What defines a balance sheet approach in international compensation?

The balance sheet approach in international compensation is primarily focused on ensuring that employees maintain their purchasing power when they are assigned to overseas locations. This method takes into account the differences in cost of living between the employee's home country and the host country to ensure that the overall compensation package is fair and comparable. By adjusting salaries based on purchasing power parity, employers aim to provide a compensation structure that compensates for differences in expenditures related to housing, food, transportation, and other living costs.

This approach helps ensure that expatriates can maintain a standard of living similar to what they would have enjoyed in their home country, rather than being financially disadvantaged or advantaged due to the geographical move.