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Compensation in the United States versus the rest of the world

27.07.2018

Compensation in the United States is different from compensation in most countries. Just like pay scales in Sweden differ from pay scales in Italy. Within the country, there are salary differences between Mobile in Alabama, Aspen in Colorado, New York City, and San Francisco in California, but generally speaking there is quite a difference between the pay packages offered in the United States and those in European or Asian countries with their national social security systems, housing market, and public education systems. Frequently, both base pay and complete pay package add up to higher numbers than they do for a comparable position in most countries. In the United States, pay packages generally comprise a variety of components usually not part of the salary in other parts of the world.

Option A

First and foremost: Salary ranges are wider! While at the lower end of qualification and pay, many workers require more than one job to make a living, the salaries can rise higher than for example in Germany and Austria with expensive college degree(s) and experience, especially leadership and managerial experience. There is also a difference between US Dollar and Euro when it comes to purchasing power. Thus, in general, foreign pay scales are not applicable to U.S. operations. The less prone your industry is to throwbacks in a recession, the more compensation your competitors offer in terms of bonus payments, retirement and other benefits, the better the pay package as defined in “Option B” you will need to offer to a qualified candidate for your position. Changing jobs is an opportunity, but also a risk, especially when it comes with a move to a different state and city, sale of real estate and acquisition of a new house possibly in a significantly higher priced area, the spouse has to change jobs or give up his or her job, the children need to change schools, or college costs are part of the equation. If a problem arises with the new position or within the family due to the move, the employee will carry the full risk. No European scale unemployment insurance will kick in, neither will European style health insurance for employee, spouse, and dependents. Children might be attending private schools or college: neither unusual in the United States, especially when you are looking at experienced professionals and executives, and both a major cost factor. So, you are trying to entice a qualified candidate to leave an established company and bonus system, possibly company shares, insurance benefits, vacation time and sick days acquired over years with seniority, to join your growing or new operations? Be prepared to offer an attractive compensation package to make it worth the change. 

Don’t make the mistake and simply convert what you would offer for the position in Europe from Euro into Dollars.

You will need to look at the U.S. market and craft a competitive compensation package for the position. This might be the time to get professional help from an executive recruiter, who will help you fill the position in a timely manner with a qualified candidate. An experienced recruiter with a retained executive search firm will be able to provide the market data you need to craft the compensation package, support tailoring the position description for the American market, and find the right candidate.

Option B

Now, let’s discuss Option B). You decide against sending an expatriate from Europe. You prefer hiring a top qualified executive in the United States. Not only will you save yourself the problems with visa, taxes, and costs for an international move, but you see the chance to recruit an executive with in-depth knowledge of the market you are about to conquer. This means though that you need to identify a person you can trust over the distance of a few thousand miles. Your company already maintains presence in the United States, and you are about to expand? Then you can hopefully rely on your U.S. leadership team to help recruit quality candidates. If you are looking at a completely new business presence in the United States though, it gets a little bit more complicated. Neither taxes nor legal topics are my area of expertise. I want to address solely the topic of recruiting.   

First and foremost: when it comes to finding the right professional or executive, you are competing with U.S. employers. The U.S. market is highly competitive when it comes to finding top quality candidates. German and Austrian companies and economy have a great reputation as employers. Yet a qualified candidate will expect a competitive pay package, which, as the word “package” indicates, has several components. 

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This can be quite different from what you consider “pay” in Germany or Austria. In the United States, a pay package usually contains base pay, a package of achievable bonus payments, insurance packages, namely health insurance packages employer contributions to private insurance for employee and possibly his or her family, private retirement plans (401k) including employer match to a certain extent, and possibly company shares. Further, paid vacation days, sick days, paid holidays, and “personal days” are generally part of the negotiated package, as they are not regulated by law, though there is flexibility for “exempt” employees and executives. Those “benefits” are an integral part of employment contract negotiations and pay packages for professionals and executives. A qualified U.S. employee will compare the package you offer to his or her current pay package. Unless you already have U.S. operations with certain structures in place, you will need to shop for partners in the United States to offer those benefits – insurance companies, financial institutions, and others, to be able to offer a competitive pay package to your chosen candidate. This is especially true in today’s highly competitive job market in North America.