Aug 9, 2019 in Research

Introduction

Expansion and proliferation of international trade and presence of global markets have opened the world to new arenas. The essence of this paper is to explore how individuals interact with other nations apart from their own. To achieve this, expatriate and executive compensation are defined and explored in detail with an emphasis on the United Arab Emirates in particular.

Expatriate Compensation

An expatriate is an individual living in a nation other than their country of nationality often briefly and for work motives. It also means a person who has abandoned nationality in their origin country to convert to another citizenship. Expatriate compensation is an addition to salaries, some benefits organizations extend to their expatriates. They include: relocation aid and a housing grant, traveling allowances, medical covers, and footing of their bills. Expatriates also have great opportunities for career advancement though it is emotionally painful.

Executive Compensation

It is the work of the chief executive (CEO) and other directors to superintend the company’s policy and processes. These managers require remuneration, which is executive compensation. The remuneration committee of the board of directors implements this task. The ‘right’ sum to pay an administrator is the least amount it takes to entice and hold a skilled individual. Executive reimbursement has four diverse features. Pay package design is typically comprised of six different compensation constituents: salary, yearly motivations, long-term inducements, assistances, privileges, and severance pay. Equity compensation, performance contingency pay, vesting schedules after financial criteria for a reward is met, and full possession of the equity prize are often offered as well.

Comparison between Expatriate Compensation and Expatriate Compensation in the UAE

In the recent past, an enormous number of expatriates have moved to the UAE, often being drawn by the guarantee of tax exemption on salary packages, constantly changing jobs, high-quality livelihood, and large savings. Some famous refugee destinations in the Middle East lie within the Gulf Cooperation Council (GCC), including Saudi Arabia, the United Arab Emirates with Abu Dhabi and Dubai, Kuwait, Bahrain Oman, and Qatar. Expatriates are moving to the UAE to receive 87% of their disposable income more than they did back home. They have large savings and pay less in income taxes than in their countries of origin. A great number of expats employed in this region are in the private sector, followed by large multi-national organizations and lastly local enterprises. The pillar of the Middle East’s prosperity is its sources of income from energy and many expatriates are engaged in energy-related industries.

Further Considerations for Expats Migrating to the UAE

Expats are advised to keep up-to-date with the existing economic atmosphere in the region before deciding on relocation. Middle Eastern nations are trying to control their reliance on foreign employment and have embraced local employment to reduce attractive expat salary packages. One should factor in the quality of life they will have in the UAE despite the prospect of earning and saving a lot, which is attractive.

Dubai-listed corporations have been among the UAE leading companies in terms of executive reimbursement according to the latest circulated corporate supremacy reports. Listed companies in the UAE have to submit their reports to their regulator and these reports reveal invaluable insights into the executive compensation of directors. The plan and equilibrium of the entire executive reward package include executive benefits and perquisites, employment contracts, and severance arrangements; governance, disclosure and compliance; and review of executive rewards and sufficient remuneration. Executive compensation in the UAE is more attractive than expatriate compensation in the same region.

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 Comparison between Expatriate Compensation and Executive Compensation Internationally

A continuous challenge for multi-national companies is the necessity to equalize compensation packages to attract the right people to the company. Benchmarking expat pay is vital for finding this equilibrium, but as corporations function into and out of an ever-growing location, these contrasts are becoming more involved. Dynamic development in regions such as Asia and South America encourages to provide marketable chances for companies, making an even increased international call for the skilled and able staff. However, in the recent past, nations in these areas have joined the ranks of expatriating nations and in the imminent future there will be more migration out of these developing regions into the developed world. This is generating additional encounters for those trying to achieve equitability.

Another challenge is the local pay issue that arises because of fast economic growth and higher inflation in developed nations (local salaries are increasing more rapidly as compared to expatriate salaries). This is predominantly true in South America and many unindustrialized Asian thrifts such as China. Nevertheless, in many industrialized countries, predominantly those in the Eurozone, local incomes have increased only moderately due to moderate price increases and controlled GDP growth.

Notwithstanding the salary structure used for determining an expatriate’s pay, it is vital to keep a trail of local wages, which aids in evaluating how it fits the assignees’ pay and assess whether it meets and reinforces business purposes. Comparing local and expatriates pay is an indication whether a remuneration system is cost-effective under the home-based approach. This is especially effective and recommended for multi-national companies that rely on how much cash the company is ready to pay to get the right individual in the right place. It may consider paying an assignee the local market rate; other companies may consider paying an extra 'position allowance' to meet expectations of the local spendable. It is clear that what may work at one job level may not work at another one. It isnbs certainly true for companies going into or operating in high growth markets. For example, placing an assignee from the West to Chile on a host-based system may be suitable for the senior level, but not at the junior manager level. An approach called 'one size fits all' does not help the company attract talent comprehensively.

Due to the current global monetary crisis, stockholders, voters, and legislators in North America and Western Europe have developed an interest in the issue of executive reimbursement. New principles such as say-on-pay stockholder votes, tax inducements to reduce base wage, and tough caps on bonuses have been ratified to slow the exponential development in the worth of executive remuneration packages in developed countries. This drift is not restricted to developed states as in other regions, for instance in Asia, executive pay has risen significantly and quite often with little or no oversight from formal controlling frames or state bodies.

Some mechanisms can be used to control executive compensation and, extrapolating to general tendencies, to detect broader corporate governance trends. Two main trends are as follows: one hemisphere is ratifying strict lawful mechanisms to regulate executive compensation, while the other depends on self-regulation; and one area is using executive compensation reorganization to open up admission to the commercial governance platform for small stockholders, while the other is endeavoring to limit stockholder democracy. As depicted above, executive compensation is more attractive internationally than expatriate compensation in both developing and developed countries.

Recommendations

Having analyzed both executive compensation and expatriate compensation, it is highly recommended to follow the path of standardizing the two packages.

Multi-national companies should continuously seek to offer uniform employment packages for employees doing the same kind of work without taking into consideration economies they operate in and the percentage of profits they record. As much as the wage bill can easily paralyze an organization, this aspect should be considered as it would promote equity and each and every employee would feel appreciated, which would aid in developing positive energy and attitude towards the job that would be later reflected in their job performance.

Individual governments of both developed and underdeveloped countries ought to take a keen interest in both expatriate compensation and executive compensation as some packages are not realistic. They are offered and implemented at the expense of other employees, especially of the junior staff. Governments, in particular those of under-industrialized countries, should seek to be more involved in the private sector as employees are equal with citizens in the public sector and should hence be protected and well-remunerated.

Directors should endeavor to offer junior employees equally attractive employment packages as they are more involved in daily operations of the organization and are the reason why good profits are gained. As they receive hefty packages, they should reciprocate it to their subordinates. This would help develop a fair remuneration system.

Conclusion

It is evident that there is a vast disparity between executive compensation and expatriate compensation in both developed countries of Europe, the UAE, and the USA, as well as in developing countries in Africa and South America. This requires increased attention from the society, especially legislators and governments. In order to reduce the disparity gap, everyone’s input is necessary, but it particularly so in developed nations. This is attributed to the fact that most under-industrialized counties benchmark their systems to developed countries and later adapt to their ways. Thus, implementing the above solution can solve the disparity globally in future.

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