ASA University Review, Vol. 6 No. 2, July–December, 2012 Compensation Issues Relating to Expatriate Managers: A Review of Related Literature Sheikh Abdur Rahim * Abstract The present study revealed the problems involved with the preparation of compensation package for the expatriate managers. The study also revealed the measures, which the managers of multinational companies throughout the world can help to reduce the problems while preparing the compensation package for the expatriate managers. Based on the secondary data, the paper argues that preparation of compensation package for the expatriate managers is very much difficult because of environment, nature of the assignment, skills, knowledge, competencies and so on between parent country and host country. The researcher also opens the scope for further research on test and describes the strategic flexibility model as to how MNCs are reacting to the complexities they face in dealing with international compensation. Keywords: Compensation, Expatriate, Multinational, Allowance, Premium, Manager. Introduction For multinational firms, successful management of compensation and benefits requires knowledge of the employment and taxation laws, customs, environment, and employment practices of many foreign countries. Also needed are familiarity with currency fluctuations and the effect of inflation on compensation, and an understanding of why and when special allowances must be supplied and which allowances are necessary in what countries. All of these needs must be fulfilled within the context of shifting political, economic, and social conditions. The level of local knowledge required in many of these areas requires specialized advice; many multinationals retain the services of consulting firms which may offer a broad range of services or provide highly specialized services relevant to HRM in a multinational context. Because of their high-cost, HR managers spend a great deal of time developing effective compensation and benefit programs for international employees. A survey by the Conference Board found that 38 percent of firms reported an expatriate cost of 4 to 5.6 times, 40 percent reported 6 to 7.5 times, and 16 percent reported 8 to 9.25 times parent country’s salary. A recent report in Fortune on doing business in China reported that hiring a local Chinese manager with 15 years of experience would cost less than U.S. $ 1,80,000; a U.S. expatriate would cost U.S. $ 6,00,000; an England expatriate would cost U.S. $ 5, 50,000 with the following compensation package ( all figures in U.S. $): * Assistant Professor, Faculty of Business and Economics, Daffodil International University