Understanding International Compensation
International compensations is the provision of monetary and non-monetary rewards – including salaries, benefits, long term and short term incentives – valued by the employees in the company’s bid to retain this personnel in accordance with their relative contribution to the company’s performance. These have become significant in today’s global marketplace. Determining international compensations is however challenging and often depends on contextual factors.
Contextual Factors That Affect International Compensation
The following are some of the contextual factors that influence international compensation:
Culture: Cultural differences exist where compensations are carried out internationally. A benefit highly valued in one country might be useless in another country. These differences are normally affected by beliefs, attitudes and values involved with different cultural heritages. Notably, studies have found that culture influence employee motivation (Flisak & Bjerkhage, 2015). In other words, culture influences employees’ preferences for compensation.
Economic Factors: Many distinctions are experienced from country to country. Different countries have different economic factors affecting them that are caused by factors including influence of politics and power, distribution of wealth across the country and sometimes unforeseen events e.g. rapid changes in rates of inflation (Al-Kassem, 2015). This would affect the compensation plans involved.
Taxation: Different countries have taxation policies. The compensation and benefits involved in these countries must meet each individual country threshold (Al-Kassem, 2015). This would also affect the compensation and remuneration plans used in different countries.
Dynamic Labor Ability: Different countries showcase a variety and different labor experiences. The remuneration involved in a company is always in accordance to services rendered by the human capital, due to the diversity involved in this, this would largely affect international compensation plan (Al-Kassem, 2015).
The Impact of Unions on Wage Determination
In recent years, there has been a significant decline in trade union membership.Regardless, the trade unions still have a significant impact on a number of elements of labor. Wage determination is one such an area in which labor unions remain significantly relevant (Madheswaran & Shanmugam, 2003). Below are some of the aspects of wages over which trade unions still have a significant influence:
General wage and benefit: The union’s bargaining strength affects the wages of employees across the globe. The mass use of the solidarity in union obligation towards workers welfare creates a pool of bargaining power through which the union adversely affects workers’ wages and benefits in accordance to the workers contribution to the companies they work in (Madheswaran & Shanmugam, 2003). Even workers who do not belong to this union also stand to benefit from the bargains.
Wage Structure: The trade unions solicit for their member’s payment structure through bargaining for them according to job levels (Madheswaran & Shanmugam, 2003). These structures are always championed by trade unions and organizations.
Wage and salary policies: The unions act as negotiators between workers and employers when setting policies that govern remuneration and benefits (Madheswaran & Shanmugam, 2003). These policies affect compensation of workers in those industries involved.
A lot has changed in the labor market. Trade unions, for instance, have grown less popular, although they still play a significant role in wage determination: wage and benefit, wage structure, and wage and salary policies. However, trade unions are more relevant domestically rather than internationally. In this regard, other contextual factors (such as culture, economic factors and taxation, among others) are more relevant.
Al-Kassem, A. (2015). Contextual factors of compensation and benefits management to expatriate workforce. International Journal of Academic Research in Progressive Education and Development, 4(4): pp. 110-123
Flisak, D., & Bjerkhage, T. (2015). How culture affects the motivation of employees: A study in differences in motivation between Swedish and Chinese employees. Bachelor Thesis: University of Gothenburg, School of Business, Economics and Law, June.
Madheswaran, S., & Shanmugam, K. R. (2003). Wage differentials between union and non-union workers: An econometric analysis. Paper Presented at the Far Eastern Meeting of the Econometric Society at Yonsei University, Seoul, Korea, July 4-6