INTERNATIONAL COMPENSATION STRATEGIES Amaresh C Nayak
International Compensation Strategies • International compensation is understood as provision of monetary and non-monetary rewards, including base salary, benefits, perquisites and long and short-term incentives, valued by employees in accordance with their relative contributions to performance.
Objectives • Attract individuals who arc competent and interested in international assignments. • Facilitate movement of expatriates from one subsidiary to another, from the home country to subsidiaries, and from subsidiaries back to the home country • Provide a consistent and reasonable relationship between the pay levels of employees at the headquarters, domestic affiliates and foreign subsidiaries. • Be cost-effective by minimizing unnecessary expenses. • Be consistent with the overall strategy, structure and business needs.
COMPENSATION PHILOSOPHY • Compensation philosophy is the set of values and beliefs that an organisation has with regard to monetary and non-monetary benefits payable to employees. • Often is combined with a set of guiding principles that further assist in compensation administration.
COMPENSATION PHILOSOPHY • What are the goals of the organization’s compensation system? • What percentage of compensation should be linked to individual/unit performance and what should be the base salary? • What is the role of performance appraisal in disbursing compensation? • How to target the positioning of compensation of employees relative to market?
COMPENSATION STRATEGY Employee Inputs Business and Industry end Labour and Preferences Operating Inputs Market Practices and Trends Compensation Philosophy and Objectives Based upon Business, Operating and Human Resource Requirements Base Pay Organisation Performance or Fringe Compensation Variable Pay. Non-monetary Benefits Administration Delivery and Other Monetary Rewards and Recognitions
Components of Compensation • Base Salary • Incentives • Allowances • Benefits • Taxes • Long Term Benefits
Variables Influencing Compensation Internal and external MNC Internal relativities MNC External Environment Environment • Goal Orientation • Parent Nationality •Capacity to pay •Labour market •Competitive strategy characteristics •Organisational culture •Local culture •Internal workforce •Home and host country composition government’s role •Labour relations •Industry type Staffing •Subsidiary role •Competitors strategy Orientation International Compensation Strategy
COMPENSATION ADMINISTRATION • Establishing salary bands • Developing rates of pay for jobs • Linkages to performance appraisal • Starting salary for new employees and • Salary increases’ reviews