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Chapter
16
McGraw-Hill
International
Pay Systems
Learning Objectives
1.
2.
3.
4.
5.
16-2
McGraw-Hill
16-3
Understanding
international
compensation begins with
recognizing variations
(differences and
similarities) and figuring
out how best to manage
them.
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16-4
Managing Variations
How
Exhibit
Exhibit
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16-5
16-6
Individuals
Employment Relationship
Government
Individuals
Organizations
Unions
Union Federations
Individual Employers
Employer Consortium
Social Contract
McGraw-Hill
16-7
SOCIAL
CONTRACT
Highly
Centralized
Localized
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Argentina
Brazil
Canada
France
Hong Kong
Mexico
Singapore
U.K.
U.S.A.
Local
Systems
Czech Republic
Germany
India
Israel
Japan
Korea
Slovakia
Slovenia
Sector/Industry
-wide Systems
PAY SETTING SYSTEMS
Austria
Belgium
Cuba
Hungary
Poland
Sweden
Nationwide
Systems
16-8
Characteristics of Culture
Often
Involves
Rooted
Influences
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16-9
Assumption
Job
of a global manager
Search
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Hofstedes Cultural
Dimensions
Power
Distance
Uncertainty
Avoidance
Individualism
Masculinity
Long-term
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16-10
Collectivism
Femininity
Short-term
2005 The McGraw-Hill Companies, Inc. All rights reserved.
Exhibit
16-11
Exhibit
McGraw-Hill
16-12
McGraw-Hill
. . . is made up from
the salary paid
directly to the worker
before deductions . . .
. . . and what an
employer pays in
social insurance and
labor taxes.
France
$17.97
$12.36
$5.61
45.4%
Germany
$28.28
$20.94
$7.34
35.1%
$14.34
$3.90
27.2%
Japan
$19.37
$16.52
$2.85
17.3%
Britain
$15.47
$13.47
$2.00
14.8%
McGraw-Hill
16-13
Factors Affecting
International Pay
Ownership
Managers
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16-14
autonomy
16-15
Comparing Costs
Factors
Standard of living
costs
Purchasing power
Exhibit
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Internal
Alignment
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United States
16-16
Germany
Long-term focus
High commitment
Egalitarian internal
fairness
Flexible workforce
Control cash flow with
bonuses
Long term
High commitment
Egalitarian fairness
Fewer levels
Larger pay differences
Many levels
Small pay differences
Highly trained
Cost control through
tariff negotiations
Employee
Contribution
McGraw-Hill
United States
16-17
Germany
Market determined
Tariff based
Same as competitors
Bonuses an increasing
percentage of total pay
Tariff negotiated
bonuses
Increases based on
individual, unit, and
corporate performance
Smaller performance
bonuses for managers
Disadvantages
McGraw-Hill
United States
Supports commitment
and security
Greater predictability
for companies and
employees
Flexibility person
based
Supports performance
competitor focus
Costs vary with
performance
Focus on short-term
payoffs (speed to market)
16-18
Germany
Supports commitment
and security
Greater predictability for
companies and
employees
Companies do not
compete with pay
Inflexible; bureaucratic
High social and benefit
costs
Not a strategic tool
16-19
Business
Operate
independently of corporate
headquarters
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16-20
(continued)
Exporting
One
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16-21
(continued)
16-22
Focus
16-23
Types of Expatriates
Expats
Third
Local
Advantages
of hiring LCNs
Advantages
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Objectives of Compensation
and Benefits for Expatriates
16-24
Attract
Provide
Maintain
Take
Facilitate
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Elements of Expatriate
Compensation
Salary
Housing
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16-25
Taxes
Allowances
and
Premiums
2005 The McGraw-Hill Companies, Inc. All rights reserved.
16-26
Financial Allowances
Family Support
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16-27
Employees on overseas
assignments should have same spending
power as they would in their home country
Home
Objectives
Ensure
Ensure
Minimize
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16-28
Base-country currency
McGraw-Hill
Relocation
Bonus
$1,500
Base-country salary
$7,000
Taxes
$1,000
Taxes
$2,000
Housing
Housing
$2,000
$700
Goods and
Services
$2,000
Goods and
Services
Reserve
$1,000
Reserve
Allowances
paid by
company
Other Approaches:
Compensation for Expatriates
Negotiation
Localization
Lump-sum/cafeteria plan
McGraw-Hill
16-29
Borderless World--Borderless
Pay?
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16-30