Global HRM Final exam 2023
International/Global Remuneration
Deals with the complex Compensation & Benefits structure of the MNE in various locations/subsidiaries around the world.
International Assignment Compensation
Deals with compensation and benefits of globally mobile employees—as sho...
Global HRM Final exam 2023
International/Global Remuneration
Deals with the complex Compensation & Benefits structure of the MNE in various
locations/subsidiaries around the world.
International Assignment Compensation
Deals with compensation and benefits of globally mobile employees—as short-term
international assignees or long-term expatriates.
Main Objectives of MNE's Global Compensation and Benefits Programs
-Attraction and retention of the best qualified talent to staff the MNE, in all of its
locations.
-Attraction and retention of employees who are qualified for international assignments.
-Facilitation of transfers between the various employment locations within the MNE.
-Establishment and maintenance of a consistent and reasonable relationship between
the compensation of employees at home and abroad.
-Maintenance of compensation that is reasonable in relation to the practices of
competitors yet minimizes costs to the extent possible.
Global remuneration involves two components
1) Developing an overall C&B philosophy of how an MNE pays its employees (a
common set of principles on which the organization bases its reward system)
-Standardization vs. Localization
-Lead, lag or be at the market equivalency compared with rivals in the industry and/or
geographic location.
-Typically, compensations are assigned based on the job analysis and evaluation.
2) Taking consideration of the external constraints placed by the various countries in
which the MNE operates (i.e., cultural and national practices, laws, and tax systems)
International Remuneration Challenges:
- Comparability
- Cultural Values for Rewards
- Salary-Benefit Ratios
- Tax laws differ tremendously across nations
- Sunshine Rules
- How salaries are expressed?
- Labor relations, collective bargaining, and employee representation
-National laws and Regulations
-Global Law of Economics
-Government-provided and mandated benefits
-due diligence and post-merger integration phases
-Equity versus comparability
Comparability
Determining peer equivalencies for jobs in the various countries and subsidiaries.
,Cultural Values for Rewards
Influence how people perceive the value of various rewards available in the
compensation system. Acceptability of compensation based on performance-driven
versus entitlement-oriented attitudes; variable (risk, uncertainty) versus fixed (risk-
adverse) pay.
Salary-Benefit Ratios.
The balance of salary versus benefits costs differs by country as a result of cultural
practices, labor relations, and local laws and regulations.
Tax laws differ tremendously across nations
and affects how employees income and benefits are taxed and how organizations pay
their corporate taxes and expense deductions.
Sunshine Rules
Whether or not employees salary information is confidential or disclosed is generally
dictated by local cultural practice and law.
How salaries are expressed?
-Net or Gross amount
-Weekly, monthly or annually
Labor relations, collective bargaining, and employee representation
also differ greatly from country to country.
Labor unions influence job security, compensation, benefits as entitlements.
National laws and Regulations.
Minimum wage, overtime, compulsory bonus and other entitlements, severance
payments, contract requirements, and taxation of employee income.
Global Law of Economics
Work, with regard to staffing, needs to be located where the quality and cost of the
production of goods and services are optimized.
Using the US as the index (=100), labor costs are higher in Scandinavia, Western
Europe, and Australia and lower in Southern Europe, Central and Eastern Europe, Latin
America and much of Asia.
-Remember to consider both, labor costs and productivity ratios
Government-provided and mandated benefits.
Great variance from country to country.
-Such as paid time off, social welfare benefits (healthcare and retirement), various leave
requirements.
Remember, Compensations and Benefits are a major part of the due diligence
and post-merger integration phases of mergers & acquisitions.
Pension obligations, potential severance liabilities, equity and stock options plans,
vacation accruals, and unwritten reward practices...etc.
Equity versus comparability.
Are comparable employees in different parts of the organization treated equitably or
fairly?
-The more subsidiaries and joint ventures you have, the more the complexity.
-The more developed is your internationalization stage, the more it is complex to
achieve consistency, given differing cultural practices, legal requirements and tax
systems.
Designing a Global C&B Program
,-Under which country's C&B programs should employees be covered—parent country,
host country, or a specially designed program?
-How should pension and health care coverage gaps be bridged? Can employees be
covered under a single plan, particularly if they move around during those careers?
-Is benefits coverage adequate for all employees? Is the benefits package equitable
externally and internally? Should employees be covered under selected home and
foreign programs?
-How can social benefits costs be minimized? Can employees' home country social
programs coverage be maintained as they change locations? Could a global program
provide equitable coverage for everyone?
-What are the tax effects to employers and employees of special benefit arrangements
for all global employees?
Issues that apply specifically to global compensation and to global benefits:
-International compensation
-headquarters scale
-local scale
- global scale
- MNEs often create two classifications: local and international with regard to
compensation
-International Benefits
- Working hours
- holiday and vacation benefits
- pension plans
- healthcare
- insurance
- leaves
- flexible benefits
- equity compensation
International Compensation
A number of different options (for establishing a worldwide compensation system) have
been used by various MNEs.
Headquarters Scale
Worldwide salary levels are established at HQ with differentials for each subsidiary
according to their differing costs of living.
-Managerial positions are usually paid through this approach
Local Scale
employees are paid based on a local scale
-Utilized for the broader employee base
Global Scale
for each position with possible affiliate differentials, thus achieving equal pay for equal
work on a global basis.
, MNEs often create two classifications: local and international with regard to
compensation.
Highest positions are paid based on an international standards (HQ) and lower positions
are paid based on local standards.
-In -country gaps, wide gaps between executives and employees
-Gaps between executives at various countries.
A multinational enterprise has decided to pay its employees based on the local
standards of each of its affiliated subsidiary. This is an example of ___________
approach
Headquarters scale
Local scale
Global Scale
Proactive scale
International Benefits
-The design of a comprehensive C&B program for all worldwide employees must, of
course, include these non-salary benefits.
-You need to pay attention to what are the benefits provided by the government and
mandated by law, in addition to how they are taxed.
-Benefits make up a significant portion of the cost of payroll (40% of the cost of payroll
in the US).
Working Hours
The number of hours worked per year varies considerably from country to country.
Holiday and Vacation Benefits
-There are wide variances among countries in holiday and vacation entitlements.
-In the US, paid vacation time is left to the discretion of each company, that is true for
most benefits.
First year: 11 days
Five years: 15 days
Ten years: 17 days
Thirty years: 24 days
Pension Plans
Retirement benefits create their own special set of complexities for MNEs.
-Defined benefit plans (pays a fixed periodic benefit upon retirement)
-Defined contribution plans (distributes retirement benefit based on contributions to the
plan)
-Government social security systems (albeit with varying retirement pay-outs)
-Others have different or no retirement plans at all.
Healthcare
-Is it provided by the private system (such as the US) or provided by the government?
-Are employees expecting you to provide additional private healthcare over and above
the one provided by the government?
Insurance
Another area of benefits that can add complexity to the design of benefits programs,
especially for international assignees, is insurance benefits (such as life, disability, and
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