Question

Refer to the scenario provided below. Assume that ForEx will use the balance-sheet approach to compensate the expatriates. Which of the following is NOT one of the steps in this approach?

Scenario: ForEx Inc.

From 2008, ForEx Inc. has shifted some of its operations to China and Malaysia, where production costs are considerably lower compared to Canada. Since then, 35 managers have been sent to those countries either to carry out short- or long-term assignments to head up operations, to conduct training and development, or just to oversee specific projects. Of the 35 managers selected, only five were women, even though women make up 40 percent of the management team. Expatriates on long-term assignments are given financial incentives to offset any qualitative differences between the costs of living in the two locations.


Add incentive premiums.
Determine the cost-of-living adjustment.
Add assistance programs.
Calculate commission pay.

Answer 1

The balance-sheet approach for compensating expatriates includes determining cost-of-living adjustments, adding incentive premiums, and providing assistance programs. Calculating commission pay is not part of this approach, as it is linked to individual sales performance rather than adjustments for international living.

Step-by-step explanation:

The balance-sheet approach is a compensation strategy used by multinational companies to manage salaries for their expatriate employees. This approach involves a number of steps to ensure that expatriates are compensated fairly so that their purchasing power remains consistent while they are on international assignments.

The steps typically included in the balance-sheet approach are:

• Determining the cost-of-living adjustment (COLA), which accounts for differences in the cost of living between the home country and the host country.
• Adding incentive premiums to compensate for the hardship or inconvenience of working abroad.
• Providing assistance programs such as cultural training, language lessons, or spousal support to help expatriates adjust to their new surroundings.

Given the context of the scenario, where ForEx Inc. is looking to compensate their expatriates based on this approach, the option that is NOT part of the balance-sheet approach is: Calculate commission pay. Commission pay is generally tied to the sales performance of an individual and does not typically relate to the balance-sheet strategy for expatriate compensation.