The Balance Sheet Approach
The balance sheet approach to expatriate compensation is used to ensure employees are able to maintain their home purchasing power while on a temporary international assignment.
In this approach, employees continue to be paid their home salary, maintain the link to home benefits, and receive a series of allowances to balance host vs. home costs for income taxes, goods and services, and housing.
These allowances are specific to home country, income, and family size, and are adjusted over time to take home and host inflation and exchange rate changes into account.
According to AIRINC’s 2019 Long Term Assignments Benchmark Report, the balance sheet approach is used by 80% of all global firms sending employees on temporary long-term (three- to four-year) assignments. The key reason is that pay barriers are removed, so the Balance Sheet Approach can be successfully used for any home-to-host combination.
AIRINC has been helping firms establish and maintain their balance sheet programs for their mobile employees for over 60 years, and can provide advice and tools to make implementation quick and easy.
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