CONVINUS Global Mobility Alert - Week 21.2024

BEST PRACTICE PART 3:

BEST PRACTICE PART 3: "HOST COUNTRY APPROACH" REMUNERATION APPROACHES FOR SECONDMENTS FRIEDERIKE V. RUCH, CONVINUS Part 3: "Host country approach" In our series on the remuneration approaches for secondment, we present the various approaches used in practice. After presenting the so-called "home country approach" in the first part and the "net-net approach" (balance sheet approach) in the second part, we will now look at the so-called "host country approach" in the third part. In the host country approach, the salary structure of the host country is used to determine remuneration. As a rule, the function, position in the company, level of education, age and duties are used to determine what the appropriate base salary would be. In some host countries, including Switzerland, the statutory (minimum) salary regulations must also be taken into account. The salary is usually stated as a gross salary. It is often difficult for the expatriate to work out exactly what this means for them financially. A Swiss expatriate who receives an annual salary of CHF 120,000 at home and is offered an annual gross salary of YEN 3,000,000 for an assignment in Japan may at first glance think that this sounds great. On closer inspection, however, he realises that the Japanese salary converted into CHF is only CHF 17,463. In addition, social security contributions and taxes must be deducted from this gross salary. In this case, it will be very difficult to convince the Swiss expatriate that he will go to Japan for this salary. The host country approach is simpler for the host company, as the posted worker can be easily integrated into the payroll accounting system. In addition, the posted worker can be easily integrated in the host country, as the frequently used argument that posted workers always earn much more cannot be applied in these situations. If a company has employees posted to a country from several countries, the host country approach helps to treat them equally. 6 convinus.com

BEST PRACTICE However, as can be seen in the example above, in practice a "pure" host country approach is often not pursued, but additional allowances or remuneration elements are granted. These include, for example, support with finding accommodation, school costs, rent, tax consultant, international health insurance, etc. What is the goal? The aim is for the expatriate to be integrated into the same salary structure as the local employees. With this approach, employees in the same country are treated equally and the expatriates can be integrated more easily in the host country. Why is this approach used? One of the main reasons is to implement the principle of equal treatment and to counteract difficulties in the integration of posted workers from abroad. In which cases should this approach be used? This approach is mainly used for expatriates who are permanently transferred and the host country generally has a higher salary level than in the home country and, from a legal perspective, this must be granted one way or another. This approach is also frequently used for postings initiated by the employee. What are the advantages and disadvantages of this approach? The advantages are the equal treatment of expatriates from different home countries combined with the equal treatment of expatriates and local employees in the host country. Administration is also comparatively easier in these cases. This approach is disadvantageous in terms of the re-patriation of the assignee, as the assignee is in a different salary structure during the assignment in the host country. This leads to both positive and negative assignments for the assignee. Another disadvantage is the persuasion work that has to be done vis-à-vis the expatriate. OVERVIEW OF THE SERIES "COMPENSATION APPROACHES FOR POSTINGS": Part 1: Remuneration approaches for secondments: "Home country approach" from 08.05.2024 Part 2: Remuneration approaches for secondments: "net-net approach" (balance sheet) from 16.05.2024 Part 3: Remuneration approaches for secondments: "host country approach" Part 4: Remuneration approaches for secondments: "International approach" 7 convinus.com