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Compensation for Foreign Employees

When hiring candidates overseas, it's important for small business owners to know the typical compensation packages for different foreign countries and the best practices for sending money overseas. Depending on factors such as the economy, cost of living and demand for talent, foreign employees may have a completely different expectation for their employee compensation packages.

There are several resources that small business owners can use to determine the appropriate salary and benefits packages for their foreign employees.

Leveraging Market Analysis

Employers can begin with a market salary survey for the country or region in which they are hiring to provide a framework on the local talent's compensation expectations.

The opportunity to visit and train in the U.S. is often considered a highly attractive perk for foreign employeeswho want the experience of working in an international market.

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Businesses can purchase salary and benefits reports for most international markets from organizations such as the Birches Group, Mercer, Aon Hewitt and Towers Watson, ranging in cost from $480 for a single job profile to $1,440 per country to $2,600 for a global report.

Employers should also take into account the market's competition level. Finding top construction talent in Brazil, for example, can be a lot harder than finding a similar candidate in Peru because there is abundant construction work in Brazil. In those situations, business owners may need to offer more money or other benefits to get the best applicants.

In addition to understanding the typical salaries for a given country, industry and job title, business owners can rely on a trusted online foreign exchange service. Free resources such as email market-rate alerts can help employers monitor exchange rates when paying employees in a foreign currency. This can be very helpful when sending money overseas.

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Seek International Services

For companies hiring just one or two foreign employees, it may not be necessary to purchase a full salary study of the region, notes Achim Mossmann, principal of global mobility advisory services for KPMG in New York. Instead, they can contract with an international compensation service provider to receive "an outline of the job description, and they will often have a market price and other benefits information already available," he says.

And it can't be assumed that a salary is similar in every city, especially in larger countries. For example in China, a factory manager in Shanghai will likely expect a much higher salary than one in Xiamen or Nantong, because the cost of living is higher and competition for talent is fierce.

Thinking Beyond Price

Companies should think about what kind of salary and benefits are required and customary in the host country, Mossmann says.

For example, in the Middle East, managers or higher-level employees expect a provided car and driver, and a housing allowance. And in some Asia Pacific countries, landlords prefer to have employers sign leases because they view them as a more reliable source of payment, he says.

Additionally, most foreign countries have government-mandated sick and vacation days. For instance, Germany mandates that workers get one month's vacation.[1] Adding extra time to that benefit is a valuable incentive, which can enable small firms to strengthen their compensation packages.

Finally, the opportunity to visit and train in the U.S. is often considered a highly attractive perk for foreign employees who want the experience of working in an international market, Mossmann says.

By gathering as much information as possible before extending a job offer to foreign applicants, business owners can ensure their compensation packages are competitive yet cost effective.

[1] "The Only Advanced Country Without a National Vacation Policy? It's the U.S." July 2, 2012, The Atlantic

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