Global Compensation, Benefits, and Taxes - Essay Example

Summary: Global Compensation, Benefits, And Taxes Name Course Code Code Instructor Date Chapter 7 Summary: Global Compensation, Benefits, and Taxes This Chapter presents IHRM practices associated with developing compensation and benefits plans in MNEs. It also discusses the different challenges that confront companies that design and implement the plans for their MNEs, which have to operate in different host-countries. The Chapter sets off with a discussion on global remunerations in different countries that play host to the MNEs, before focusing on discussions on C&B plans for international assignees. In my view, it appears the central argument that guides this Chapter is that different laws in different countries and cultural practices make designing of an effective C&B plan difficult, and as a consequence make a global standardised approach ineffectual. Therefore, in order for the MNEs to operate in different host-countries with local employees, it is critical for HR managers to be knowledgeable of the country-specific variances, as these are crucial for developing effective HRM practices for the subsidiaries. As discussed, designing and maintaining the total reward system of an enterprise is among HR managers' critical responsibilities. However, an international business scenario complicates the responsibility and, therefore, demands for greater competencies and partnering for other departments like tax, finance, legal and accounting. Jiang et al. (2009) also contends that in the face of such complexities, remuneration cost is of great significant. This is particularly the case in MNEs when determining pay and benefits due to considerations of C&B for employees in many countries. Therefore, effective designing of a global C&B philosophy is a critical success factor for HR management in MNEs. I believe this is because when C&B system is effectively designed, it can effectively balance the cost and benefits for an organisation, yet also make the total reward system useful for attractive and retaining employees. The C&B in MNEs encounters a range of problems that are unique to the global environment and are unlikely to occur in local business environments. This includes deciding who should be a peer for a hob in varied countries and subsidiaries, the influence of organisational culture and national culture and how they influence people's different perceptions of value, and the different salary-benefit ratios depending on the country. Additional challenges include laws and regulations, labour relations and the degree of government interference depending on the country. Therefore, for HR managers to make effective decisions regarding the most appropriate location here the MNEs can operates, have to come up with metrics of the costs of labour and expected productivity of different employees in different MNEs. Several options exist for establishing a global compensation system. An example is the headquarters scale, where the salary levels of all MNEs are set at the headquarters and given out to different countries depending on the different costs of living in countries they operates. An alternative method is basing the salary scale on local geography by basing the salary scale on local geographies. In spite of these methods, it appears it would still be difficult for MNEs to eliminate allegations of inequity. This is particularly the case given the different tax systems, costs of living, and labour laws. Still, I reason that the objective of these global compensations systems of eliminating factors that de-motivate employees, such as unexplained differentials in compensation globally. Still, it should be observed that salary is merely one of the components of total remunerations. There is also another critical component called benefits package. This implies that in designing a C&B program that can be considered to be exclusive, it would also need to take consideration of non-wage benefits. However, HR managers would still need to contend with the issue of comparability, where different countries have different approaches for employee benefits. The country-by-country difference may be in terms of the number of working hours, vacation or holiday benefits, pension plans, insurance, and leave. Due to the different benefits practiced in different countries, corporate policy that establish and change benefits should be constantly monitored to cut unnecessary variations among subsidiaries while making sure that the parent company’s objectives to cut costs and stay competitive are considered. As a consequence, the MNEs need to come up with quantitative parity and qualitative parity in respect to benefits. Overall, deciding on an effective international compensation strategy and creating a holistic international assignment policy is a crucial starting point for organisations that seek to develop their international presence. Overall, the objective should be to ensure greater levels of consistency with local policies and equity among all employees and reducing barriers to international assignees' global mobility. Indeed, Haile (2002) agrees that pay systems should conform to local legislations and methods of employee compensation, while simultaneously remaining consistent with the global MNC policies. To the international assignees, therefore, it appears that a compensation benefits should aim to provide them with an incentive to leave their home countries, maintain their current living standards, take concerns of their family and careers, and facilitate efficient re-entry back to their home country at the end of their international assignment. The factors that determine international assignee compensation approach include the type of employee population to be sent abroad, the objective of the international assignment and its duration, the international assignee's peers, as well as what should happen at the end of the international assignment. Several approaches have been suggested to address these challenges, including negotiation, localisation, balance sheet, global plans, regional, and 'cafeteria." Still, I believe that due to the perceived differences between situations in home and host country, MNEs should provide some equalisation adjustments. These include adjustments to the different costs of living, and fluctuating exchange rates. Yet again, after determining the base salary and calculating the necessary adjustments, it would still be crucial to decide incentives considered as capable of convincing employees that taking a foreign assignment would be to their material advantage. An example of these incentives includes the 'foreign premium', housing allowance, and 'hardship' postings. In spite of an organisation's show of goodwill in providing these incentives it would still need to contend with some compensation issues, like inflation, fluctuation of exchange rates methods of payment and social society. Overall, these problems are intrinsic in an international assignment C&B approach. References Haile, S 2002, "Challenges in International Benefits and Compensation Systems of Multinational Corporation," The African Economic and Business Review, vol 3 no 1, pp.1-22 Jiang, Z, Xiao, Qi, H & Xiao, L 2009, "Total Reward Strategy: A Human Resources Management Strategy Going with the Trend of the Times," International Journal of Business and Management, vol 4 no 11, pp.177-183 Read More