Factors to consider when setting wages - Essay Example

? Factors to consider when setting wages Introduction The determination of wages to be paid to employees can be regarded as one of the most critical functions of a human resource department. The human resource director in any organization should determine the appropriate wages to be paid to employees. It is necessary to consider some parameters when determining the wages to be paid to employees. When a multinational corporation is operating in a foreign country, the human resource director has to set the appropriate wages for both the local employees and expatriates. There exist differences in the cost of living between the host country and the home country. When expatriates move to a new environment, they expect some changes in their salaries. This is because there may be hardships experienced while working in a foreign country. The wages of expatriate managers and engineers in the case of multinational food processing company is likely to be influenced by the salary scales in their home countries. On the contrary, the wages of local managers, engineers, and manufacturing staff will be determined by factors in the local markets (Ajami, 2006). Factors to consider while setting the wages for expatriate managers and engineers The calculation of expatriate pay borrows a lot from the wages that the expatriates could receive if they were working in their home country. As such, many factors that determine expatriate pay can be regarded to be external to the host country. The difference between the wages paid to the expatriates and the wages that the locals receive can also be determined by considering the variations, which exist between the host country and the home country. Some of the factors that I would consider as a human resource director while determining the wages of expatriate managers and engineers include the currency exchange rate, cost of living, and the hardships in the host country among others (Kontrimas 2006, p.51). While determining the salaries of expatriate managers and engineers in Australia, India, and Russia, it is necessary to consider the expenditure of the host country where the expatriates will settle. The cost of life in a host country may go up for expatriates since they tend to live in the major cities of the host countries. For example, the expatriates may decide to settle in the capital cities of Australia, Russia, and India. The cost of living in the capital cities is always high since some of the lavish estates tend to be occupied by the elite and the political class. Given the high cost of living in such places, it would be vital for the HR director to offer competitive wages to the expatriate engineers and managers (Ajami, 2006). Since multinational companies establish their businesses in the key towns and cities of the host countries, the setting of wages for the expatriates should consider the high cost of living in such cities. Therefore, as a human resource director, I would set wages that can be adequate for the expatriate managers and engineers to cater for their needs. Another vital factor, which I would consider as a human resource director while determining the wages of expatriate managers and engineers, is the law governing the compensation packages for the expatriates. Czinkota (2008, p.323) observes that while setting the wages of expatriate managers, it is crucial to consider both the law of the home country and the host country laws regarding the wages of expatriates. As a human resource director, it is vital to have the knowledge of both the local laws and the laws of the host country regarding payment of wages. This is remarkably crucial in order to ensure that the set wages do not conflict the local laws. The laws of host countries dictate the standard wages that should be paid to expatriates. Setting high wages for the expatriates may contradict the local laws in the host countries and lead to conflicts between the multinational corporation and the government of the host country. The other crucial factor to consider when setting the wages for expatriate engineers and managers operating in Russia, Australia, and India include taxation. As a human resource director, it is necessary to consider the amount of taxes charged to foreigners. In some cases, the wages paid to the expatriates can be taxed by both their home countries and the host country. It would be necessary to increase the wages of the expatriate managers and engineers since they will pay high taxes. The issue of taxation may also be complicated by the fact that expatriate employees may be charged higher taxes than local employees. As such, the human resource director should ensure that the expatriate pay is high and that expatriate managers and engineers are entitled to more benefits than the local employees (Czinkota 2008, p.325). However, if the taxes charged in the foreign countries are low, I would consider harmonizing the pay and avoid paying the expatriates extremely high wages. The amount of wages paid to expatriate managers and engineers can also be determined by the internal policies of the company. For example, considerations such as the level of the employee in the organizational hierarchy should be a factor to consider while setting expatriate wages. Those in higher levels of management and hold top positions in the company will receive higher wages than those in the lower ranks. Another factor that determines the wages to be paid to expatriate managers and engineers include the nature of work. In this regard, the managers and engineers who have been assigned more duties by the company should earn higher wages than those with few duties. The allowances for managers and engineers doing more work should also be higher than the allowances and entitlements of engineers and managers having fewer duties (Suutari 2000, p.518). The other factor that I would consider while setting wages for expatriate managers and engineers operating in Australia, Russia, and India would be the academic background, qualifications, and experience of the managers and engineers. Highly qualified and experienced engineers and managers deserve higher wages than inexperienced managers and engineers. In some cases, the inexperienced employees can be paid the same wages as the local employees. Another crucial factor to consider when setting the wages for expatriate managers and engineers would be the company’s stage of development. Since the company is new in the host countries, the wages of the expatriate managers and engineers would not be as high as it would be the case when the company has already established itself (Tornikoski 2012, p.6). This is because high wages would strain the entire company as it would be forced to use income from other branches to cater for the wages of expatriates in Australia, India, and Russia. The other factor that could determine the wages paid to expatriate managers and engineers of the British multinational company include the economic factors, and development level in the host countries. When the level of economic development in the host country is high, the expatriate managers and engineers will be paid more wages. This is because a high level of economic development creates a desirable market for the food products of the multinational company (Peng 2009, p.447). There are variations in the levels of economic development in Russia, Australia, and India. Russia is more developed and has a stronger economy than Australia and India. This means that the salaries of expatriate managers and engineers in Russia would be higher than the salaries of expatriate engineers and managers in Australia and India. The exchange rates of currencies and the possible hardships in the host countries also determine the amount of wages to be paid to expatriate engineers and managers. The multinational food company may establish branches in hardships areas, in the host country, and send the expatriate managers and engineers in these hardships areas. While working in hardship areas in Australia, India, and Russia, it is crucial to make sure that expatriates are paid higher wages than the employees who may not be posted in hardship areas. This is because there may be high expenses in hardship areas due to the lack of some amenities, which have to be acquired at a high cost (Tornikoski 2011, p.24). Factors to consider when setting the wages for local managers, engineers, and manufacturing staff in Australia, Russia, and India As a human resource director, there are certain factors that I would consider when setting the wages for local engineers, managers, and manufacturing staff. Collings (2010, p.173) observes that the salaries to be paid to local employees will be highly determined by the local demand and supply of the needed skills. The prevailing market rates in the host country have a profound impact on the local pay. One of the factors that would determine the wages of the local employees is the labor laws of the host country. Australia, India, and Russia have labor laws, which have set the minimum wages and the benefits that should be accorded to local employees. Since the multinational company will operate based on both the local and international labor laws, it would be necessary to follow the local laws. The amount of wages given to local employees should not contravene the requirements of the local labor laws. While setting the wages for the local employees, it would be crucial to consider how many hours the local managers, engineers, and manufacturing staff will be working. For the local employees who work for longer hours, the wages should be higher than the employees who work for shorter hours. The wage packages of the local employees should also be informed by where the plant is located. If the plant is located in a city where expenses are high, and the employees are forced to shift to such a location, then they should be paid high wages. This is because the expenses will be high in such locations (Peng 2009, p.449). Another factor that I would consider in setting the wages for local managers, engineers, and manufacturing staff is the activities of the labor unions. Unions have a significant impact on wages and compensation offered to employees. Both local and international employers sign agreements with the local labor unions. Such agreements bind the employer to offer reasonable wages to the employees. Therefore, as a human resource director, I would take into consideration some of the requirements set forth by labor unions and ensure that the company follows these requirements. It is crucial to follow the labor union requirements in order to avoid legal suits that may emanate from poor treatment of workers (Collings 2010, p.176). As a human resource director, it is crucial to consider the rate of unemployment in the host countries when determining the wages for local employees. The rate of unemployment has an impact on wages and benefits to be accorded to workers. If the rate of unemployment is high and many people seek jobs in the company, it would be advisable to offer low wages to the local employees. If there is a low rate of unemployment, the local employees would be offered high salaries. Therefore, the wages offered to local managers, manufacturing staff, and engineers would be higher in Russia than in India (Cooke 2003, p.12). The level of skills of the employees is also another crucial factor that I would consider while setting the wages for the local employees. For highly skilled employees, the wages should be higher than for lowly skilled employees. This is because highly skilled employees can take some management roles carried out by expatriates and be competent in such positions. The social and cultural factors of the host country should also be considered when setting the wages for the local managers, engineers, and manufacturing staff. As a human resource director, I would take into consideration the cultural factors that determine the remuneration of employees in the host country (Ahlstrom & Bruton 2010, p.390). Conclusion In conclusion, as the human resource director of a multinational company, I would consider certain factors when setting the appropriate wages for both the local employees and expatriates. For expatriates, I would consider the taxes they are required to pay in the host country, their education, background and the living standards of the host countries among other factors. Some factors to consider when determining the wages of local employees include the unemployment rate in their country, the education levels, as well as the local laws that govern labor. References List Ajami, R. A. (2006). International business: theory and practice, Armonk, N.Y., M.E. Sharpe. Ahlstrom, D., & Bruton, G. D. (2010). International management: strategy and culture in the emerging world, Australia, South-Western Cengage Learning. Pp. 389-395. Czinkota, M. (2008). Fundamentals of international business, [S.l.], Wessex Press. pp. 323-330. Collings, D. G. (2010). Multinational corporations and industrial relations research: A road less travelled, International Journal of Management Review 10 (2), pp. 173-193. Cooke, W. N. (2003). Multinational companies and global human resource strategies, Westport CT [u.a.], Quorum Books [u.a.]. pp. 12-15. Kontrimas, A. R. (2006). International expatriate employment handbook, Alphen a. d. Rijn, Kluwer Law Intern. pp. 50-56. Suutari, V. (2000). Determinants of Expatriate Compensation-Findings among Expatriate members of SEFE, Management Organization 9(10), pp. 517-539. Peng, M. W. (2009). Global business, Mason, OH, South-Western Cengage Learning. pp. 446-450. Tornikoski, C. (2011). Expatriate Compensation, Business Management 98 (2), pp. 24-32. Tornikoski, C. (2012). Expatriate Compensation: A Total Reward Perspective, Business Management 8(3), pp. 4-14. Read More