 In this topic and the subsequent few topics, we are going to discuss about various different approaches to international compensation. There are various approaches which are used to calculate the compensation packages and design the compensation packages for international assignees. Those are the going rate approach. Second one is the balance sheet approach and now another approach is emerging which is called the local plus approach. So these are the approaches that we are going to discuss in these coming topics. In this topic, we are going to talk about the going rate approach. What is the going rate approach? It is basically the going rate, the rate market. So your expatriates, for example, they are moving from US to Pakistan, they will be paid according to the market of Pakistan. So in the Pakistani market, what salaries are being paid to the executive? For example, if you have to appoint the head of finance, what is the payment to the head of finance? In the Pakistani context, you will follow that, that is the going rate approach. It is based on the local market rates. For this, there are certain surveys that are conducted and it relies on survey comparisons and these survey comparisons could be made on different dimensions. You can do a comparison with local nationals. How much is the host country nationals paid? For example, head of finance, how much money is taken from an organization in Pakistan. So that is one way to calculate that. Second way is that expatriates of the same nationality. For example, if Americans are working in Pakistan, what is the payment to the Americans in Pakistan? If someone is appointed in American Pakistan as head of finance, what is the payment to them? According to that, if they want to keep the head of finance in their own company, in the same type of industry, in the same type of situation, the size is also the same. And then another way to compare is that how much is being paid to expatriates of all nationalities. In that country, for example, in Pakistan, expatriates who work from foreign countries, how many salaries are given to them? So you can equate with them. So either you can equate with the host country nationals salary. Or you can equate with the people of that particular nationality with their salary. Or you can equate with the generally expatriates who are being paid in that country. So these are the three different comparisons that you can make according to the going rate approach. And compensation is then based on the selected survey comparison. Then you select the survey with which the compensation is done. But if the going rate approach takes you and makes the employee end up with a very low pay. For example, if someone is working from America to Pakistan, there is a huge difference between the pays in America and in Pakistan. So in America, the managers who are given salary have no comparison with Pakistan. So in such a situation, base pay and benefits may be supplemented by additional payments for low pay countries. So if there is a low pay country, then you will supplement additional payments with it so that if there is a requirement of expatriate assignments, then people are ready to come and work there. So it is all a combination of what is required and what has to be paid to the people to make them work in that particular situation. In the going rate approach, it has got certain advantages and certain disadvantages. Let's take a look first of all at the advantages. Advantages are that first of all, there is equality with the local nationals. Local, who are working in subsidiary, they don't feel that there is any discrimination between the parent country national or the host country national. Then it is something which is simple to administer. So you can just calculate what is the local payment and you can administer it. Then it also creates an identification with the host country. Your compensation package, your organization then identifies with the host country rather than it implements packages that are conversant with the parent country. It is using packages which are conversant with the host country. Then equity among different nationalities. So if you are paying according to the going rate approach, there is going to be a perception of equity between different people who are coming from different nationalities. So if you are using the going rate approach and people from different places come and work with you, which is more prevalent in the developed countries, then the going rate approach is more implemented there. Because if people are working from Japan, Pakistan, America, UK, for example, if there is a firm in Australia, they cannot give salary according to the country. They will implement the going rate approach. And the equity is created between different nationalities. What are its disadvantages? There is variation between assignment for the same employee. If someone is working in Australia first, then he is working in Pakistan, and on the going rate approach, he is getting compensation. So in Australia, he will get a lot of the salary, he will not get it in Pakistan. That is why there is going to be variation. Then variation between expatriates of same nationality in different countries. Once again, it is the same kind of situation. So expatriates, if they are moving in different countries, they will also feel this kind of variation. And potential for re-entry problems. For example, if you send them to a subsidiary, where you give them a very good compensation, and the going rate there is higher than the parent country. For example, if you are sending someone to America from Pakistan, and you are giving them a going rate salary, then when you call them back, you will repatriate them. When the re-entry stage comes, they will not feel like coming back from America and working in Pakistan. So in this situation, there is going to be a potential for re-entry problems. These are the certain disadvantages of the going rate approach. So the organization, it must take into account the situation, and what approach would be more suitable for that particular situation. And that approach must be taken according to the context, and the context of the organization as well as the context of the parent country and the host country. So that was the discussion on going rate approach.