Approaches to Expat Compensation: Going Rate vs. Balance Sheet Understanding the Going Rate and the Balance Sheet is crucial for accurately calculating exp...
Understanding the Going Rate and the Balance Sheet is crucial for accurately calculating expat compensation.
The Going Rate represents the typical salary an expat would receive in their home country. It includes the salary, benefits, and other forms of compensation paid by the employer to an expatriate working in their home country.
The Balance Sheet, on the other hand, focuses on the company's financial situation and includes:
Fixed Assets: These are assets that remain with the company, such as physical property, equipment, and investments.
Current Assets: These are assets that the company can convert into cash within one year, such as accounts payable, trade receivables, and inventory.
Owner's Equity: This is the company's residual interest in the business, represented by shares and retained earnings.
Calculating the Going Rate:
Start by subtracting the value of the company's fixed assets from its total assets.
Next, deduct the value of its current assets from the total assets.
Finally, add the value of the company's shareholder's equity to arrive at the going rate.
Calculating the Balance Sheet Going Rate:
The going rate represents the company's expected future compensation to its expatriate employee.
It's calculated by dividing the company's total compensation expense by its total number of employees.
Understanding the Difference:
The going rate is a snapshot of the compensation package offered to an expat at a specific point in time.
The balance sheet going rate is an estimate of the future compensation the expat can expect to receive over a period of time, taking into account changes in the company's financial situation.
Importance of both Rates:
The going rate helps companies attract and retain qualified expatriates by accurately portraying the compensation package they offer.
The balance sheet going rate is essential for investors and creditors to understand the underlying financial health of the company, impacting its valuation and debt financing decisions