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Designing appropriate compensation packages for local and expatriate employees is a major challenge for an internal HR of a multinational organization. This process requires extensive planning, and informed decision-making. In setting the wages for local and expatriate employees, it is crucial to maintain balance so that an organization does not appear to favour one group. Both local and expatriate employees play a key role in the realization of strategic goals and plans for a company. However, the special circumstances under which expatriates serve their company requires a special approach in setting of wages. The internal HR has to consider several factors that will maintain job satisfaction and performance of employees remains at satisfactory levels.
Key considerations in compensation packages for expatriates concern the nature of employment, duration of contract and legal laws and jurisdiction (Dunning & Lundan 2008, p.315). Thus, as the internal HR for the British multinational food processing company, which is opening new sites in Australia, Russia and India, I will set the wages for British expatriate managers and engineers considering these factors above.
In consideration to the nature of employment, I will set the wages depending on the location from which the managers and engineers will be working. Since the sites will be abroad, the wages will be higher in comparison to those of managers and engineers working for the company’s branch in Britain to cater for special requirements relating to relocation among other costs (Hamilton & Webster 2012, p.143). In addition, I will entitle the expatriate managers and engineers more holidays and minimize their working hours as a means of improving employee morale, which may have suffered due to matters of relocation and cultural barriers.
Wage levels for the expatriate managers and engineers will depend on the duration of their contract. I will ensure that the package for employees on long-term contracts will be more compensative to include aspects such as house allowance, allowance for children’s school fees and travel. Such a comprehensive package is important in motivating the expatriate managers and engineers (Sims 2007, p.94). The wage setting for expatriates on short-term contracts will incorporate most of the elements in the package for long-term-contracts, but exclude considerations for holiday entitlement and allowances for school fees since small periods of work abroad will have minimal impacts on the expatriates’ personal affairs (Kontrimas & Samsa 2006, p.209)
The variation in legal laws and jurisdiction will have some effects on certain affairs of the expatriate mangers and engineers. In this regard, I will ensure their wage setting includes compensation for anticipated shortcomings due to rules and regulations within the country of operation. I will consider local laws regarding the filling of tax returns by expatriates, and tax laws in the country of operation (Brewster & Harris 1999 p.98). Such consideration will ensure proper address of the welfare of expatriate managers and engineers so that they do not feel disadvantaged in comparison to their colleagues working locally. In case the country of operation imposes tax on the regular income of expatriates, I will set higher wages to cushion the expatriate managers and engineers. However, if the law exempts expatriates from taxes on income so that only the company is liable to taxes on gains, the wage setting will exclude compensation on tax returns (Stahl et al. 2012, p.178). This will mitigate high operating costs that may result from instances of double taxation.
Considerations for wage settings for local managers, engineers and manufacturing staff should reflect changes in the local economy and labour industry. In this regard, I will ensure that wage setting consider factors that influence cost of living and thus the levels of responsibility. Wages will directly reflect working hours compensate as per the local market rates. I will incorporate allowances relating to holidays in adherence to provisions of local labour laws. Unlike in the case of long-term expatriates, I will not incorporates elements of compensation such as allowance on children’s school fees since the local employees cannot claim any form of interference on their personal affairs because their location does not change.
Concerning matters of filling taxes on income, I will set wages to provide some form of cushion against upheavals in the economy. However, I will ensure that the level of cushioning does not exempt the local managers, engineers and manufacturing staff from tax obligations stipulated in various local policies and plans (Gitman & McDaniel 2008, p.214). Thus, when taxation levels go up such as in the case of required increase in government funding, I will ensure that wages for local managers, engineers and manufacturing staff remain within acceptable levels to avoid promoting declining levels of job satisfaction and employee performance (Evans & Nelson 1989, p.3). Such considerations are key factors in the realization of strategic goals for an organization both locally and abroad. Matters relating to local laws and jurisdiction are an important consideration even for local employees. This is because local employees, similar to their expatriate counterparts, must work within a scope defined by various rules and regulations in the national and labour laws (Bohlander & Snell 2009, p.786).
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Concerning the duration of contract for local managers, engineers and manufacturing staff, I will ensue that these employees are on long-term contracts with a more comprehensive wage package. Such an approach is important in promoting loyalty and high performance within the organization considering the money invested in creating a skilled and effective workforce of managers, engineers and manufacturing staff (Aswathappa 2005, p.294). However, salary for the local employees will not be as high as that of expatriates since the later faces numerous challenges abroad.
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