Global Compensation Practices Flashcards
7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Global Compensation Practices flashcards as text
Which approach to international compensation uses the home-country salary as the foundation and adds allowances to maintain the employee's purchasing power abroad?
Answer: Balance sheet approach
The balance sheet approach anchors pay to the home-country salary and adds differentials so the expatriate is neither advantaged nor disadvantaged financially.
A multinational company wants to establish pay grades that apply consistently across all its country operations. Which pay philosophy best supports this goal?
Answer: Global pay banding
Global pay banding creates broad salary ranges that apply across countries, enabling internal equity and mobility while accommodating local market differentials.
When calculating a mobility premium for a hardship location, which factor is MOST directly assessed?
Answer: Quality-of-life differential versus the home country
Hardship premiums compensate for quality-of-life deficiencies—political instability, climate, healthcare access—compared with the employee's home location.
Under the tax equalization concept, which party typically pays any host-country taxes that exceed the hypothetical tax amount?
Answer: The employer absorbs the excess taxes
Tax equalization means the employer covers taxes above the hypothetical amount so the expatriate's net pay is the same as if they had stayed home.
A company is transitioning a long-term expatriate to local hire status. What is the primary compensation implication?
Answer: Removal of expatriate allowances and alignment to local pay scales
Localization removes expatriate premiums and allowances, placing the employee on the host-country compensation program.
Which international compensation element is specifically designed to cover the cost difference for goods and services between the home and host locations?
Answer: Cost-of-living allowance (COLA)
COLA compensates for price differences in everyday goods and services so the expatriate's purchasing power is maintained.
When designing compensation for a short-term international assignment (typically under 12 months), which approach is most commonly used?
Answer: Home-country pay plus a daily per diem allowance
Short-term assignees typically retain home-country pay and receive a per diem to cover living expenses, avoiding the complexity of full expatriate packages.