6): The boost in global trade and the expansion of transnational companies have resulted in cross-cultural workforces. Global interdependencies increase exposure to risks. The global workforce is aging and becoming both gender- and ethnically diverse. Skilled workers from emerging countries will improve productivity while seeking higher wages across borders. Remote and temporary workers increase flexibility to meet labor needs but increase demands on management. Organizations struggle to balance societal culture and their corporate culture. Cultural differences affect management styles and employee development. Cultural diversity contributes to success. Corporate social responsibility helps manage risk while boosting the bottom line. A common theme, which we will reiterate again here, is that change has the potential to either benefit or harm both organizations and individuals. We must be aware of these changes and how they will impact business practices. This is especially true when dealing with cultural and geographic differences. As the saying goes, you must be careful about trying to compare apples to oranges. For example, as we discussed in Chapter 9, it is a common refrain that corporate CEOs are overpaid. Applied from a global standpoint, the CEOs of United States– based firms look to be particularly overcompensated. However, when you look beyond the base numbers, there is an identifiable reason for this difference that suggests that U.S. CEOs are not overpaid in comparison to other CEOs: Namely, these CEOs are more likely to have their compensation tied to corporate performance (Fernandes, Ferreira, Matos, & Murphy, 2013). This performance-based compensation is usually paid via stock options, which can lead to lucrative payoffs, as we’ve discussed in previous chapters. Therefore, this is not necessarily a case of one country arbitrarily paying its CEOs more; rather, it’s a case of different practices—in this case, pay practices—causing different results. Additionally, compensation practices and overall level of pay for international firms are becoming more similar to those of U.S.–based companies (Fernandes et al., 2013). That’s why it’s critical to have an understanding of the environment, including the business, strategy, goals, practices, and so on, in which a company operates. We must also be careful when accepting common perceptions and gut instinct as truth. Everyone has biases and preconceptions that influence perceptions and behavior. Having an awareness of how culture plays into those perceptions can result in better decision making. Cultural Differences Culturally different businesspeople in a conference. iStock/Thinkstock Hofstede has data on 76 countries and how they can be compared based on six different dimensions. One of the most commonly utilized frameworks for understanding cultural differences is the cultures and values identified by Hofstede (1983a, 2001). Currently providing data on 76 countries, Hofstede evaluates countries based on the six dimensions of masculinity, individualism, uncertainty avoidance, power distance, long-term orientation, and indulgence (Hofstede, Hofstede, & Minkov, 2010). A country-versus-country comparison can be created using tools found online at http://geert-hofstede.com/. Below are descriptions of each of the dimensions in Hofstede’s model. Masculinity—Cultures vary in their orientation toward work goals, with more “masculine” cultures inclined to focus on the acquisition of resources and extrinsic rewards, while other, less masculine (i.e., more feminine) cultures pursue interpersonal harmony and a high-quality work life. For example, countries such as Japan and Austria are relatively masculine in their orientation, while most of the Scandinavian countries, such as Denmark and Norway, are on the feminine end of the continuum. Individualism—Cultures vary in the degree to which they are oriented toward the needs and goals of the individual (i.e., individualist) or the needs and goals of the group (i.e., collectivist). Individualist cultures promote and reward independence, while members of collectivist cultures tend to look after each other and share resources. The United States scores among the highest on Hofstede’s measure of individualism, in comparison to most Asian countries, which are much more collectivist. Uncertainty avoidance—Cultures vary in their acceptance or avoidance of uncertainty. Cultures high in uncertainty avoidance prefer highly structured, formal situations with strictly defined rules of behavior. In addition, cultures high in uncertainty avoidance tend to avoid risky situations. In contrast, countries low in uncertainty avoidance welcome ambiguity, risk, and unpredictability and tend to behave much less formally and with less structure. Hofstede places many Western European countries, including France and Spain, on the high end of this dimension, while Singapore and Denmark score on the low end. Power distance—Cultures vary in the extent to which leaders remain psychologically distant from their followers. Leaders in cultures high in power distance are dominant over their followers, with little tolerance for disagreement. These cultures favor coercive and referent forms of leader power. Leaders in cultures low in power distance tend to use power only when it is legitimate or based on differences in expertise. In addition, disagreement with subordinates and their participation in decision making is more acceptable in cultures low in power distance. The Philippines, Mexico, and India are examples of countries that are high in power distance, while Denmark, Israel, and Austria are examples of countries that score low in power distance. Long-term orientation—Cultures vary on how much emphasis is placed on tradition versus the issues of today and the future. Countries that score low on this dimension focus on maintaining traditions and norms, while those on the high end take a more pragmatic view and focus on adaptation and preparations for a dynamic future. In the business literature, a short-term view is often called normative while the long-term view is referred to as pragmatic. As an example, modern China scores very high on this dimension, while the United States and Canada score relatively low. Indulgence—Indulgence deals with the gratification of basic human needs and desires. A highly indulgent culture values and allows the free gratification of desires and focuses on enjoying life and having fun. Restraint is the opposite of indulgence, and those cultures low on this dimension regulate need fulfillment through laws or the enforcement of cultural norms. As an example, Mexico rates very high on indulgence, while China ranks very low. The United States falls in between the extremes of this dimension. Figure 10.3 presents a comparison of the United States, China, and Mexico on all six dimensions of the Hofstede model. As can be seen in the figure, all three countries score about the same on masculinity. For power distance, Mexico and China are similar, with the United States scoring much lower. For individualism, the United States scores very high, while Mexico and China are on the low end. Mexico scores higher on uncertainty avoidance than either the United States or China. China scores much higher on long-term orientation than either the United States or Mexico. Lastly, as was already mentioned above, Mexico scores highest on indulgence, while China scores lowest, and the United States scores in between. Comparisons such as this can be very useful when considering both short- and long-term business arrangements across different countries. Figure 10.3: Cultural comparisions among the United States, China, and Mexico Cultural comparisons using the six dimensions of the Hofstede model can be helpful when considering international business arrangements. A bar graph that compares the United States, Mexico, and China on power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence. The United States is highest in individualism. China is highest in long-term orientation. Mexico far exceeds the others in uncertainty avoidance and indulgence. Source: The Hofstede Centre, http://geert-hofstede.com/ Another useful resource for finding information about a country is the World Factbook, which can be found online at https://www.cia.gov/library/publications/the-world-factbook/. This resource provides detailed information on most countries in the world, beginning with an overview of the selected nation followed by detailed sections on geography, people and society, government, economy, energy, communications, transportation, military, and transnational issues. This provides a good overview of the country as well as in-depth knowledge about various aspects of it. Critical Thinking What are Hofstede’s cultural dimensions and how can they help us understand cultural differences across organizations? Understanding the cultural background of employees, including both similarities and differences between home and host countries, is critical in designing and promoting a successful international work assignment. For example, an employee from Japan may expect pay and promotion decisions to be based primarily on seniority and not merit. An employee from Europe may expect better benefits than one from the United States. In China, a manager may need a prestigious job title that shows status in order to be taken seriously by other employees. Cultural differences such as these must be considered when compensating and motivating multinational employees. Economic Differences Table 10.3: Top 10 most expensive cities in the world Rank City Country 1 Luanda Angola 2 Hong Kong Hong Kong 3 Zurich Switzerland 4 Singapore Singapore 5 Geneva Switzerland 6 Shanghai China 7 Beijing China 8 Seoul South Korea 9 Bern Switzerland 10 N’Djamena Chad Based on Mercer’s 2015 Cost of Living Rankings. 17 June 2015 US, New York Countries also vary in terms of how much it costs to maintain a certain standard of living. This is commonly called the cost of living and includes factors such as the cost of housing, inflation, and goods and services. Mercer, a global consulting firm, prepares a cost-of-living report each year. Table 10.3 shows the costliest cities to live in for 2015 based on this report. Mercer uses the U.S. dollar as the basis for comparison and then ranks other cities against New York City, which ranked 16th in 2015. Clearly, it can be quite expensive to maintain a consistent lifestyle across cities given the varying costs of living. It is also useful to consider per capita income, which is a measure of the amount of money that is earned per person in a specified geographic region. This measurement is typically calculated by computing the total income or gross domestic product of a city, region, or country and dividing that number by the population of the area. Per capita income commonly serves as a proxy of wellbeing and standard of living in the region, although keep in mind that it is not an indication of how much individuals actually earn since it is a calculation for the entire area and not for specific individuals. Standard of living can also be calculated based on life expectancy, education, and other income indices. Based on data from the International Monetary Fund (2015), as of April 2015, the countries with the highest standard of living were these: Qatar Luxembourg Singapore Brunei Kuwait Norway United Arab Emirates San Marino Switzerland United States The lowest included in their rankings (with 1 being the lowest standard of living country) were these: Central African Republic Congo Malawi Liberia Burundi Niger Mozambique Eritrea Guinea Guinea-Bissau Because of the potential for great disparity, the country of origin as well as the destination country for both employees and employers must be taken into account when making decisions regarding pay and benefits for international assignments. Language Differences Table 10.4: Top 10 languages spoken in the world Rank Language Number of speakers 1 Chinese 1.2 billion 2 Spanish 400 million 3 English 335 million 4 Hindi 260 million 5 Arabic 242 million 6 Portuguese 203 million 7 Bengali 189 million 8 Russian 166 million 9 Japanese 128 million 10 Lahnda 89 million Based on Lewis, M. Paul, Gary F. Simons, and Charles D. Fennig (eds.). 2015. Ethnologue: Languages of the world (18th ed.). Dallas, Texas: SIL International. Online version: http://www.ethnologue.com. Language differences are also an important factor to consider when dealing with international assignments. While English is often called the “language of business,” it is not the native language of the majority of the world’s population. Table 10.4 lists the top 10 most-spoken languages, by number of speakers, in the world, and Figure 10.4 shows a map of the major languages spoken throughout the world. Table 10.4 and Figure 10.4 do not tell the whole story. Even within countries, there are often individuals who speak different languages. For example, in the United States, which is predominantly an English-speaking country, there are areas where the main language spoken is not English. Often this occurs due to immigration. Many individuals in these areas do not speak English fluently or at all. There is also the issue of dialects, which can make communication difficult even if the individuals technically speak the same language. Now extrapolate this issue across international boundaries. Bloomberg (http://www.bloomberg.com) ranked the top language for business as English, followed by Mandarin, French, and Arabic. The importance of each language, of course, will vary by region. A valuable benefit for any international assignment would be the resources to learn the important local languages. Figure 10.4: Major languages spoken throughout the world Though English is called the “language of business,” it is not the major language of many countries. Learning the local language for an international assignment would be a valuable benefit. Map showing the primary language of each country. 10.3 Defining Roles and Aligning Reward Systems Before we can discuss specific issues concerning international compensation and benefits, we need to consider the difference between those who make up the international workforce, namely, expatriates, host-country nationals, and thirdcountry nationals. Individuals who fall into any one of these categories are part of the international workforce, but they may be compensated quite differently. Expatriates are employees who are working in a country in which they are not a native and do not have citizenship. Host-country nationals, on the other hand, are locals who work for a foreign firm. Third-country nationals are individuals who work for a foreign firm in a foreign country. In other words, they are not native to the home country of their employer or of the country of their work location. In general, the common term expatriate, or expat, is often used interchangeably for those working in a foreign country but native to the company’s home country (expatriates, as defined above) and for third-country nationals. While grouped together in general discussions, the details of compensation packages, and even the currency in which individuals are paid, may differ greatly between these two groups. Different laws and legal regulations will apply to each category of international worker as well as country, so it is always recommended to consult legal counsel that is familiar with the laws and legal environment of the country in which business is being conducted. What is legal in one locale may not be legal elsewhere. This is critical information to know before designing a compensation and benefits plan. Types of Exchanges Businessman walking in office lobby. Fuse/Thinkstock Business is conducted across the world, and a company’s workforce must meet the demands of globalization while being properly aligned with the company’s rewards system. As with any compensation relationship, international compensation involves an exchange relationship between employees and the organizations for which they work—the employee provides work in exchange for compensation. The difference in an international context is how that exchange relationship is structured. In other words, what is the nature of the relationship between the employer and employee? Specifically, is the employee being treated the same as or differently than local employees? The answer to these questions will result in differences in the exchange relationship. In general, the relationship can differ based on the company and treatment of the worker along the following formats: Local company/local treatment: This relationship involves working abroad for a local company where the employee is essentially treated the same as a local employee and doesn’t receive any special considerations for international status beyond, perhaps, the necessary documentation and fees needed to obtain incountry employment. For individuals from less affluent or developed countries, this can be a very positive result. For those from countries that are more affluent, however, this may result in less overall compensation than would typically be received in their home country. In a local-to-local setup, the employee’s salary and benefits will be comparable to those of local employees— including tax obligations. No extra perquisites or bonuses are provided. Local company/expat treatment: In this situation, the employee works abroad for a local employer, but the compensation arrangement is modified to recognize any special skills or experience as well as the fact that the employee has relocated. Typically, this results in a higher salary than that of the local workers, and the employee may be granted more holidays and a modified work schedule. For example, an American living abroad may negotiate to receive time off for the Thanksgiving holiday even though it is not celebrated in the local country. In addition, if the employee relocates specifically for the position, then relocation costs or an allowance may be paid. International company/local treatment: This arrangement involves foreign nationals (i.e., expatriates) working for an international company but entering an employment relationship as if they were a local or host country national. The end result is the same as the local-to-local presented above except for the employer being international in scope. Locals and expats will be treated the same. This is common for smaller companies that cannot afford large remunerative packages or for which specialized skills requiring the importation of human capital, with its corresponding increase in costs, is not necessary. International company/expat treatment: This is what most people think of when considering expatriate compensation. It is usually the most lucrative situation for the employees, whether they are third-country nationals or citizens of the employer’s home country. Correspondingly, it requires the most financial and resource expenditures from the employer. Typically, this arrangement is utilized by large companies with extensive resources or in situations that require specialized skill sets and experience. In addition to geographic considerations, the time of the international assignment should also be considered. Long-term assignments are treated differently than short-term ones. Long-term assignments: Often, compensation packages for long-term international assignments are very generous. In fact, this generosity is often credited with attracting employees to pursue these assignments despite the disruptions in social and family conditions that are a natural part of moving abroad. Therefore, it may inherently be needed in order to find candidates for such positions. Packages may include the storage of furniture and property in the home country, a housing allowance, tuition and school fees for dependent children, a travel allowance, and an enhanced salary. Short-term assignments: Very short assignments may be treated as little more than an extended business trip, with a company’s normal per diems and expense coverages. As the length of stay increases, however, typically so do the benefits. Short-term assignments, however, are not rewarded as well as long-term assignments due to a lower level of disruption to the employee’s life activities. Expenses for family members (tuition, travel allowances, etc.) are also less likely to be paid since the family members are typically not impacted by the assignment, especially if the assignment is under six months. As a rule of thumb, the transition from a short- to long-term assignment is around 6 to 12 months. Most companies also provide a maximum length of time that an international assignment will last (five years is a common number), but this will vary based on business necessity, and sometimes open-ended assignments with no set end date are used. Both the type and length of international assignments can have a dramatic impact on the attraction, tenure, and success of employees as well as the cost to the company. Clarifying the Exchange It is important that the type and duration of an international assignment be established clearly by both the employee and the employer in order to help make the assignment successful for both parties. Consider the following scenario: Dante is a U.S. citizen who has been asked by his U.K.-based employer to take a position at company headquarters in London. The position is a promotion from his current job and comes with a 10% pay increase. Is this enough information for Dante to make an informed decision about the offer? The obvious answer is no, but often people accept jobs with little more information than the job title, a brief list of job duties, and the salary. Dante needs to avoid falling into this trap. A more prestigious job title and pay increase are not enough to know if this “promotion” is actually in his best financial or personal interest. Standard of living as well as quality of living must both be considered. Employees and employers make significant investments in terms of both time and resources when dealing with international assignments. Therefore, it is in the best interest of both parties to make sure that potential employees have a realistic view of the job before they begin (Gibson, Hardy, Baur, Frink, & Buckley, 2015) so that they can take on the international assignment with full knowledge and acceptance of what it entails. While in this example we do not provide information on Dante’s family situation, it is important to remember that one of the most common reasons for the failure of international assignments is that the expat’s family is not happy. Even if the employee is satisfied with an assignment, he or she can still fail if family issues negatively affect his or her ability to adjust and succeed in the new environment. So, what questions should Dante ask before accepting this position? What additional information should the company provide when making the offer in the first place? The type and duration of the assignment need to be clarified: Is it a timelimited move or indefinite? Details about compensation and benefits also need to be provided. Will Dante be treated the same as citizens of the United Kingdom or will he receive a premium because he is moving abroad? What currency will be used for compensation? What are the tax obligations and how will they be paid? How does the cost of living compare in the new country and city? What benefits will be provided? Answers to all of these questions, plus others specific to the situation, should be clarified both before the position is offered and before the position is accepted. 10.4 Designing an International Compensation Program The first step in making any international compensation decision is to consider the business case and the necessity that are driving the change. With modern technology, it is often not necessary to have a physical international presence. Instead, companies can take advantage of electronic communication options, such as email, tele- and videoconferencing, and document sharing, to conduct business with suppliers, customers, and other business partners. In addition, the shipping of physical goods is quicker and, in most cases, cheaper than ever before. A physical, long-term international presence therefore may not be needed. If the business need does exist for creating, maintaining, or expanding international assignments, then companies must determine how assignments will be financed and administered. The logistics of this process are beyond the scope of this book but are key considerations that limit the salary and benefits that can be provided to employees. Legal considerations must also be taken into account since laws vary dramatically across countries, as we mentioned earlier. Even concepts such as “at-will” employment vary. In some countries, it is easy to fire or displace poor-performing employees, while in others it is not. Laws regarding what constitute fair wages as well as acceptable working conditions and hours also vary across countries and need to be taken into account. A company can run into trouble if it is perceived to be taking advantage of the local workforce. Legal professionals familiar with laws across national and jurisdictional borders must also determine whether local employment laws apply to expatriates. Compensation and Benefits in the Real World: Nike Nike is a company that has a long history of outsourcing manufacturing. In the late 1980s and early 1990s, this resulted in an earned reputation of promoting poor treatment of workers and using sweatshop labor due to the company’s focus on low-cost production. Nike began addressing the problems head-on by owning up to its mistakes and implementing better corporate policies. It took time, but Nike’s actions turned its image around and resulted in its earning a reputation for positive corporate responsibility. For more information on Nike’s efforts to revitalize its reputation and deal with the problem of sweatshops and outsourcing, see http://www.businessinsider.com/how-nike-solved-its -sweatshop-problem-2013-5. While all of the legal issues impacting normal business operations need to be addressed, in an international context, the two that have the most impact on compensation and benefits practices are laws related to clawback provisions and equity-based compensation. We covered clawback provisions in Chapter 9 as they relate to executive compensation. In the context of this chapter, clawback provisions are salary or benefits that are distributed to an employee and then returned to the company as a result of unusual or special circumstances. Due to the costs associated with international assignments, clawback provisions are a fairly common part of expatriate contracts. While specifics vary across companies and assignments, clawbacks typically require an employee to pay back a portion of the funds paid to facilitate an international assignment if the employee quits or gets fired with cause within a certain time period after the assignment begins. Clawback provisions are also often encountered in sales positions, where the employer can recover commissions if it is determined that they were unearned. The laws regarding the legality of clawback provisions differ dramatically across countries. In some countries, clawback provisions are illegal. Laws regarding equity-based compensation practices, such as stock options, are also particularly prone to differing interpretations across geographic borders. Both home and country of employment regulations must often be followed, which adds to the complexity. This gets particularly difficult when dealing with taxes owed and with issues such as what constitutes insider trading or other practices that may be interpreted as illegal in one jurisdiction and legal in another. Always consider local and international law when setting or changing expatriate compensation practices. Setting Base Pay Once the business needs and legal issues have been worked out, the next step is to actually determine base pay. Keep in mind that compensation packages, of which base pay is often the most visible part, should be designed to attract, retain, and motivate employees. Concurrently, the costs to and expected returns for the organization must also be considered. Additionally, companies need to look at their compensation structure to ensure fairness across the organization, especially with comparable roles. The international components—labor competition, exchange rates, legal regulations, and so on—can make comparisons difficult, however, so it is important to remember that fair doesn’t necessarily mean equal. When it comes to actually setting base pay for international assignments, the most common approaches are the balance sheet, negotiation, localization, lumpsum, and cafeteria approaches. Each approach has advantages and disadvantages, and no one technique is best for any given situation. Each will be discussed in more detail below. Balance Sheet Approach Most companies attempt to maintain an equitable pay balance for employees when they take an international assignment. Accordingly, the balance sheet approach attempts to set base pay so that employees maintain the same spending power as before the assignment. Many of the same techniques discussed in Chapters 4 and 5 (e.g., market surveys, job evaluations) are used to determine a comparable salary for a similar position in the home country. This amount is then evaluated based on typical costs in the home country for (1) taxes, (2) housing, (3) purchases and other expenses, and (4) discretionary income (including saving and investing). Employees then receive extra pay to cover any costs for each category in the host country that exceed the cost in their home country. For United States–based comparisons, the U.S. Department of State publishes a quarterly evaluation of living costs abroad, quarters allowances, and hardship differentials that can be accessed online at http://www.state.gov/m/dghr/flo/c15220.htm. Alternately, compensation consulting firms may be hired to compute differentials, or companies may conduct analyses based on internally collected data. The balance sheet approach is most favorable to employees who receive higher salaries before the international assignment as they can afford a higher standard of living that is then maintained upon moving abroad. Since the maintenance of the status quo may not be enough incentive to overcome the hassles and difficulties involved in such a move, a relocation bonus is often paired with the balance sheet approach to entice employees to take a foreign assignment. The balance sheet approach works best for mid- to senior-level employees, moves to countries with similar levels of development, short-term assignments, or situations when assimilation or adaption to local cultures is either not feasible or not desired by employees or employers. The main disadvantages of this approach are the time and effort required to implement and maintain balance across cultures and locations. There are also privacy concerns since the employee’s financial records and activities are visible to employers. Negotiation Approach The negotiation approach, on the face of it, seems to be the easiest approach. With this method, the employer and employee simply agree on a mutually beneficial arrangement. However, as can be readily seen by the fact that there are entire courses and certifications on negotiation, the actual implementation of this approach can be difficult. The negotiation approach works best when dealing with only a small number of expatriates; therefore, this method is used predominantly by small firms or larger ones with minimal international staff. As the number of expatriates increases, it is usually necessary to implement formal procedures and guidelines. Negotiation, however, can still be a valid practice that adds some flexibility to international arrangements, even with large employers, and it allows companies to address the individual needs of employees. As we discussed in Chapter 3, employee motivation is about directing, energizing, and sustaining behavior that is desired. A good way to tie individual and organizational goals together is to recognize that employees are different from each other and to demonstrate concern for different needs. Localization Approach The localization approach is essentially the opposite of the balance sheet approach. Instead of attempting to maintain the status quo in terms of standard of living, localization bases the expatriate’s salary on that of locals in the host country. This is particularly useful when local talent is available for comparison since similar positions may pay quite differently in different countries. Localization does allow for cost-of-living adjustments to account for differences in living expenses across locations. Several cost-of-living calculators are available online (domestic: http://money.cnn.com/calculator/pf/cost-of-living/; international: http://www.expatistan .com/cost-of-living). Critical Thinking How do the balance sheet and localization approaches differ in setting base pay for international assignments? Using the localization approach based on salaries of the local market for talent provides a sense of equity similarity between expatriates and locals. This has the advantage of also simplifying the administration of pay and benefits. The downside to this method is that it may be harder to entice employees to relocate to locales where the prevailing pay for their specialty is lower than in their home country. Negotiating and strategically providing benefits can help alleviate this concern. Lump-Sum Approach The lump-sum approach attempts to address the privacy concerns of the balance sheet approach by providing a set amount (i.e., a lump sum) of money to cover expenses. Salary is based on home country parity. By providing a lump sum for expenses, it is not necessary to track employees’ personal finances. Besides privacy, advantages to this approach are that employers do not pay for expenses that are not meaningful or needed by the employees, and employees have the flexibility to spend the lump sum in the manner they desire. The difficult part of this method is actually calculating the lump sum that should be provided. This approach is best for a midlength assignment of one to three years but not for extremely short or open-ended assignments. Cafeteria Approach The cafeteria approach is similar to the lump-sum approach but offers other options besides cash. This option works best for employees for whom base pay is not their main source of revenue, such as executives. Many of the benefits discussed in the next section, along with special perks such as a local driver, may be among the options selected. Often a dollar or point value is assigned to possible selections, and employees are then given a budget to spend on available options. Other times, the cafeteria approach resembles negotiation such that employees and employers decide through an informal or mediated discussion which options will be selected. Benefits Many of the same benefits discussed in Chapter 7 are provided as part of international compensation packages. The specifics of these benefits, however, often differ across national borders due to legal issues and cultural norms. Other benefits are unique to international assignments. Therefore, cultural distinctions should be taken into account in international assignments (Byham & Dixon, 1993). Following are some of the most commonly provided benefits and special considerations that should be taken into account for international compensation. Allowances A type of cash benefit that was mentioned earlier in this chapter is a location allowance. An allowance is typically a cash payment intended to cover additional expenses incurred while living abroad. In some cases, these are specified in terms of what is being reimbursed, while in others, a general payment is made to cover many different expenses. Companies vary widely in terms of how generous or strict they are in interpreting extra expenses incurred and in calculating payments. Inflation and fluctuations in currency exchange rates are two main reasons that allowances are provided. Medical Insurance Medical insurance can be costly, and the logistics involved in seeking treatment outside your home country can be daunting. Laws, regulations, and the availability of services differ greatly. Some countries, such as the United Kingdom, provide free national health care coverage to all individuals working in the country. Others, like China, may provide insurance only to citizens. When setting up an international assignment, care must be taken to plan for emergency and routine medical services. Where are services located and which services are available? What is the out-of-pocket cost to the employee? Does coverage extend to family members? All of these questions and more need to be answered when setting up the international assignment. It is often advantageous to employ individuals familiar with the local country, such as former expatriates returned from an assignment in the area, as consultants for determining how to handle medical insurance. Retirement Working outside your home country can affect retirement plans, especially since equity-based compensation that has clawback provisions may be illegal in some countries, as we’ve mentioned previously. Pensions are typically based on an average of top earnings. For U.S.–based companies, U.S. dollars are typically the point of reference for calculating earnings; however, a local contract paid in local currency may complicate calculations. Additionally, for definedcontribution plans, vesting arrangements may be complicated if international assignments require transfer to subsidiary or partner organizations. All of these details need to be considered and worked out prior to the beginning of the expat assignment. Property Arrangements One of the most complicated issues encountered by expatriates is what to do with property remaining in the home country while they are on assignment. Additionally, items that are transported internationally are subject to loss or damage. To deal with these issues, companies may provide personal property insurance and assistance with the rental or sale of the employee’s property. Cardboard moving boxes. liquidlibrary/Thinkstock Transferring items internationally and planning what to do with belongings or property that remain in an employee’s home country can be complicated and expensive. Personal property coverage is the type of insurance that reimburses individuals for the cost or replacement of household items such as furniture and electronics. Not all insurance plans are valid across national borders, so it is often a good idea to purchase insurance in the host country for transported items and in the home country for those that will be stored. Some insurance companies require that the employee, rather than the employer, purchase personal property insurance. In these cases, the employee can purchase the insurance and then be reimbursed for the cost by the employer. The cost of transporting goods internationally can be very high. Companies can facilitate arrangements with moving companies and pay associated costs directly or reimburse employees for expenses incurred. Items left in the home country will also typically accrue charges for storage. The mechanism and limitations for payments and reimbursements must be determined. In addition to furniture and other items, employees often own property such as a house or condominium. If this is the case, then the employee must decide whether to sell, rent out, or keep the property vacant for the duration of the international assignment. All three options have risks and associated costs that must be carefully weighed before determining how to proceed. Family Benefits One of the major determinants of success in an expatriate assignment is how well the employee’s family transitions to the new location and culture (Black, 1988; Shaffer & Harrison, 1998). A number of monetary and nonmonetary benefits can help ease this transition. Among these are temporary or permanent housing arrangements, spousal assistance with finding a job, and tuition reimbursement for dependent children. The idea behind offering family benefits is to take the burden and worry away from the employee so that he or she can focus on the job and not be distracted by family difficulties. Travel It is common to reimburse employees for travel expenses incurred during the move from the home to the host country. Specific documentation of expenses may be required, or companies may opt for a per diem strategy that reimburses based on distance and time. Additionally, it is expected that some trips be provided (i.e., paid for) for the employee and family members to travel back to their home country. Some companies will not count these trips back home against the employee’s vacation time, while others will. It varies based on the policies of the company as well as the length of the assignment. One issue that also needs to be planned for in advance is emergency or bereavement travel. Housing Companies should ensure that employees and families find housing that is both safe and of sufficient condition to maintain their preassignment lifestyle. Housing costs are typically evaluated based on home-country housing norms as well as anticipated expatriate host-country housing costs. Some companies maintain arrangements with local facilities such that rent and housing costs are billed directly to the company. Others, especially firms with limited exposure or experience in the local area, are not in a position to maintain ongoing contracts and relationships and therefore opt for a reimbursement arrangement. Personal Benefits There are a number of other benefits that ease the transition of employees into international assignments. These may include local legal consultation, the provision of an automobile or other form of transportation (including, in some cases, a local driver), and membership in expatriate or “home country” clubs or groups. In some countries, it may also be cost effective or even necessary to hire local help to aid in local cultural assimilation. Language lessons may also be provided before and during the assignment since being able to communicate with the locals goes a long way toward easing the difficulty of an international assignment. Repatriation A last consideration for international compensation is to consider what happens when the assignment ends. The process of employees returning to their home countries is called repatriation. Too often, repatriation is the least planned part of an international assignment, and when done poorly, it can result in a decrease in motivation, poor future work performance, conflict with other employees, and an employee quitting the company (Chew, 2004). Additionally, it can cause other employees in the company to avoid international assignments due to the issues they observe when an employee returns from overseas. Repatriation considerations, therefore, are a necessary and critical part of an effective international compensation strategy. Care must be taken to reintegrate returning employees back into domestic life. Since the return to a domestic assignment also comes with the loss of any special benefits or monetary compensation received as an expatriate, the employee may view the return as a demotion. This is especially true in instances where a major incentive for accepting the international assignment was to improve skills and experience, with a corresponding expectation of future promotions and career options. The key components of effective repatriations are clear communication and career planning. Both the business need driving geographic relocations and future career prospects should be clearly communicated between employees and employers. This communication needs to occur before and after the assignment as well as during the assignment as a way to touch base and clarify expectations. Successful former expats also can be a strategic resource for their employers. The improved cultural familiarity of returned expatriates makes them a valuable resource for the creation and maintenance of foreign business relationships. Additionally, these individuals can provide future expats with a realistic perspective of international assignments and advice on how to succeed. This enhanced role can help make the expat feel that his or her assignment was worthwhile and, at the same time, provide valuable information to the company. Apply It: There and Back Again An engineer had an opportunity to go to France on assignment for his company. After much deliberation, he decided to accept the assignment and move his wife and two daughters, ages 4 and 7, from the United States to France. Below are the details of the compensation and benefits that he received for this assignment. Keep in mind that this is just one example of the many ways an overseas assignment could be structured. The company took care of related paperwork and filings for the assignment. This included filling out special paperwork stating that the engineer was uniquely qualified to do the job and wasn’t taking a job away from a French citizen. It also covered getting visas and renewing them at the proper time. Additionally, the company filed taxes for both countries and paid the international taxes. While the company paid for related paperwork and filings, the family had the responsibility for gathering and submitting the paperwork, which included getting translated copies of everything—an extremely tedious undertaking. The company provided someone to help the family find an apartment or house, to get the children enrolled in school, and to handle any official paperwork with the city. It also paid for a certain number of language tutoring lessons, with the most hours provided to the engineer and weekly lessons for the wife and oldest child. The engineer’s wife was not allowed to work. (She worked prior to the overseas assignment.) Pay was just a small increase since the company was focused on reducing costs and becoming leaner. An exchange rate stipend was not provided at first. The family had to request one and submit paperwork showing the difference in their main costs, which the company used to determine a monthly exchange rate stipend. The company paid airfare to go over to France at the beginning of the assignment and to return to the United States at the end of the assignment. The company paid for a certain weight of household goods to be shipped to France as well as a basic household allowance to buy furniture, kitchen items, and so on. The company paid for moving and storing the family’s extra household goods in the United States. The amount of time the engineer got for vacation and holidays wasn’t spelled out clearly. Although officially he got what he had in the United States, no one tracked it. The engineer ended up taking French holidays but only his American vacation days. The company paid airfare for one trip home a year. The company paid for the upkeep (yard maintenance, monthly inspection for any issues, etc.) of the family’s home in the United States as well as housing in France until the family sold their house. The family had to pay all utilities. The company provided one car; the family paid for all gas. The company paid for any major repairs to the car as well as regular maintenance, but the family was responsible for taking the car in for service. As we mentioned, the return of the employee (repatriation) is also a critical component of a successful overseas assignment. Below is how this company handled the return for the engineer. The engineer received a promotion to quality manager when he returned from the overseas assignment. The company paid to pack and move the family’s household belongings back to the United States from France. The company paid movers to move the family’s household belongings from storage to their new house when they returned to the United States. The company paid for a few days’ stay at a hotel before the family moved to their new house. The decision to undertake an overseas assignment is not just a decision made between an employee and employer. It also involves the family. As the wife in this example said, “It’s definitely true that everyone in the family has to be happy, not just the employee.” The engineer’s overseas assignment ended when the family got to the point of saying that it—living overseas—was enough; they were done. 10.5 Considerations Due to Company Size As is obvious from the preceding discussion, international compensation packages vary dramatically across companies and geographic locations. They also vary based on the company’s size. Larger organizations are more likely to have standardized pay packages and more resources to assist employees taking an expatriate assignment. They also benefit from previous experience in managing international assignments. Both the successes and failures of assignments and employees can serve as learning tools to facilitate the success of future international assignments. Care must be taken, however, to avoid rigidity and treating expatriate postings as routine. What is typical from the organizational perspective may be new, exciting, and often frightening from the perspective of a first-time (or even returning) expat. Smaller organizations, on the other hand, have fewer resources from which to draw. This lack of resources is often compounded by a lack of experience and familiarity with the logistical and legal issues that may be encountered when working internationally. Dealing with these issues is also expensive to do, adding to the costs and taking away from the company’s limited resources. Smaller companies, however, may have more flexibility to deal with individual differences in employee expectations and desires. This customized approach adds value that may help overcome the size limitations. Critical Thinking How does company size affect international compensation packages? Regardless of size, companies within their overall business they have a plan in place for to compensate those employees care must be taken to balance business needs, and available Summary & Resources Summary need to make sure international assignments fit strategy and goals, and they need to make sure handling international assignments, including how on assignment. With any international assignment, employee desires with legal considerations, resources. The workforce of today is more diverse (especially in terms of age, gender, and ethnicity), more likely to be skilled and educated (with many of these workers originating in developing countries), more connected and able to communicate quickly via technology, and more geographically mobile and able to travel than ever before. In this chapter, we began by discussing the global economy and how the business world is interconnected, even for companies that do not have a specific international presence, since they must deal with international suppliers, customers, and competitors. We then discussed cultural differences using Hofstede’s taxonomy of cultural differences as a framework for our discussion. Next, we discussed the design of an international compensation package including both base pay and benefits. Lastly, we covered the impact of size on international compensation packages. Key Terms balance sheet approach An approach to setting international pay that maintains the employee’s standard of living when moving abroad. cafeteria approach An approach to setting international pay in which expatriates select among benefits and perquisites, instead of or in addition to cash, as compensation for their international assignment. chaos theory Nonlinear relationships exist such that seemingly random events are actually predictable when considering deterministic causes. cost of living Cost to maintain a certain standard of living; includes factors such as the cost of housing, inflation, and goods and services. expatriate General term to denote a person who lives and works outside his or her native country; the individual could be a native of the company’s home country or a native of a different country than the one in which he or she is working or living (see definition for third-country national). global economy Comprises the overall economic output of the world as a whole. global gross domestic product (global GDP) The value of goods and services produced in the world. host-country national Local employee of a multinational company who is a citizen of the country in which he or she works but not of the country in which his or her employer is headquartered. individualism Cultural dimension dealing with the degree to which a person is oriented toward the needs and goals of the individual versus the needs and goals of the group. indulgence Cultural dimension dealing with the gratification of basic human needs and desires. localization approach An approach to setting international pay that bases salary on comparable local jobs. long-term orientation Cultural dimension dealing with the relative emphasis placed on norms and tradition versus modernity and change. lump-sum approach An approach to setting international pay that provides a set amount of money to cover expenses during an international assignment. masculinity Cultural dimension dealing with the preference in society for achievement, assertiveness, and material rewards versus a preference for cooperation, modesty, and caring. negotiation approach An approach to setting international pay in which employees and employers agree upon a mutually beneficial compensation package. outsourcing Delegating labor from one country to another country where the cost of labor is cheaper. per capita income Measure of the amount of money that is earned per person in a specified geographic region. power distance Cultural dimension dealing with the distance and formality of relationships between leaders and followers. repatriation Process of employees returning to their home countries from an international assignment. third-country national Individual who is not a citizen of either the country in which he or she is working or the country in which his or her employer is based. uncertainty avoidance Cultural dimension dealing with the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity.
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