TREX Global & International Compensation

Question 1

Which international compensation approach maintains an expatriate's home-country purchasing power by adjusting pay to account for cost-of-living differences between the home and host country?

Accepted Answer

Balance sheet approach

Answer

The balance sheet approach equalizes the expatriate's purchasing power to what they would have at home, typically covering housing, goods/services, and taxes.

Question 2

Under tax equalization, which party typically bears the cost when an expatriate's actual host-country tax liability exceeds the hypothetical tax calculated on the home-country salary?

Accepted Answer

The employer pays the excess tax on behalf of the employee

Answer

Tax equalization ensures the expatriate pays only a hypothetical home-country tax; the employer absorbs any additional host-country tax liability above that amount.

Question 3

A 'hypothetical tax' in the context of international assignments refers to:

Accepted Answer

The approximate home-country tax an employee would have paid had they not gone on assignment

Answer

The hypothetical tax is the estimated amount the employee would have owed in taxes at home, used as the employee's tax contribution under tax equalization.

Question 4

Which type of international assignment premium compensates employees for living in locations with significant physical hardship, safety risks, or political instability?

Accepted Answer

Hardship allowance

Answer

Hardship allowances compensate expatriates for adverse conditions in the host location, such as political instability, health risks, or lack of amenities.

Question 5

Which classification describes an employee who is transferred to a country that is neither their home country nor the company's headquarters country?

Accepted Answer

Third-country national (TCN)

Answer

A third-country national (TCN) is an employee who works in a host country that is neither the employee's home country nor the company's home country.

(TREX) WorldatWork Total Rewards Certification Practice Test

(TREX) WorldatWork Total Rewards Certification Practice Test

TREX Global & International Compensation