Impact of International Trade on the Human Resources of Multinational Corporations - Coursework Example

International Business and Law There have been invigorating changes in the business realm in last few eras. Organizations have achieved enormous improvements in their internal structures and they have established strong relationships with their external environment as well. Globalization is one of the most discernible shifts that have connected organizations with distant locations to each other so they can share resources and achieve economies of scale. This phenomenon of internationalization has bridged the gap between the nations but it has also triggered off intricate problems for some companies while bringing substantial benefits for those who are capable of grasping new opportunities. This paper explores the impact of international trade on the human resources of multinational corporations in the scope of law and different regulations pertaining to the employees of different countries. It has been emphasized that human resources are the most powerful strategic resource that drive the organizations to capture growth and expansion. The policies and law related to human resource management are of vital importance because they are considered as a powerful medium for control and coordination of international operations (Bartlett & Ghoshal, 1991). On the other node it has also been argued that Human resource strategies are a formidable obstacle when companies try to devise global strategies. Hence, this paper will analyze the laws pertaining to human resources in international trade and their implications on the businesses. Each country has its own ideology and structure and their laws are based on their principles or doctrines. The government plays a fundamental role in formulating policies of law whether they are related to crime, federal system or labour resources. The state establishes a legal framework that comprises of legislation (e.g. labour rights) and executive action (e.g. handling disputes in industry). Considering the role that state plays in human resources of each country; US lies at the bottom of the list as the government here is much more flexible than other countries. In Australia, United Kingdom and Japan the state plays an average role whereas in Germany and Poland it has been observed that the companies are highly regulated by the state’s labour laws and the state intervenes in most of the labour issues. The terms of compensation and fringe benefits differ across the borders. Even in many of the cases these conditions are determined by the state legislation. Hence, it is mandatory for each of the multinational corporations when trading across the boundaries that they should comply with the local requirements. For instance, if a UK company is trading in United States than there terms and conditions of employment should be based on US regulations. Multinational companies that are operating in Italy are owed to provide a pension plan, a relocation allowance, and medical allowance. In Spain the state determines the health and safety policy and the remuneration associated with it. Multinational corporations in China are entitled to pay funds to a social welfare trustee that covers all the expenditures related to medical, insurance, children education, retirement and pension plans. These costs are often as high as fifty percent of the salary of an employee (Pincus & Belohlav, 1996). In North American countries like Brazil and Peru the law enforces companies to pay a year end bonus which is equal to a month of salary. The Indian employment regulations demand that employees should be paid a rent allowance and a termination payment which is equal to fifteen days salary for each year worked. Understanding these employment practices across the globe is the first task need to be handled by the multinational corporations. A company failing to comply with the requirements of the host country can be subject to severe penalties by the local government and it can bring the operations of the company to a halt. Further, if you do not abide by the regulations of host country, than your employees can take on a position in your competitors territory because they are offering them lucrative packages of compensation. Multinational corporations in developing countries like India often face such problems of turnover. Finally, the cost of sustaining an employee increases when you move to a different country. We can argue that moving to a cheap labour country can reduce the costs by huge margins however certain countries who want to protect their employment rate impose high tariffs on importing goods and services to their costs which compensates for the cheap cost of labour. The labour laws of some countries can even intervene in the domestic matters of businesses. In Europe, state influence is reinforced by the role of the European Union’s, where the regulatory regime has sponsored social partnership. In Australia and the state gets involved in the employee relations. In Mexico, the federal board has been given the authority over businesses. These boards determine and regulate the compensation and benefits which comprises of six paid vacation days per year, a twenty five percent vacation pay premium, seven paid federal holidays, and fifteen days of salary as a Christmas bonus, profit sharing plans and an employer-funded payroll tax that supports a federal day care program (Pincus & Belohlav, 1996). This means that the compensation terms would be set by the board rather than the corporation itself which implies that the local laws are hindering the organizations to fully define and adopt the human resource practices. Further, the organizations are not allowed to dismiss employees based on the reasons which are not specified in Mexican Labour law. This entails that the multinational corporations can not absolutely control and manage the human resource domain. If an organization finds that the performance of an employee is severely suffering and the reason is not complying with the Mexican labour law than the organization can not fire or dismiss him and neither can it demote him to a lower position which as a result impairs organizational effectiveness. The phenomenon of Collective bargaining has been on the peak of the labour world since centuries. “Collective bargaining” is the bargaining between employers and employees over wages, benefits and terms of employment etc. where the employees are represented by a trade union or some other collective body. There are some economies which reinforce collective bargaining through their laws. In the United States the deregulatory policies embraced by a new government subverted the power to collective bargaining originally based on the New Deal legislation of the 1930s, resulting in a ‘representation gap’ (Towers 1997). In the United Kingdom, the post conservative government enfeebled the power and role of unions. Such policies undermine the power of collective employees and buttress the management power therefore they can utilize it for even negative motives. There are even some states which encourage the process of collective bargaining. In some European countries like Germany, the industry wide collective bargaining is protected by legislation (Mückenberger 2003). Even International labour organization encourages the role of unions and support collective bargaining. This collectivist cultures poses several serious obstacles in the way of multinational corporations. These unions often give rise to recidivist behaviour and they break several national and business rules and regulations which tarnish the brand image of the organization at local and international level. Over and above that, if you do not fulfil their unreasonable demands than they call out for a strike which breeds several obstacles and bringing a halt to company’s operation. Trivial matters such as holidays and vacation periods are also creating grave impediments for the organizations which are involved in international business. Some countries have their laws which warrant that there should be a period of holidays and no one is allowed to work during those days. For instance, in Muslim countries there are 4 to 5 consecutive holidays for religious rituals such as Eid-ul-Adha and Eid-ul-Fitr. Hence, this can have a drastic implication of the operations of a company. If the demand of a certain product is very high in those periods and human resources are not available to fulfil the demand than it can drastically reduce the revenue that would have been generated by the company. There have also been discriminatory practices in employee regulations across different countries. The table below shows the differences among distinct dimensions across different countries. Types of Discrimination Prohibited Within Selected Countries Country Age Sex National Origin Race Religion Marital Status United States Yes Yes Yes Yes Yes No France Some Yes Yes Yes Yes Yes Greece No Yes No Yes Yes Yes Great Britain No Yes Yes Yes No No Venezuela No No No No No No Canada Yes Yes Yes Yes Yes Yes Hong Kong No No No No No No Japan No Yes Yes Yes Yes No Italy Yes Yes Some Yes Yes No Spain No Yes Yes Yes Yes Yes Belgium Some Yes Yes Yes Yes Yes Netherlands No Yes Yes Yes Yes Yes (Table 1) Source: Adapted from (Pincus & Belohlav, 1996). These discriminatory laws have profound implications on the trades of businesses which are operating at an international level. Countries which are discriminating on the basis of sex stifle the process of innovation in their organizations. Since we can assume that women are as creative as men therefore a deficiency of women labour engenders lack of innovativeness. In some countries such as Belgium, women are not allowed to work at night hence if an organization is operating under dual shifts then it can not operate at a full capacity during night shift. This process causes a shortage of supply and produces an imbalance between the demand and supply of the products. There has also been a growing issue of child labour in developing countries and if such multinational corporation are found in child labour than the media can easily mar the reputation of these organizations at the international domain. Finally, we will be analyzing the flexibility of labour law climates in various countries of the world across different dimensions. The comparative table below illustrates the differences. Here the higher values indicate greater rigidity on the scale of 0 to 100: Country Difficulty of hiring Difficulty of changing work hours Difficulty of firing Firing costs (in weeks of pay) United States 0 0 10 8 Canada 11 0 0 28 Mexico 67 60 90 83 Brazil 67 80 70 165 United Kingdom 11 40 10 25 Germany 44 80 40 80 Russian Federation 0 60 20 17 Japan 33 40 0 12 China 11 40 40 90 India 33 20 90 79 South Korea 11 60 30 90 Table 2 Source: Adapted from (Hansen 2006) Human resource is a strategic and vital corporate asset that provides competitive advantage to the organizations in this competitive arena. However we can deduce from the analysis that international businesses need to recognize, understand and comply with the regulations of the local country in order to escape from the knotty problems. Comprehending the laws and than mapping out effective strategies to minimize there impacts will notch up unprecedented success in the long run for the multinational corporations. BIBLIOGRAPHY Bartlett, C.A. and Ghoshal, S. 1991, Managing Across Borders: The trans-national solution , London Business School, London Hansen, F. 2006, LEGAL LIMITS TO HARMONIZATION, Workforce Management; 85 (7), p. 23 Mückenburger, U. 2003, “German Industrial Relations in a Period of Transition”. Systems of Production: Markets, Organisations and Performance. London: Routledge. Pincus, L. B. and Belohlav, J. A. 1996, Legal issues in multinational business strategy: To play the game, you have to know the rules, Academy of Management Executive, 10 (3) pp. 52-61 Towers, B. 1997, The Representation Gap: Change and Reform in the British and American Workplace, Oxford: Oxford University Press. Read More