Course

Year

: J0822 Compensation and Performance Management

: 2010

International Pay System

12th Meeting

Milkovich/Newman: Compensation, Ninth Edition

International Pay
Systems

McGraw-Hill/Irwin

Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Managing Variations
How

people get paid around the world depends

on differences (and similarities) in the following
general factors
Economic
Institutional
Organizational
Employee

16-4

Variation in International Pay Practices

Social contracts

Cultures

Trade unions

Ownership and financial markets

Managers autonomy

16-5

The Social Contract

Viewed as part of the social contract

Employment relationship is more than an exchange
between an individual and an employer
It includes
The government
All enterprise owners
All employees

Relationships and expectations of these parties

form the social contract
16-6

Comparing Costs
Factors

affecting wage comparisons

Standard of living
costs
Purchasing power
Working time required
16-7

Why Expatriates Are Selected

16-8

Elements of Expatriate Compensation

Salary

Housing

Taxes

Allowances
and
Premiums
16-9

Common Allowances in Expatriate Pay

Packages
Financial Allowances

Social Adjustment Assistance

Family Support

16-10

Balance Sheet Approach

Premise Employees on overseas assignments

should have same spending power as they would in
their home country

Home country is standard for all payments

Objectives
Ensure cost effective mobility of people to global
assignments
Ensure expatriates neither gain nor lose financially
Minimize adjustments required of expatriates
16-11

Other Approaches: Compensation for

Expatriates

Negotiation

Localization

Modified balance sheet

Decrease allowances

Lump-sum/cafeteria plan
16-12

Borderless World--Borderless Pay?

Corporations attempting to become globally

integrated enterprises, are creating cadres of
globalists:
Managers who operate anywhere in the world in a
borderless manner

To support a global flow of ideas and people,

companies are also designing borderless, or at
least regionalized, pay systems
Testing ground for this approach - European Union

16-13