Expatriate Remuneration

Table of Contents

INTRODUCTION3

BACKGROUND OF THE STUDY3

SIGNIFICANCE OF THE PROBLEM4

Research Aims And Objectives8

LITERATURE REVIEW9

Aim and objectives of the review9

Expatriate compensation: a closer look at the fundamental issues9

RESEARCH METHODOLOGY11

Company Background11

MEASURES12

LIMITATION OF THE RESEARCH13

Salient contextual factors affecting expatriate compensation13

The Expatiate Compensation Balance Sheet19

Compensation of Host-Country National Managers22

CONCLUSION24

APPENDIX29

Expatriate Remuneration

Introduction

Background of the Study

A multinational corporation (MNC) is usually defined as a company with operations in more than one country (Porter, 1990). This means that an MNC has significant assets in terms of plants and/or offices in one or more foreign nations and derives some of its profits from these operations (French, 1998). The growth of the global economy has increasingly pushed MNCs into all corners of the world. The impact of the growth of international economy has become a major force in business in general and in human resource management in particular. These practices are important realities faced by MNCs doing business overseas. MNCs must coordinate policies and procedures that effectively balance the needs and desires of host country nationals (HCNs), parent country nationals (PCNs) and third country nationals (TCNs). Compensation is one of the most complex areas of international human resource management. Pay systems must conform to local laws and customs for employee compensation while also fitting into global MNC policies. It is also important for MNCs to consider carefully the motivational use of incentives and rewards among the employees drawn from three national or country categories. International business has been around for centuries. However, the growing impact of MNCs is a relatively recent phenomenon. Most big MNCs operating overseas during the 1950s and 1960s were Americans. In the 1970s and particularly in the 1980s the nature of international business operations became global in nature. MNCs are a natural outcome of the global economy and they are playing an increasingly major role in the global economy. 

Significance of the problem

MNCs' HR managers are facing the complex components of international benefits and compensation every day as they attempt to manage human resources across national boundaries (Cascio, 1998). One of the most critical determinants of an MNC's success in a global venture is the effective management of its human resources. This success depends on the linkage between IHRM and an MNC strategy (Welch, 1994). A successful compensation strategy involves keeping expatriates motivated while meeting MNC goals and budgets. MNCs' HR managers must build an expatriate pay package by: (1) meeting corporate goals at home and abroad, (2) keeping expatriates motivated, and (3) complying with company budgets (Latta, 1998). This strategic perspective on the linkage between IHRM and strategy is so critical for an MNC's success. An MNC that can develop a highly trained, flexible, and motivated international workforce is at an advantage relative to its competitors, especially if that workforce can be used strategically to support corporate goals (Mcfarlin & Sweenely, 1998). It is essential that there is synergy among business objectives, staffing, and compensation. A sound expatriate strategy is a key to international business success and should be a major interest of senior management (Reynolds, 1997). This globalization of business brings a host of management challenges concerning international benefits and compensation. MNCs' HR managers are focusing on their strategic objectives and developing a comprehensive compensation plan, in terms of considering base pay, short and ...