In a World of Pay - Case Study

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HRM Strategy of a Multinational Company

A key feature of multinational companies (MNCs) as employers is their ability to transfer HR practices across borders. The impact of such transfer has the potential to influence the performance of MNCs, while it can also lead the change in the HQ as new practices become established.

International environment requires HR department to undertake more HR activities such as international taxation, international relocation and orientation, administrative services for expatriates.

A truly international conception of HRM would require to recognize that the assumptions and values of the HQ should be adapted to the culture of the host country. HR managers working for MNCs should understand the importance of cultural awareness. Each country has its own way of managing people, which is a direct result of its cultural dimensions. In the US for example “Time is Money”, therefore meetings have to be hold on time, where as in Asia “Time is a river”. Deadlines have a relative importance. Culturally insensitive attitudes are not only improper but cause business failures. All these differences should be made discussable, since only with cross-cultural learning HRM practices will produce effective ways of managing people.

The real challenge to internationalize the HR function is to change the attitudes of the senior management, since they might assume that what is practiced in the domestic HRM is easily transferable to international HRM. Therefore HR managers have no other way than working closely (and as smooth as possible) with the top management.

Expatriate Employee Management

Expatriation is the most expensive staffing strategy for multinational organizations, but still it is a viable method for increasing the organizations’ understanding of international operations.

Going abroad for a number of years to live and work in a different country and culture is a major change for most people. To make this easier and minimize the risks of facing adjustment difficulties for these people going abroad, companies’ Human resource departments, in particular, have great responsibilities.

HR can tailor packages to suit the needs of each individual’s circumstances (pay school fees for some expats, but this means that something else within the package budget is decreased). The company produces a cost projection for each international assignment and the cost is then allocated to the home or host country.

In contrast, HR can also standardise all its international relocation in order that there is no disparity between employees on the same level and ensure a transparent process. HR can use data from consultant companies to determine the expatriate incentive and the quality of living (QOL) incentive to produce standardised packages.

When moving an employee overseas, company also have to take into account the disruption this will cause to their partners and family.

Many host country companies provide house and educational allowances (language lessons) to help minimize the difficulty of adjustment for the expatriate. The expatriates who are most willing to be relocated and have easier to adjust to the environment are those whose families support them.

Many families have a dual income and one of those incomes will probably have to be sacrificed in order to move with the employee. Many companies take this into consideration when negotiating the expatriate’s salary.

Necessary HR assistance: Sell or rent out own home, find accommodation in host country, pay rent in host country, relocation allowance, international removalists, local storage, family relocation, visas for all, suitable schools and health care. There is a long list of considerations (other than mentioned above) in expatriate administration:

Salary package: Cash component, currency, where it’s paid, where it’s taxed, tax equalisation, cost of living allowance, hardship allowance, superannuation continuity

Tax...
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