The Factors that Influence The Global Compensation Approaches

Global compensation approaches are normally determined by taking into consideration issues such as assignment objective, costs, organizational compensation philosophy, international employee demographics, standardization, internal equity with locals and international designees within the company and the market, and home-country benefits. A key factor of how organizations manage international assignment rewards lies within the approach that is adopted to design a compensation package.

The composition of the expatriate workforce is evolving, with greater proportions of global nomads compared to traditional expatriates and a more abundant international talent pool available. Therefore, it is incumbent upon international benefits managers to drive cost regulation through analysis of the expatriate population; streamlining the use of home country benefits. At the same time, developing regulations necessitate review of each case to ensure that tax efficiency and legal compliance requirements are met (Consistent Flexibility, 2013).

I would elect to utilize what is known as a home based structure, which aims to ensure that the value of the package for the expatriate parallels that of the home country. Dependent on the length of the assignment, what the employee would earn if doing the same job in the home country may need to be factored into this equation. This approach uses the package that the employee would receive in the home country as a basis for the corresponding international assignment reward. Several items are then added to this, such as: cost of living adjustment, cost of housing, taxation, and allowances that are relevant to the assignment. It is also common for overseas employees to receive allowances for items such as school and travel expenses in addition to the host based pay.

As Harzing and Pinnington (2011) denote, “Discretionary payments are also given to expatriates in order to attract and retain those most qualified. There are three goals of discretionary allowances. The first objective is to promote a sense of well-being among expatriates and their families, the second is to maintain their standard of living, and the third is to prevent their purchasing power from declining”.

For example, if the cost of living in the country where the employee will be employed is considerably higher, an adjustment will be made to reflect this; if the employee is expected to procure their own living space, then an amount to offset this amount will be added. In response to any issue of inequality, HR practices should focus on increasing the transparency of pay practices to clearly indicate linkages between work inputs and compensation; anticipate questions and be prepared to provide details of the procedures used to determine varying pay packages; and communicate these differences to emphasize the associated challenges faced and sacrifices made by expatriates.

In many cases specific skills necessitate placement to maximize efficiency and optimize business operations. If it is decided that an expatriate is best suited for the assignment; it is especially prudent to allocate employee rewards to grant compensation for any disruption associated with the move, so that there will be no loss suffered as a result of the placement.

Therefore, it is of high priority for businesses to appraise the costs and risk of an international assignment prior to any selection process, to ensure that the benefits outweigh the expense. As Mahajan (2011) indicates, “Compensation can have different meanings for different individuals. Satisfaction from compensation can result only if it meets those subjective definitions. Moreover, national culture does in fact play a significant role in shaping individual subjective definitions”. Decisions about which compensation structure is most suitable for the location, business, and employee will designate not only the attractiveness of the assignee package, and its acceptance, but also will comprise several other aspects such as equity with other international assignees in the organization, market standards, ease of administration, consistency, and repatriation. Inevitably, the reward package must be both appealing and beneficial not only in terms of salary; considerable advantages of an international assignment include personal development, career prospects, and expansion of knowledge and expertise.