COMPENSATION
International Compensation
• Defined as the provision of monetary and non-monetary
rewards,
rewards including base salary, benefits, perquisites,
long- and short-term incentives, valued by employees in
accordance with their relative contributions to MNC
performance
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Internal Variables influencing International
Compensation Strategy
• Goal orientation
– UK-based foam manufacturer Zotefoam, where equality is a key
aspect of HRM in the company’s mission, the only perks that
differentiate executives from other workers are private health
insurance and a car allowance – MD of the firm sees the
internationalizing firm as one with minimal status differences
between levels in the org. hierarchy
• Capacity to pay
– Cost constraints on the enterprise
• Competitive strategy
– If for eg., as part of the MNC competitive strategy, the IHRM
strategy is to be a mkt leader in employee compensation in order
to compete for the most competent candidates, then the levels of
compensation might well be higher than if the competitive
strategy is based on, say, the provision of secure employment.
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Internal Variables influencing International
Compensation Strategy
• Organization culture
– It also influences the degree to which employees are
compensated on the basis of seniority, in contrast to
personal connections or performance
• Workforce chs.
– Age, education level, qualifications and experience,
along with workforce tastes and preferences, and
labour relations factors such as nature of employment
relationship (level of TU involvement within MNCs)
will result in different international compensation
approaches
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External Variables influencing International
Compensation Strategy
• Competitors’ strategies
– Even if the MNC is not seeking to be a mkt leader in
international compensation, it generally cannot afford to fall
behind mkt rates across its locations, as it will risk losing
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Compensation of International Staff Transfers
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Compensation of International Staff Transfers
– Home leave – provision for the assignee and family to return home
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Compensation of International Staff Transfers
• Basis for expatriate compensation is maintaining relatives with parent
country national colleagues and preserving parity of purchasing
power, viz ensuring that the expatriate maintains the same std of
living that he or she enjoyed at home
• Regional approach
– Attempts to capitalize on apparent similarities in culture, compensation and
taxes, for eg. by adopting the same compensation for all countries within a
particular region
– MNCs are beginning to view the 11 countries that have adopted the Euro, or the
‘Eurozone’ as a region for compensation structures
– Eg., Portal Software Europe has equalized car allowances and some other
benefits for employees in 8 of their 11 Eurozone bases
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