Introduction The compensation has long been established as a primary means of fostering loyalty and productivity of international expatriates. Nevertheless, the HR managers continue to face several challenges when implementing it which ends up in loss towards the organizations. Evans, Pucik and Barsoux, (2010) has elaborated that the issues that gave birth to international human resource management remain more important than other functional areas is expatriation and adaptation of practices to different cultures. The challenges posed by transferring the employment of an executive to a foreign-based company are many and are not easily solved. The aim of the current report is to outline the factors that affect the compensation process, review the most popular approaches, and determine if they address the issues comprehensively. If the differences between the methods and the needs could be found, a set of recommendations to improve the current HR practices will be formed that will offer useful insights on the matter. Literature Review Factors Affecting Expatriate Compensation The most often mentioned factor that influences the expatriates’ satisfaction by the compensation strategies is the differences in cost of living between the host and parent country (Nazir, Shah, & Zaman, 2014). If the cost is higher, the employer is required to adjust the compensation package in order to merge the gap. In the opposite situation, the difference is not subtracted. Such approach is known as a no loss policy and occurs with slight variations in the majority of the HR practices. The most difficult part of addressing this factor is the assessment of the gap. However, with the growing trend of the multinational business practices the need for a universal approach has emerged, so some attempts have been made to present an analysis that would allow the calculation of the cost of living (Mishra, Singh, & Sarkar, 2012). Nazir et al. (2014) point to a growing body of evidence that expatriates expect from their company to assess the trends of goods and services in the host country and incorporate the results in the compensation package, and that the supplementary cost of living is adjusted so that the employees are left in either equal or a better position compared to that of the parent country. The presence of expectation can be viewed as a form of physical contract – a set of beliefs that form during the initial phase of the agreement and is equally important for the successful retaining of the personnel (Tornikoski, 2011). Thus, the factor can be viewed as a combination of financial, or tangible reward, and the expatriate’s perception of the HR practices, known as the intangible particularistic reward, or IPR (Tornikoski, 2011). Cultural influences As gradually more companies establish subsidiaries in other countries, and for some of the multinational corporations it is not uncommon to have expatriates in many parts of the world at once, cultural issues become visible as part of the working environment. The unaccounted cultural influences possibly result in two outcomes: the lack of mutual understanding on the individual level and the incorrect perception of the company’s policies and strategies. For example, the some of the benefits highly appreciated in one culture may be deemed inappropriate in another (Mishra et al.,