Expatriates are people that reside temporarily or permanently in a country with culture other than their legal or factual residence. Employers in the US often send their employees on short-term assignments to the overseas subsidiaries as ‘expatriates’. This scenario has emerged due to the globalization of the international economy in the last few decades. the main reason is that organizations seek opportunities to remain competitive by creating affiliated entities in other countries across the world (McNulty & Inkson, 2013).
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Employers view such assignments as important step in increasing revenue and overseas integration as well as an opportunity for employees to develop their careers. However, these assignments present substantial challenges to employees, such as relocation difficulties for those with spouses and children, cost of living, and culture shock among others. Since many employees are not enthusiastic about expatriation, employers who practice overseas assignments offer special benefits and other financial incentives as compensation for the employees willing to relocate (McNulty & Inkson, 2013).
The purpose of this research is to examine expatriates in the US and the benefits, compensations, and risk involved in the expatriation process. The relevance of this research in the field of human resource is that it examines how the utilization of the human resource, which is the primary objective of the field, is achieved through expatriation. This paper will cover the benefits, compensations, and risks of the expatriation process in the US.
The preliminary findings indicate that expatriates receive a variety of special benefits and compensations that exceed those of other employees. These benefits and compensations underscore the fact that expatriates face unconventional challenges. Compensation and benefits packages vary from one company to another.
In addition, the packages differ based on other elements such as job description and living and economic standards of the country of relocation. Apart from covering the costs incurred in the actual move, the relocation benefits cater for special assistance. The relocation benefits are meant to reimburse the employees’ travel expenses. Such packages also cover housing, transportation, orientation, and any other needs that may arise in the process of relocation.
Relocation benefits are important for the expatriate employee because they cater for their needs while they familiarize themselves with a new country. A company that intends to send its employees on any overseas assignment has to provide the relocation package as one of the important elements of the process.
One of the findings of this research is that another key benefit to be considered is the expatriates’ family benefits. In some cases, employees might be unwilling to move to foreign countries due to different issues, for instance, the children’s education welfare can be among the reasons. Therefore, organizations step in to allay such fears by offering help where necessary like securing the children’s education in international schools among other benefits.
For expatriates with working spouses in the country of origin prior to the relocation, some companies may step in to look for job opportunities in the place of relocation for the spouses. This move is meant to compensate individuals for the potential loss of income (Riusala & Suutari, 2000). In addition, some companies scout for volunteering opportunities for the expatriates’ spouses in the country of relocation. In essence, organizations give such fringe benefits as a way of helping the expatriates make a smooth transition to the new country of residence.
In addition, companies offer tax equalization benefit. It is “meant to ensure that the expatriate employees only bear the income taxes that is payable to their home country” (McNulty & Inkson, 2013, p. 98). On the other hand, the employer bears the economic cost that comes with extra income taxes. Few companies offer tax equalization benefits, but employees should negotiate for it with their employers to ensure that they reduce their tax burdens.
Apparently, the findings of this paper prove that most companies do not take the expatriates’ training and counseling seriously. However, such practices are critical for preparation of expatriates for the tasks and challenges ahead in the new country of residence. Such training is undertaken before the departure where expatriates receive training on cross-cultural aspects to help them prepare and combat the challenges that they are likely to experience as new residents in a foreign country. For temporary expatriates, they benefit from the repatriation orientation in a bid to adapt to the changing environment back at home (McNulty & Inkson, 2013).
This aspect is especially important for expatriate employees who are sent not on temporary, but long-term assignments abroad that last for several years. Ironically, after spending many years in other countries, expatriates encounter many challenges when returning to their country of origin. Therefore, organizations tend to offer challenging roles like promotion in the workplace after the expatriates relocate to their home countries.
The aspect of expatriates’ training in different languages based on their place of relocation comes with numerous benefits. For instance, after such course, expatriates benefit from improved personal and professional aspects coupled with easy integration into the new country. Language training is offered before the relocation. However, language training is not necessary if the country that the expatriate is relocating to uses the same language as the home country (McNulty & Inkson, 2013).
Companies offer this benefit only to the expatriates who relocate to the countries that have a dialect different from their native one. For example, the USA expatriate relocating to a country in the Middle East should be offered training in the Arabic language before relocation. In cases where there is no sufficient time to train the expatriates in the language of the country that they are relocating to, some companies offer translation services to facilitate the expatriates’ communication with the locals in the new place of residence, while trying to fit in and learn the new language fully.
American organizations are keen to reap from the totalization pacts that the US government has ratified with other countries. Totalization agreements “address double taxation, which is the paying of taxes in the US as well as contributing to the host country’s social welfare plans; in addition, they allow the American expatriates to receive credit for their entire working careers with the inclusion of overseas assignments” (McNulty & Inkson, 2013, p, 129).
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Employers compensate their expatriate employees adequately for the losses and expenses that they incur during their relocation. As stated earlier, compensation packages depend on the company, position in a company, and the risk involved (Riusala & Suutari, 2000). A basic relocation package includes salary. In most cases, organizations determine the amount of salary basing on the exchange rates in the country of origin.
For instance, an expatriate from the US working in Qatar will receive a comparable salary with what they would receive while working in the US. However, in some cases, the local salary ranges may not be in a position to sustain an expatriate. Therefore, in such cases, the involved organizations come up with a working remuneration formula to match the local rates. For instance, the US companies with expatriate engineers working in Russia, where engineers are paid better than in the US, may be forced to restructure the remuneration package to match the Russian standards. The net compensation for expatriates includes taxes, pension, and insurance among other expenses. However, when determining the remuneration package, organizations consider different elements such as inflation and fluctuation of currency rates.
Allowances are another form of compensation offered by the company who sends an expatriate to another country. Allowance is not fixed and a company can increase or decrease it depending on various changes, including change in the levels of remuneration, currencies fluctuation, and changes in tax law among other factors. Some of the allowances that can be given to expatriates include mobility allowances, which are meant to cover the movement expenses of the expatriate in the new country.
The mobility allowances ease the movements of the expatriates before they can acquaint themselves with the transport system of the host country. Examples of other allowances that are given by companies to their expatriates are the medical allowance and salary continuations for the short-term absence or sick leaves. Companies should ensure that they offer adequate allowances that ensure their sustenance in the new country, especially before they can fit in fully (Riusala & Suutari, 2000).
While expatriation could seem a straightforward process especially when a company facilitates the process, some risks are involved, and thus both the expatriates and the company sending them abroad should be aware of them. For example, the risk residence of loss for long-term or permanent expatriates. Therefore, expatriates need to discuss with their companies how to dispose of the property that they leave behind or the properties acquired in the course of their stay in the host company. They could settle for selling or renting out the properties or keeping them vacant if there are chances that the expatriates will come back.
Expatriates with schooling children are also at risk. As such, they should ensure that the companies assigning them abroad offer proper reimbursement to facilitate minimal interference with the education process. Normally, the country of citizenship will be regarded as the home country to prevent an expatriate from losing his/her citizenship. In addition, the liability for violation of employment laws or any other laws in the host country is a critical risk. Normally, the US laws apply to all American expatriates.
This research has sown that different issues are considered in the expatriation process. The most outstanding ones include benefits and risks involved. The employer and the expatriate should ensure that they handle all the issues involved in the process. This move ensures that neither of the parties is frustrated while relocating and settling. The employer and the expatriate should discuss benefits, compensations, and risks involved in the process. Planning in advance is essential here in a bid to avoid last minute hiccups. In this regard, proper communication channel should be established to facilitate communication between the expatriate and the host country.
McNulty, Y., & Inkson, K. (2013). Managing Expatriates: A Return on Investment Approach. New York, NY: Business Expert Press.
Riusala, K., & Suutari, V. (2000). Expatriation and Careers: perspective of expatriates and spouses. Career Development International, 5(2), 81-90.