Expatriate compensation : An exploratory review of salient contextual factors and common practices

Purpose – This study aims to examine important situational factors impacting expatriate compensation and common practices utilized in compensating expatriates. Design/methodology/approach – A synthesis of literature was reviewed, leading to the identification of numerous situational or contextual factors impacting expatriate compensation. A review of extant literature also identified several customary approaches to expatriate compensation. Findings – A variety of factors can directly affect expatriate compensation, with three primary approaches an organization should consider. These factors include host‐country cost of living, housing, dependent education, tax implications and health care – factors most often incorporated as a component of one of the primary approaches to compensation discussions: destination‐based approach, the balance‐sheet approach, and the international headquarters approach. Practical implications – This article was intended to enhance understanding of expatriate compensation by collectively examining not only the “how” (primary approaches) but also the “why” (salient contextual or situation factors) firms should consider when determining how to assemble an appropriate package. Originality/value – Presenting the factors and practices together makes an important contribution to the literature on expatriate compensation by addressing not only the “how” (customary approaches) of expatriate compensation, but also the “why” (salient contextual factors).