There are many significant challenges that face multinational organizations in today’s business world. One such challenge, for global organizations and the human resource department, is effectively managing employee compensation and benefits packages. Managing compensation structures has become an integral part of many organizations that conduct operations in the global market, as there are many considerations for the host country when sending expatriates abroad. It is imperative for organizations to develop global compensation structures that attract and retain quality employees while not impeding operations or diminishing the profits of the organization. This paper will discuss the challenges of global compensation structures for multinational organizations and highlight some issues that arise from maintaining a global employee presence. In addition, this paper will discuss adherence, or lack of, to various United States compensation practices and policies and other general best practices that are recognized globally.
The Expatriate Compensation
The first step for a multinational organization’s human resource department is to develop a global compensation structure that understands the “political, social, legal, and cultural differences” (Haile & Williams, 2011, p. 25) of the countries in which they operate. It is not only essential to have factual knowledge of the local nation’s compensation and benefits best business practices but ensuring that all involved have cultural sensitivity is oftentimes difficult when structuring global compensation packages.
The goal of a global compensation structure is to ensure that the organization attracts and retains high quality employees that are interested in overseas assignments and will exhibit organizational commitment. In addition, the compensation structure must support the overall objectives of the organization and ensure that such compensation packages do not reduce the organization’s profits. A large portion of the value of an organization exists in the “knowledge and skills of the workforce” (Shelton, 2008, p. 56). Therefore it is crucial for an organization to effectively place skilled workers in assignments that will enhance the organization and add value to the company’s global investments. It is important to understand that an expatriate’s pay structure can impact their success which will determine if the placement of this employee will benefit the organization as a whole.
Global Benefit Packages
There are many different approaches that an organization can take when structuring global benefit packages. It is important for the human resources team to remember that different types of plans may be needed for an organization that operates in many countries simultaneously. What works in one country may not work in another, which highlights the need for the human resources team to have an in-depth understanding and comprehensive knowledge base of each country in which their organization...