Reflection JOURNAL | Case Study

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THERE ARE TWO OPTIONS IN INTERNATIONAL COMPENSATION THAT
IS THE BALANCE SHEET APPROACH AND THE GOING RATE APPROACH.
The balance sheet approach is the most used and has the objective of keeping the
expatriate whole. In this method, all the employees are paid by the rules of the country
where the company originates. For example, coca cola pay their expatriates on the basis
that exist in the country they invest. The approach has four broad categories housing,
income taxes, goods and services and reserve. The approach has several advantages in
that it brings equity between expatriates from the same country and equality between
assignments. The approach also facilitates re-entry of the expatriates, and it is easy to
communicate to the employees.

3 THE METHOD HAS THE DISADVANTAGE IN
THAT IT BRINGS DISPARITIES BETWEEN EXPATRIATES OF DIFFERENT
NATIONALITY AND BETWEEN LOCAL NATIONALS AND EXPATRIATES
(FESTING, & ENGLE, 2013).
The going rate approach the base salary in the country is linked to the pay structure in the
country transferred. All the employees are compensated on the basis to the rules of the
hosting company. The approach has the advantage in that it brings equality with the
locals, and the company identifies with the local company. The method faces critic due to
its disadvantage in that it brings variations between expatriates of the same nationality
working in different countries.

Description

The article is about Frying Wombat Travel Pty Ltd an Australian –based company. The firm has more than thirty travel agencies In Australia. Despite the competition in the travel industry, the company has not reduced their ticket prices. Rather the company has capitalized on their strong point that is, experience in the region’s activities. Recently the management of the firm has decided to open an oversea company in China hoping that the experience in the industry will help the company gain a greater share of the Chinese market. Sara is the head of firm’s HRM section and despite her experience if many years in the position she has never worked outside the country. Although she had the required confidence, she later found the task to be more challenging.