A Primer on Compensation, Taxation and Bribery Related to the Employment of Expatriate Employees: Pitfalls and Opportunities

This paper will investigate several important aspects in the employment of expatriate employees in conducting international business. The choice of three discreet topics [expatriate compensation, taxation, and aspects of the Foreign Corrupt Practices Act] reflects the nature of issues that have immediate implications for an American who might be seeking a foreign employment opportunity with a Multinational Enterprise, a subsidiary, or related business operation (such as a joint venture or an international franchise) of an American company. 1. Expatriate Compensation An expatriate (sometimes shortened to expat) is an employee temporarily or permanently working in a country other than that of the person’s upbringing—termed the host country. As found used commonly in the context of international business, the term expatriate is often used in the case of professionals or skilled workers sent abroad by their companies for a temporary work assignment, rather than for the larger category of immigrants or migrant workers who may be seeking permanently to change their residence, largely for economic reasons. [These employees are sometimes referred to as “economic migrants.”] According to Fahmy (2014), an expatriate employee will be chosen for an overseas assignment because of a combination of three characteristics: technical competence, adaptiveness, and leadership ability. Frazee (1998) notes that there may be an overarching corporate purpose in employing expatriate employees in foreign work assignments, sometimes referred to as home-country “ethnocentric staffing,” even for brief periods of time. These may include: “Filling a skills gap overseas; Transferring technology and technical skills to the local workforce; Developing a fast-tracker’s management skills; and Transferring the corporate vision to a cross-border location.” (Frazee, 1998).