Competency

Analyze the practice of special pay systems.

Scenario

You are the Total Rewards Director for a private company in the Midwest that has 1,000 employees. Your company manufactures specifically engineered material used in first-responder uniforms. This material is flame-resistant, durable, breathable, and demand is rapidly increasing. The current manufacturing plant cannot keep up with the increasing number of orders. At the same time, labor and materials costs are also increasing. Therefore, the CEO has decided to open a new manufacturing plant in Indonesia. This new plant will provide three-times more capacity to manufacture the material, at a 45% cost reduction in terms of labor and materials. The CEO has selected a top manager to work in Indonesia for the next two years to set up the new plant, train the local management team, and ensure production is hitting targets.

This manager will be the first internationally assigned employee of the company. Based on your prior experience in a multinational firm, you decide that the best approach for adjusting his compensation is to use the balance sheet approach to create a balance sheet compensation summary.

Instructions

Part One – Excel Template

Prepare a balance sheet compensation summary for the manager’s international assignment to Indonesia in the provided excel template 

, using US dollars for notations and calculations, except where specifically noted in the spreadsheet, that includes the following:

• Base salary amount, total family size at home and in Indonesia, Foreign Exchange Rate within assignment dates of 2019 and 2020 (must cover the two-year period).
• For two individual years, plus the total of the same (i.e., there will be three sets of calculations):
  • Base Compensation
    • Salary
    • Bonus
    • US Taxes (Employer-paid and employee-paid for federal taxes and Social Security).
  • Differential Calculations for Net Base Income on Assignment in Indonesia.
  • Assignment Allowances (minimum of four).
  • Relocation Costs (minimum of three).
  • Recommendations for portions paid in US dollars and Indonesian rupiah.

Part Two – Narrative Summary Document

Create the narrative summary in a separate document that:

• Provides rationale and explanation for calculations and recommendations.
• Provide attribution for credible sources used in the balance sheet compensation summary (Part One – Excel Template and Part Two – Narrative Summary Document).