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ASSIGNMENT II

Relative Cost of Living of 5

CountriesDrafting a Pay Plan for Managers

Submitted By:

Abhishek Rao

101202136

MBA IV sem

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Relative Cost of Living of 5 Countries

MANIPAL INSTITUTE OF MANAGEMENT Page 1

COST OF LIVING OF 5 Countries

COUNTRIES

Australia Brazil Korea USA UK

FACTORS

Clothing low high low high high

Communication High high low average high

Education High high low high averageHouseholdAccommodation High high low average high

Transport High high low high high

When we look at the above table we mentioned countries and factors in different axis.

Countries are Australia, Brazil, Korea, USA and UK. These are the most preferred countries

where the expatriates are sent on for foreign assignments. Whenever the expatriates go on

foreign assignment it is important for him if he goes with a family. The factors like clothing,

communication, Education, Household accommodation and transport are the major factors

which are considered by the employee as well as the organization. The employer has to see

that the employee is sent on foreign assignment and has to come back and work for the

organization. For this the most important is the Compensation Plan which is an important part

for an expatriate. According to the survey many expatriate assignments fail each year by 30% ie

because of family dissatisfaction, cultural issue and financial dissatisfaction.

So in the above table we have considered factors like Clothing, Communication, Education

Accommodation and Transport. So the pay plan has to be planned as per the basic needs to

survive in other country.

1) CLOTHING: In Brazil, USA, and UK the clothing cost is high compared to Australia and

Korea that means the amount of compensation has to be paid more than the other two

countries. This is according to the Cost of living index 2011. So the employee has to see

that the pay plan should increase the component of pay in 3 countries.

2) COMMUNICATION: This is a basic requirement for an expatriate when he is on foreign

assignment. When we look at the consumer price index of 2011 korea and USA are at

the lower side and the other countries are at the higher side. So the emp loyer would be

advantageous were the communication expense is at the lower side.

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3) EDUCATION: This is when the expatriate is with his family on foreign assignments. In the

above table we can see that korea and UK are cheaper. So it would be easy for the

employee and the employer to accommodate family in these two countries. But the

level of education also matters. Since the level of education is more important the

employee may not consider more important than the pay. But employer has to see thatthe pay considers the expense of the education allowance or education fee

reimbursement facility in the pay plan.

4) HOUSE HOLD ACCOMMODATION: in most of the countries the accommodation is the

major problem and most costly factor as an expatriate goes on foreign assignment.

Australia:

Rent Per Month Avg.

Apartment (1 bedroom) in City Centre 1,570.79 $ Apartment (1 bedroom) Outside of Centre 1,194.20 $ Apartment (3 bedrooms) in City Centre 2,491.73 $ Apartment (3 bedrooms) Outside of Centre 1,752.59 $

Buy Apartment Price Avg.Price per Square Meter to Buy Apartment in City Centre 6,571.15 $Price per Square Meter to Buy Apartment Outside of Centre 4,563.11 $(Amount in $)

Brazil:

Rent Per Month Avg. Apartment (1 bedroom) in City Centre 548.26 $ Apartment (1 bedroom) Outside of Centre 386.06 $ Apartment (3 bedrooms) in City Centre 1,298.59 $

Apartment (3 bedrooms) Outside of Centre 823.49 $

Buy Apartment Price Avg.Price per Square Meter to Buy Apartment in City Centre 2,599.24 $

Price per Square Meter to Buy Apartment Outside of

Centre

1,668.73 $

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United Kingdom:

Rent Per Month Avg. Apartment (1 bedroom) in City Centre 741.62 Apartment (1 bedroom) Outside of Centre 605.66

Apartment (3 bedrooms) in City Centre 1,201.51 Apartment (3 bedrooms) Outside of Centre 960.12

Buy Apartment Price Avg.Price per Square Meter to Buy Apartment in CityCentre

3,390.96

Price per Square Meter to Buy Apartment Outside ofCentre

2,377.13

KOREA:

Rent Per Month Avg. Apartment (1 bedroom) in City Centre 563.09 $ Apartment (1 bedroom) Outside of Centre 395.68 $ Apartment (3 bedrooms) in City Centre 1,519.99 $ Apartment (3 bedrooms) Outside of Centre 892.02 $

Buy Apartment Price Avg.Price per Square Meter to Buy Apartment in CityCentre

6,042.15 $

Price per Square Meter to Buy Apartment Outside ofCentre 3,775.30 $

USA:

Rent Per Month Avg. Apartment (1 bedroom) in City Centre 897.56 $ Apartment (1 bedroom) Outside of Centre 701.96 $ Apartment (3 bedrooms) in City Centre 1,556.21 $ Apartment (3 bedrooms) Outside of Centre 1,237.34 $

Buy Apartment Price Avg.Price per Square Meter to Buy Apartment in Citycentre

1,980.14 $

Price per Square Meter to Buy Apartment Outsideof Centre

1,332.01 $

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From the above table we can see that the cost of living in accommodation is much

cheaper in korea. It also gives a data of apartment cost with the city and outside the

city. this would be helpful for the employer and employee in different ways, like

travelling and pay plan, while designing it would help the employer to manage the plan

in a simpler and also reduces the travelling cost if within the city if nearby to office. Soall this would help in designing an effective pay plan when the expatriate is sent to these

countries.

TRANSPORTATION: whenever an expatriate is sent on a foreign assignment it is most

important that transportation cost which is most incurred. It depends on the employer

whether he stays with or outside the city and whether he uses the public transport or

his own vehicle. So when we look the above table except korea all other countries

transportation is on the higher side. That means when the employer deigns a pay plan

and also sending expatriate onsite the location and the expense paid to the employee

has to be competent enough to manage himself and his family.

The employee has to see that the transportation allowance has to be paid as per the

cost ofliving of the country which has to be paid on the higher side. As the cost of living

of the other country increases the amount of allowance has to increase in the pay plan.

CONCLUSION:

So finally we can come to a conclusion that the from the above 5 countries Korea is

the cheapest countries for an expatriate as well as the employer. So the pay plan for

Korea will be much comprehensive than the other countries and the employee would

feel more comfortable with the pay package and also its benefited to the organization.

Every company compensates differently.

TOP PRIORITY: MAKE THE EXPATRIATE HAPPY!!

It is important to get an understanding of how the employees perceive the

international human resources policy put in place and why they have been relocated

them. It is necessary to make sure they feel good about the programs that are underway

to facilitate their international assignment.

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REFERENCE:

http://www.bestplaces.net/col/

http://www.expatistan.com/cost-of-living

http://www.numbeo.com/cost-of-livingInternational Journal of Management & Marketing Research (IJMMR); 2010, Vol. 3 Issue

2, p85-118, 34p

Social Security Bulletin; 2007, Vol. 67 Issue 3, p73-88, 16p, 4 Charts, 1 Graph

Journal of the History of Economic Thought (Cambridge University Press); Jun2011,

Vol. 33 Issue 2, p187-222, 36p

Wages, prices, and living standards in China, 1738-1925: in comparison with Europe,

Japan, and India.

Applied Economics; Jun90, Vol. 22 Issue 6, p739, 19p, 6 Charts, 1 Graph

How Design Rates on Pay Scale - Design News; 9/3/90, Vol. 46 Issue 17, p19-19, 1/4p

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