Higher of Host or Home

A home- or headquarters-based build-up is prepared, using traditional elements of base salary plus incentives, the cost of host housing, and any positive cost-of-living adjustment. Deducted from this amount are hypothetical tax and a home-housing contribution. At the net pay level, this build-up is compared with the result of placing the employee in the host pay structure. This approach may be attractive to companies that seek some of the benefits of a host-country approach but recognise that a host approach will often not be sufficiently attractive to persuade employees to relocate.

One variation is to make the calculation net of home-country savings (or, reserve), thus focusing primarily on the costs of goods and services. Another option is to factor in allowances (e.g., education)—representing a straightforward cost of employing an expatriate that arises from the expatriate's personal situation—on the host-country side of the comparison.

Advantages: