Global Reward Management Flashcards
(37 cards)
Why does reward matter?
It matters for
- Attraction: good fit for organization?
- Retention: Good salary is helpful for retaining human capital in organizations?
- Motivation: Rewards can be a source of extrinsic and intrinsic motivation for individuals.
Top attractive drivers for employees
- Base pay/salary
Top retention drivers for employees
- Base pay/salary
The Global Brain trade
Based on the Global Brain trade, some people tend to leave their country (for e.g. India) yet some people enter another country (e.g. the USA) based on the pay offered.
Aspects of pay
- Level
- Structure
- Basis
- Benefits
- Administration
- Level of Pay
How much should we pay people?
- Structure of Pay
How is the pay structured across levels?
How do people move up?
Is pay relative between departments?
- Basis of pay
Is pay based on: seniority, performance, profits, or something else?
- Benefits
How much benefits are there which are on a non-cash basis?
- Administration
How do we communicate pay? Who makes all the decisions?
1st aspect of pay: Pay level
- Should pay package be more “home-based” or more “host-based”?
Choices in expat reward design.
- “No worse off” than in home country?
- Maintain a similar standard of living as in home country?
- Consistent with peers in the host country?
- Simplicity of administration?
What factors should we account for informing expat reward design?
Based on:
- Localize or repatriate?
- So do we want to keep them for a long time, or a short period of time? - Desirability of the assignment?
- Did employer initiate it, or did the employee initiate it?
- What’s in it for them?
- Do we need to compensate for hardship or danger? - Financial costs for the employee?
- Costs of living at home (how long is the assignment for? Long or short term?)
- Costs relating to their personal situation? (e.g. family) - Factors discussed in class:
- Standard of living in the host country (e.g. costs for food, rent etc..)
- Strategy of the company (e.g. individual based pay or group based incentive)
- Additional compensation (e.g. healthcare in the USA)
Net Minimum wages
Australia has the highest minimum wages per hour after taxes.
National Salary comparison for middle management position
For Switzerland & Hong Kong, gross pay and net pay is very high as compared to other countries.
Determining the pay level of expats
- Budget system: Aims to assess the costs incurred in home and host countries combined.
- Market rate: Companies pay the market rate for nationals in the host country.
- The Balance Sheet Approach: The difference between the two locations is assessed so employee has the same purchasing power as at home.
Example: Global Foreign Exchange changes in UK and EU pre-&post Brexit
- There was a 13,000 pounds increase from the pre-Brexit (2015) to post-Brexit (2016) when moving from the UK to the EU.
- Yet while moving from EU to UK, there is a drop of 20,000 pound sterlings from the pre-Brexit phases to post-Brexit phase (2016).
2nd & 3rd aspect of pay: Structure and Basis of Pay
For these aspects of pay (structure & basis), Hofstede’s cultural dimensions are used. They are:
- Power distance
- Individual vs Collectivism
- Masculist vs Feminism
- Uncertainty avoidance
- Short-term vs Long-term orientation
- Indulgence
Example: Manufacturing facilities in same MNE
- Pay basis: In the US, it maybe more performance-based pay system (individualism) as compared to Germany.
- There is greater pay inequality due to performance in the US, than Germany.
- In Germany, pay basis may be based on the length of service.
Example: Manufacturing facilities in same MNE
Broadband system:
US (less pay scales) → more flexible and individualistic
Germany (many more pay bands) → more uncertainty avoidance, hierarchical approach and clear, structured career promotion process.
Example: Manufacturing facilities in same MNE
Downside of US: - Less clear guidelines and lack of transparency. - Open to bias and unfairness. Downside of Germany: - Cannot negotiate your pay - Less flexibility
Chiang & Birtch paper (HK & Finland example)
- Studied bankers in Hong Kong and Finland
- In HK, there is a higher preference for financial incentives in general.
- In Finland, there is more preference for intrinsic rewards and competency-based incentives.
- Main takeaway: We shouldn’t overstate cultural differences because there might be more similarities in cultures than differences in the financial sector.
4th aspect of pay: Benefits
How much in non-cash benefits do you receive?
Example: Paid Parental Leave: U.S. vs. the World
In the US, there is a very low rate of parental leave as well as state provisions for healthcare. Yet they have many benefits offered which are not taxed and are highly prized.
In Europe, there are better state provision of benefits (e.g. healthcare) than elsewhere in the world).
In Nordic countries, France: Generous childcare means less prized as a benefit. Prefer to receive cash to use as they wish.
In China, Japan, Korea: Tax levied only on base pay, so bonuses and benefits have greater financial value.
Bonache & Fernandez, 1997: Expatriate compensation and its link to the subsidiary strategic role: a theoretical analysis.
- If the knowledge acquired abroad is of high relevance and value, the expat assignment will have a positive impact of their career with low preference of extrinsic reward, and high preference of intrinsic rewards.
- If the knowledge acquired abroad is of low relevance and value, the expat assignment will have a repatriation issues, with high preference of extrinsic reward, and low preference of intrinsic rewards.
- If the knowledge acquired abroad is of high relevance and low value, the expat assignment will have an uncertainty impact, with medium preference of extrinsic reward, and medium preference of intrinsic rewards.
