Establishing and Determining Base Pay

Base Pay
Base pay is one of the main components of a basic compensation system. Apart from base pay, other key components of a compensation system include short-term and long-term incentives, recognition awards, attraction or retention awards, and perquisites. These can be used to attract domestic employees. Long-term incentives can be in form of stock options while short-term incentives include profit sharing, gain sharing, small-group incentives, and bonuses (Kavanagh et al., 2015). Recognition awards are retrospective low-cost or no-cost awards advanced to employees when they do something worthwhile. Attraction or retention awards are intended to attract or keep employees to the organization. Perquisites are awards based on the level of the job and can include aspects such as first-class travel and executive dining rooms.
Two approaches can be used to develop the base pay for international employees: the host country approach and the balance sheet approach. In the host country appr...