Name of Company
From: TotalRewards Director
To: ChiefExecutive Officer
The company haselected to open a new foreign production plant in Mexico. The newplant will need to be operational by December 2016. Therefore, thecompany has decided to send 10 US-based employees to Mexico to beginoperations in the new plant. Therefore, it is critical to design andimplement a comprehensive international compensation program. Thiscompensation package aims to encourage upper-level managers and otherselected workers to accept the foreign assignment.
All of the tenexpatriate positions will be offered $80,000 monthly gross salary toensure consistency. However, fringe benefits will be provided to allemployees that take the assignment in Mexico. By default, allAmerican workers are entitled to certain benefits. The SocialSecurity federal program provides for retired or disabled employeesalong with certain dependents. The amount of social securityavailable to a worker depends on the level of earnings. Unemploymentcompensation is also due to workers as a weekly benefit. This benefitis payable when employees are out of work due to factors beyond theircontrol (Herod, 2009). Worker’s compensation is remitted in paymentof medical expenses incurred from occupational diseases orwork-related accidents.
As a generalrule, most of the benefits and employee contributions should be madepre-tax. Adopting this approach would allow the expatriates to payfor their portion of benefits using direct income before deduction ofUS taxes. Consequently, this would reduce the tax liability of theexpatriates (Herod, 2009). Health insurance should be offered tocater for medical expenses incurred while in Mexico. The health coverwould also include translator services in recognition of the foreignnature of the assignment. Moreover, preventive and restorative dentalcare could be assimilated into the health plan. Dependent Child LifeInsurance should be established so as to cover the families of theexpatriates, whether they relocate to Mexico or choose to stay in theUS. Short-term and long-term disability insurance should be providedwhere employees would be paid 60% ($48,000) of base pay for theentire duration of their incapacitation. This would cover forillness, pregnancy, and other non-work related injuries (Martocchio &Bezuidenhout, 2014). An adjustment feature of 5% should beincorporated to cater for the annual rise in the cost of living.
Paid ParentalLeave should be offered to caregiving parents whereby they wouldreceive 100% of their salary for a year following the birth of achild. Business Travel Accident should be set at $350,000 in case ofaccidental death, loss of sight, or dismemberment when makingofficial company trips within and outside of Mexico. The companyshould set up a Retirement Plan by making monthly contributions of10% ($8,000) of base pay into a fund payable upon retirement(Bhattacharyya, 2009). Supplemental Retirement Accounts should be setup to let employees choose whether to make post-tax or pre-tax salarycontributions. Time offs would be granted based on the designatedholidays in Mexico. This would also be adjusted accordingly to makeallowance for travel needs (Martocchio & Bezuidenhout, 2014).Leaves should be extended as per Mexican labor laws. However, thecompany can set a maximum of 15 allowable days for each calendaryear.
The increase inglobalization of businesses has made it necessary for companies toexpand operations into foreign countries. Essentially, companies needto address the fears and challenges experienced in unfamiliarterritories (McNulty & Inkson, 2013). It would be proper for theorganization to establish an Employee Assistance Program gearedtowards offering resources, information, and counseling. Each of theten expatriates should be eligible for at most two counselingsessions per month on whatever issue.
As discussed,establishing a new plant is Mexico is necessary so as to expand thecompany portfolio. Nevertheless, the ten expatriates need to beenticed with reasonable benefits so as to take up the foreignassignment. The various categories of benefits include health cover,life insurance, disability insurance, retirement plans, and othermandatory benefits. Adopting these benefits would encourage the tenexpatriates to consider the plan along with their families carefully.
Bhattacharyya, D. K. (2009). Compensation management. NewYork, NY: Oxford University Press.
Herod, R. (2009). Expatriate compensation strategies: Applyingalternative approaches. Alexandria, Va.: Society for HumanResource Management.
Martocchio, J. J. & Bezuidenhout, M. L. (2014). Compensationmanagement. Harlow, UK: Pearson.
McNulty, Y. & Inkson, K. (2013). Managing expatriates: Areturn on investment approach. New York, NY: Business ExpertPress.