International Pay Systems

Topics: Trade union, Tax, Human resource management Pages: 6 (1955 words) Published: October 4, 2010
International Pay Systems

September 20, 2010

International Pay Systems
Riordan manufacturing has proven to be leader in the manufacturing industry with the production of plastic injecting molding. They have plants in Georgia, Michigan and China, and have even been carefully viewing their options for opening a plant in Japan. Riordan understands that with the possibility of expansion in global markets that there is a need for great legal and regulatory practices and policies that must be adhered to. The Human Resource department must be able to work closely with the foreign country in order to understand the customs and preferences of the locals while complying and enforcing privacy, copyright, and intellectual property laws. They must also take into account the cultural differences of the workers and customers and work to bridge the gaps with management and other transplanted American workers. By taking account of the legal issues that are involved in international business venture and being able to incorporate the customs and prefers of the country will help Riordan Manufacturing meet their goals in expanding their market and sales in a global economy (University of Phoenix, 2010). The Case of Robert Lord

Local taxation and living costs must be considered, along with the gross salary of the senior managers. Senior mangers typically earn a higher gross salary than that of a lower ranked employee in many countries including Japan. Once the local taxation and cost of living are taken into account, it is estimated that the United States employee is compensated well than that of his Japanese counterpart. If Robert Lord was sent to Japan on the domestic terms, his buying power is reduced greatly although the gross salary would be higher. The spendable incomes need to be adjusted to meet the differences in the cost of living. In doing this the expatriate is assured of the same appending power in the host country as here in the United States. Several allowances and or incentives could also be added to the host country portion. The United States is one of the few countries to impose tax on income earned on foreign soil, although many of the companies will bear this additional tax burden. This is called tax equalization agreement in which the employee is reimbursed by the employer for the extra amount incurred by the expatriate. Most often a company will withhold a set tax from each payroll payment to the employee, based on a projected tax incurred by that nations salary, and at the end of the tax year, after the exact amount of tax is calculated, the employee or employer must reimburse the other for over/under payment. US companies find themselves at a disadvantage with these tax-equalization pay systems, and many companies are trying to fill their senior management positions with local hires (eca international, 2010).

The Role of the Social Contract in Japanese Systems
One of the defining reasons for a government’s tendency to enact protective measures to counterbalance the effects of markets are the insufficient welfare systems and Japan’s existing social contract, which does not tolerate uncertainty and social suffering. At the very basic level a social contract is a covenant to the Japanese culture. It is not codified by which the society and the state are constituted. It addresses the areas such as how many services the government has to provide in return for its right in reducing citizen’s incomes. This could be done through high taxes and or high prices. The differences are reflected significantly in the basic societal assumptions and preferences as well as the political and economic struggles. Countries will differ in how they craft this social contract over the course of history. A social contract will evolve over time and become inclusive of that country’s leading interests as well as their norms and values, and it is extremely difficult to change either...

References: Prentice Hall Publishing.
Engle, Allen D (2007)   Eastern Kentucky University
European Working Conditions Surveys (2005) Retrieved September 20, 2010 from
Kochan, T and Shulman, B (2007) A New Social Contract   Restoring Dignity and Balance to the
Economy. Retrieved September 18, 2010 from
Olson, Mancur, 1982, The Rise and Decline of Nations: Economic Growth, Stagflation, and
Social Rigidities
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