Mohit Juyal^J BBA 3rd Year 6th Semester^J IHRM Presentation.pptx

IHRM

1. PRESENTATION OF INTERNATIONAL HUMAN RESOURCES MANAGEMENT ON INTERNATIONAL COMPENSATION & ITS APPROACHES SUBMITTED TO:                                   SUBMITTED BY: Ms. SHRUTI RAWAT                              MOHIT JUYAL                                                                     BBA 3rd YEAR 6th SEMESTER                                                                     Q.ID:- 21080070

2. INTERNATIONAL COMPENSATION

3. Compensation is a key economic issue, which continues to assume an increasingly large share of its operating expenses. HR executives in global firms spend a great deal of time and make a lot of effort in designing and managing compensation programmes , because of their high cost and impact on corporate performance, employees commitment and also their retention. Objectives of International Compensation: Attract employees who are qualified, experienced and interested in international assignments Facilitate the movement of expatriate’s from one subsidiary to another, from home to subsidiary, and back from subsidiary to home Provide a consistent and reasonable relationship between the pay levels of employees at headquarters, domestic affiliates and foreign subsidiaries Be cost effective by reducing unnecessary expenses Should be easily understood and easy to administer

4. APPROACHES OF INTERNATIONAL COMPENSATION GOING RATE APPROACH This is based on local market rates. It relies on comparisons of surveys of the local nationals, expatriates of same nationality and expatriates of all nationalities’ pay packages. In this approach, the compensation is based on the selected survey comparison. The base pay and benefits may be supplemented by additional payments for low pay countries. The key characteristics of this approach are summarised : Based on local market trends and rates Relies on survey comparisons Local nationals (HCNs) Expatriates of same nationality Expatriates of all nationalities Compensation based on the selected survey Base pay and benefits may be supplemented by additional payments for low-pay countries

5. In this approach, the base salary for international transfer is linked to the salary structure in the host country. The multinational usually obtain information from local compensation surveys and must decide whether local nationals (HCNs), expatriates of the same nationality or expatriates of all nationalities will be reference points in terms of benchmarking. For example, an Indian bank operating in London would need to decide whether its reference point would be local U.K. salaries, other Indian competitors in London, or all foreign banks operating in London. With the Going Rate Approach, if the location is in a low-pay country, the multinational usually supplement base pay with additional benefits and payments.

6. The advantages of the Going Rate Approach are, Equality with local nationals Simplicity Identification with the host country Equity amongst different nationalities The disadvantages of Going Rate Approach are, Variation between assignments for the same employees The rivalry between expatriates of the same nationality in getting assignments to some countries Potential re-entry problems in the home country

7. 2.  BALANCE SHEET APPROACH The Balance Sheet Approach to international compensation is a system designed to equalize the purchasing power of employees at comparable position levels living abroad and in the home country and to provide incentives to offset qualitative differences between assignment locations. The balance sheet approach is widely used by international organizations to determine the compensation package of the expatriates. To balance the compensation received for the international assignment with compensation received in the home country, multinational companies usually provide an additional salary. This increased salary includes adjustments for differences in taxes, housing cost, and the cost of basic goods and services.

8. The basic objective is the maintenance of living standards of the home country plus financial inducement by balance sheet approach: Goods and Services: Outlays incurred in the home country for food, personal care, clothing, household furnishing, recreation, transportation, and medical care. Housing: All major costs associated with housing in the host country. Income Taxes: Parent country and host country income tax expenditures. Reserve: Contribution to savings, payments for benefits, pension contributions, investments, education expenses, social security taxes, etc.

9. The advantages of the Balance Sheet Approach are: Equality between assignments and between expatriates of the same nationality. Facilitates expatriate re-entry Easy to communicate to the employees The disadvantages of the Balance Sheet Approach are: It can result in considerable disparities between the expatriates of different nationalities and between expatriates and local nationals. It can be quite complex to administer due to changing economic conditions, taxation etc.