GPHR International Total Rewards 2 — Questions and Answers
Question 1: A multinational company is designing a global pay structure. Which approach allows local country managers the most flexibility to set compensation while maintaining global cost controls?
- Global grading with local pay ranges (Correct answer)
- Single global salary scale
- Headquarters-determined fixed pay
- Country-specific autonomous pay systems
Correct answer: Global grading with local pay ranges
Global grading with local pay ranges sets a consistent job evaluation framework globally while allowing pay ranges to reflect local market conditions.
Question 2: When calculating the cost of an international assignment, which element is typically the largest component of total assignment cost?
- Relocation allowance
- Home-leave airfare
- Base salary and associated uplifts (Correct answer)
- Hardship premium
Correct answer: Base salary and associated uplifts
Base salary along with associated uplifts (COLA, housing, tax equalization) typically constitutes the largest portion of international assignment total cost.
Question 3: An expatriate on a balance sheet approach receives a housing allowance. How is the hypothetical housing norm typically determined?
- Based on host-country average rents
- By the employee's personal preference
- Estimated from the home-country spendable income norms (Correct answer)
- Set equal to the host-country executive housing cost
Correct answer: Estimated from the home-country spendable income norms
The hypothetical housing norm is derived from home-country norms, representing what the employee would typically spend on housing at home, which is then deducted from spendable income.
Question 4: Which international compensation philosophy aligns most closely with treating all global employees as members of one workforce, regardless of nationality?
- Localization approach
- Balance sheet approach
- Global compensation philosophy (Correct answer)
- Headquarters-based approach
Correct answer: Global compensation philosophy
A global compensation philosophy treats all employees uniformly across borders, using consistent frameworks and principles regardless of nationality or location.
Question 5: A company uses a 'local plus' compensation package for international assignees. What does this typically include?
- Full balance sheet allowances plus home-country benefits
- Local market salary plus selected expatriate allowances (Correct answer)
- Headquarters salary plus full host-country benefits
- Host-country salary only with no additional allowances
Correct answer: Local market salary plus selected expatriate allowances
'Local plus' packages provide a local market-competitive salary supplemented by a limited set of expatriate allowances such as housing or school fees.
Question 6: Which of the following best describes 'purchasing power parity' (PPP) in the context of international total rewards?
- A tax equalization method for expatriates
- An index measuring relative cost of living to equalize real purchasing power across countries (Correct answer)
- A method for converting salaries to a single global currency
- A pay benchmarking approach using local market data
Correct answer: An index measuring relative cost of living to equalize real purchasing power across countries
PPP measures how much a given amount of currency can buy in different countries, allowing compensation to be adjusted so employees maintain equivalent purchasing power.
Question 7: When a global organization benchmarks executive compensation internationally, which data source is considered most reliable for host-country market data?
- Internal job evaluation results
- Published local market compensation surveys (Correct answer)
- Anecdotal data from local managers
- Exchange rate calculations from headquarters pay
Correct answer: Published local market compensation surveys
Published local market compensation surveys provide statistically reliable, current data on what competitors pay in a specific country for comparable roles.
GPHR International Total Rewards 2
A multinational company is designing a global pay structure.
Which approach allows local country managers the most flexibility to set compensation while maintaining global cost controls?