Human Resource Management International Pay Systems - Essay Example

Running Head HUMAN RESOURCE MANAGEMENT INTERNATIONAL PAY SYSTEMS Human Resource Management International Pay Systems National compensation systems differ in America and Japan based on different laws and regulations adopted by these countries. The problem is that pay directly affects what individuals can do off the job, their family's standard of living, the extent to which they can travel, and the leisure time activities in which they can indulge. Pay indirectly conveys to workers the value an organization places on them and the status they have achieved. When workers are paid less than they think they are worth, they are likely to reduce their efforts in order to restore a sense of equity in their relationship with the employer, a fact well demonstrated by psychologists in their studies of equity theory (Schuler, 1998). Conversely, there is evidence that paying workers bonuses based on organizational performance can markedly increase their effort and performance (Bateman and Snell 2004). Pay can thus be a powerful motivator in encouraging many workers to higher performance and greater growth. Nevertheless, effective pay systems--satisfactory for the worker as well as productive for the employer--are more the exception than the rule. External wage comparability is regarded as a means of achieving a degree of equity vis--vis other employees outside the employing organization. The assumption is that wages in the organization should be comparable to those outside it. The focus is on the going rates for comparable work with other employers. If Robert Lord works in Japan, his pay would differ from those of the same age. There are first the components of what is paid out in respect of the work done in any one pay period. There is commonly a basic time-rate, but this may account for only a minor part of total earnings, for these may also contain forms of payment by results or bonus on performance; payment for overtime; premiums for shift, night, or weekend work; other allowances for work in special conditions; allowances for tools, clothing, or travelling time; and allowances for seniority or age (Schuler, 1998). Robert Lord's pay would involve housing, healthcare, transportation and premiums. Also, the company will have to spend additional resources on language training and his family. There remain amenities that are made available to employees generally, but are not provided in specified amounts to any one employee as part of his agreed and enforceable terms of employment. These amenities include subsidized canteens and recreational and educational facilities; medical services; contributory pension or life insurance schemes in which the participation of the employee is voluntary; and sale of the firm's own product to employees at concessionary rates. This different is equitable because the company will have to create favorable and comfortable conditions for R. Lord and his family abroad. Allowance must be made for the boundaries between the groups of occupations having been drawn differently in the various countries, but this will hardly account for differences as great as we find when we run our eyes along the bottom row and the top. But pay differentials are not the sole or very possibly even the main means by which the required allocation is sought in practice. There are also administrative incentives and pressures, which in Poland have been described as 'the long-standing policy of planned recruitment, the training of cadres and the planned employment of persons graduating from higher and secondary schools, housing policy, and social policy (Bateman and Snell 2004). In several years spent in Japan, Robert Lord would lose his connections and relations in his home country. The company would have to support him and help to adapt to new environment. In 3-5 years, the company's structure and design, climate and resources would change significantly, so the 'old' workplace would be alien to R. Lord. The company would have to support Lord and his family to relocate back to the USA (Schuler, 1998). Pay for performance is considered a means of achieving equity through adjusting the individual's pay to his contributions. Here, attention concentrates on those means that can serve for evaluating these contributions--a variety of measures focusing on employees' inputs such as seniority, education, skill level, or his outputs and performances. Moreover, it is widely recognized that, to make wage comparisons an effective tool in a pay policy aiming at pay fairness, much factual information is needed on the comparison referents used by employees, which employing organizations. Policies aimed at achieving a measure of pay fairness are thus shaped in practice through a process of cooperation and conflict between the employing organization and the employees' representatives. Both sides, though close to the scene, are guided in their dealings by their own beliefs about pay fairness rather than by well-founded factual knowledge about the employees' pay-fairness notions. These notions, which in principle are supposed to guide the policies aiming at a measure of pay fairness, are in practice largely hidden from their eyes (Brayer-Hess and Linderman, 2002). There is a significant difference between Japan and Euro-American countries regarding the structure of unionism. In Japan, trade unions have a crucial impact on compensation and pay system of their employees (Schuler, 1998). While crafts unions and/or industrial unions, whose members consist of workers who engage in the same occupation and/or work in the same industry, are common in Europe and North America, enterprise unionism is quite common in Japan. Thus, it is important to discuss why and how enterprise unionism differs from craft unionism and/or industrial unionism, and several economic and social characteristics of unionism in Japan (Brayer-Hess and Linderman, 2002). Enterprise unionism implies that employees in one firm organize their own union based on their initiative. All employees who are not on the management side and who are permanent regular workers in the firm can participate in the union, although some differences appear between closed-shops and open shops. About 90 per cent of unions are closed-shops. Thus, it is true that union membership is virtually compulsory if there is a union (Reynolds, 1995). The Japanese firms generally have to take account of the market only when engaging new entrants: once a man is hired, the total pay due for the whole working life of a man of his quality could be allocated to the successive stages of his career without much need to have regard to what was being paid for his kind of work in other firms, or to the match between what he was getting and the value of his work to the firm at any one time. In fact each man's basic wage or salary rose annually, while from time to time, according to his merit but without regard to the work he was doing or post he held, he was advanced to a higher grade. There were recognized maximum ages by which the worker was assured of reaching a certain grade. In both ways pay was thus made to rise with age, which together with merit was seen as conferring status (Reynolds, 1995). The connection between relative pay, place in an organization, and self-respect appears at its clearest wherever there is a chain of command, in management, the armed forces, and administration generally. For most people it is as incontestable that someone who has authority over others must in the nature of things be paid more than they, as that any two sides of a triangle are together greater than the third. At first this seems a strong case of status determining pay. But the principle that higher authority must have higher pay is not given categorically; it rests rather on the premisses, first, that this authority can be exercised efficiently, and can command the respect of subordinates, only if those in whom it is vested are of greater capability; and, second, that greater capability should and generally does receive higher pay (Schuler, 1998). The social contract protects international and domestic employees from discrimination and unequal pay. But this argument concerns only the rank order, and not the size of the differentials between the ranks. It may be contended that these are set as status symbols. If we suppose that executive skill and capital are co-operant factors in producing profits (i.e. a given degree of skill can generate more profit the greater the value of the resources over which it is exercised), it follows that the marginal product of an executive would have a strong positive association with the value of the resources under his control; i.e. with his 'scale of operations'. For this purpose it is irrelevant that pay takes the form of purchasing power, and equally that most of the amount by which the top salaries rise out of the ruck is lopped off by tax (Reynolds, 1995). What matters is that the high salary distinguishes the recipient as bearing no less high responsibility. It is an announcement to the world of the exacting requirements of his office, and an assurance to him that his energy and ability in meeting those requirements are recognized. In this it is like badges of rank in the armed forces, and the familiar 'status symbols', such as office furniture or access to particular dining-rooms, by which grades are distinguished in civilian organizations (Schuler, 1998). As for regular working hours, the effect of the voices of employees in union firms is negative with statistical significance, while it is negative but statistically insignificant in non-union firms. The stronger the voices of employees in union firms, the shorter are the working hours in these firms. The above result is not observed in non-union firms (Reynolds, 1995). Negative selectivity is seen because the positive coefficient is obtained at the selection variable in union firms. Also, the coefficient is significant statistically. The negative coefficient in non-union firms, however, is not significant. Thus, it is impossible to assert any selectivity with confidence. A similar result is obtained for severance payment, namely the higher the voices of employees in union firms, the higher the amount of severance payment (Reed, 2001). In general, both expatriates and national managers receive equal pay, but expatriates are paid additional money for housing, transpiration, medical services and family support. Such rates of pay are fixed by custom, administrative decision, or negotiation. In all these processes the principle that gradations of status must be marked by differentials of pay provides a guide to actual rates and a basis of agreement (Reed, 2001). The familiar objection of the skilled manual worker to a rise in the pay of the unskilled that he does not share cannot arise from any reduction in his purchasing power, but does express resentment of a reduction in the recognition accorded to his skill. In this way, relative pay neither confers status nor is conferred by it, but is an announcement and confirmation of status. The same customary association finds even readier application to those occupations or employments whose pay, within limits, is insulated from the forces of the market, and is little influenced by changes in the availability of or demand for the labor concerned (Schuler, 1998). Following Brayer-Hess and Linderman (2002), there is a low involvement of employees and trade unions in compensation systems for cross border organizations. In this situation, the social judgment depends on the economic, or has an economic component, might be maintained on the ground that our admiration for the qualities that attract high status really depends no less than our willingness to pay for them on their being scarce. If in the course of social development the rare qualities of skill, expert knowledge, and creativity become less scarce, the relative pay they command will fall. This raises the whole question of the basis of our admiring judgments (Reed, 2001). Also, this issue carried here to an extreme has already been raised in a milder form by the extension of secondary and tertiary education. Time will show whether certain qualities will always be seen as admirable in themselves, however common they may be, so that as more people come to possess them the status they attract will persist although the pay they command falls: or whether to excel is essentially to be exceptional, and rarity is an essential condition of high status. References 1. Bateman, T.S, Snell, S. A. (2004). MANAGEMENT: the New Competitive landscape. 6th edn., McGaw Hill Irwin. 2. Brayer-Hess, M., Linderman, P. (2002). The Expert Expatriate: Your Guide to Successful Relocation Abroad; Moving, Living, Thriving. Intercultural Press Inc.,U.S. 3. Reynolds, C. (1995). Compensating Globally Mobile Employees: Approaches to Developing Expatriate Pay Strategies for the Evolving International Corporation. Worldatwork. 4. Reed, A. (2001). Innovation in Human Resource Management. Chartered Institute of Personnel and Development. 5. Schuler, R. (1998). Managing Human Resources. Cincinnati, Ohio: South-Western College Publishing, Read More