Challenges:

Taxation
Availability of information about local cost or standard of living
Currency rates
Social security and pension issues
Spouse-related issues

Balance sheet approach (The home country system)

Generally used for compensating expatriates with short assignment duration (105 year)

 Usually expatriates are kept on the same base salary structure as their peers
at home
 A series of allowances is given to ensure the expatriates will not lose financial
ability while working abroad, including goods and services, housing and
income taxes.
 If the company wishes to provide additional incentives such as foreign
service/mobility premiums or hardship allowances will be calculated and paid
as allowances separate from the balance sheet.

The elements of the balance sheet system are:

- Salary and benefit
Expatriates typically remain on the same base salary structure and benefits programs
as their home country peers or colleagues. This approach ensures that expatriates’
base salaries are comparable or other similarly evaluated jobs within their home
countries. Salary increases and bonuses are also consistent with the practice for
their home-country counterparts.

Advantages of balance sheet system:

 - It helps to facilitate mobility among locations and the reintegration of expatriates
into their home-country compensation programs upon repatriation.
- Treats all assignees from the same country consistently, regardless of their
assignment location
- Maintains a consistent relationship between the compensation of assignees and
their home country colleagues
- Maintains assignees home country standard of living
- Facilitate repatriation or reassignment

Disadvantages of balance sheet system:

- Cannot achieve a consistent compensation levels among assignees of different
nationalities
- Compensation levels for assignees usually inconsistent with local taxes
- Level and nature of compensation and assignment allowances innapropriate for
long-term assignments
- Can be difficult to administer