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GSBS6007: Managing Human Resources in International Organisations

International Compensation Module
• Successful management of compensation and benefits is an important facet of International HRM. Compensation questions require careful consideration because dissatisfaction with pay can make an expatriate less willing to adjust to the new culture and serve the company‘s interests. Poorly constructed compensation policies can also create relativity issues with locals in terms of perceived inequity with expatriates.

Source: http://smapp.rand.org/ise/ourfuture/ Newworld/

Module 7: International Compensation

• In this module we explore how firms may devise compensation packages to enhance the effectiveness of expatriate assignments. We examine the key components of international compensation programs and the approaches that may be used in devising such programs. We also examine the complex issue of taxation as it relates to pay and how it may be addressed in the choice of compensation programs.

International Compensation Module
In this module, we: • Examine the complexities that arise when firms move from compensation at the domestic level to compensation in an international context. • Detail the key components of an international compensation program. • Outline the two main approaches to international compensation and the advantages and disadvantages of each approach. • Examine the special problem areas of taxation, valid international living cost data and the problem of managing TCN compensation. • Examine recent developments and global compensation issues.

Terms
HRIS repatriation base salary benefits Tax equalization Tax protection allowances: COLA housing home leave education relocation spouse assistance global corporate culture International base pay

going rate approach balance sheet approach
IHRM Chapter 7

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Introduction
• Global compensation managers (that is, everyone involved at any level in pay-related decisions) increasingly deal with two areas of focus. They must manage highly complex and turbulent local details while concurrently building and maintaining a unified, strategic pattern of compensation policies, practices and values. • For multinationals successfully to manage compensation and benefits requires knowledge of employment and taxation law, customs, environment and employment practices of many foreign countries, familiarity with currency fluctuations and the effect of inflation on compensation and an understanding of why and when special allowances must be supplied and which allowances are necessary in what countries – all within the context of shifting political, economic and social conditions.

Objectives of international compensation
When developing international compensation policies, a firm seeks to satisfy several objectives. The policy: 1. Should be consistent with the overall strategy, structure and business needs of the multinational. 2. Must work to attract and retain staff in the areas where the multinational has the greatest needs and opportunities. Hence the policy must be competitive and recognize factors such as incentive for foreign service, tax equalization and reimbursement for reasonable costs. 3. Should facilitate the transfer of international employees in the most cost-effective manner for the firm. 4. Must give due consideration to equity and ease of administration.

Objectives of international compensation
The international employee will also have a number of objectives that need to be achieved from the firm’s compensation policy. The employee will expect: 1. The policy to offer financial protection in terms of benefits, social security and living costs in the foreign location. 2. A foreign assignment to offer opportunities for financial advancement through income and/or savings. 3. Issues such as housing, education of children and recreation to be addressed in the policy. (The employee will also have expectations in terms of career advancement...
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