Compensation and performance management of expatriates

3. Compensation and performance management of expatriates

Global economic conditions have been challenging than ever before. The necessity to move talent around the world – and do it productively and cost effectively - has never been more crucial to successful global strategy. (Maley et al., 2020) In this context it is important for an organization to have an attractive compensation to attract best talents and also to obtain the maximum performance of them for the organization. An organization’s compensation system is the usual means by which employee rewards are planned and administered (Fenwick, 2004). Compensation will not be limited to financial returns but will include both financial and non-financial benefits. According to (Suutari & Tornikoski, 2000) the compensation package would include the following for an expatriate.

 

3.1 Financial Benefits

3.1.1 Base Salary and bonuses

The base salary of expatriates is linked either to the base salary of the home country or the host country and is paid in home country currency mostly and sometimes paid in host country currency as well.

3.1.2 Premium on Foreign Service

Some organizations tend to offer expatriates an additional percentage from the base salary as a premium for accepting foreign service.

3.1.3. Cost of Living Allowance

It includes the difference between cost of living of the parent country and the host country for a similar size family. The percentage of cost of living is calculated and base salary is increased by that percentage.

3.1.4. Housing Allowance

This is provided to make sure that expatriates also have housing facilities and other utilities similar to what they receive in the parent country. The size of the family and the corporate position held would determine the size of the allowance.

3.1.5. Taxation

This includes preventing of the employees earnings from double taxation both in the host country and the parent country. For example a UK expatriate working in China have to pay a number of local taxes in China and will be taxed again for the same income in UK. The Tax management policy could vary depending on the corporate position of the employee, size of the company and number of expatriates. (Suutari & Tornikoski, 2000)

 

3.2. Non-Financial Benefits

 

3.2.1. Health Insurance

The health insurance coverage that is received by an employee could vary depending on the country. For example in China only Chinese receive health insurance where as in UK everyone is covered irrespective of the nationality. To manage this, organizations introduce their own health insurance covers for the expatriate and his family living abroad.

3.2.2. Assistance for the family

When moving to another country the spouse of the employee might find it difficult to find a place of work for them, to provide education for their children and to settle in the country. MNC s provide assistance for these as a part of their compensation package.

3.2.3. Career development opportunities

It is important for ensuring the expatriates that there is an advancement in their career path after arriving to the home country due to their foreign assignments.

 

Conclusion

Although there are number of financial and non-financial benefits offered by MNCs the compensation package enjoyed by a particular employee varies according to his/her position in the organization, the size of the company, gender, nature of assignment, nationality of the employer and the family situation. It is important for the companies to design an attractive compensation package since the compensation management is the system that motivates employees to perform to the standard expected by the organization.

 

References

Fenwick, M., 2004. 12 International Compensation and Performance Management. International human resource management, p.307.available from https://imead.org/wp-content/uploads/2019/02/International-Human-Resource-Management.pdf#page=326 [Accessed 28 April 2022]

Maley, J.F., Moeller, M. and Ting, A.F., 2020. Sustainable expatriate compensation in an uncertain environment. Journal of International Management, 26(3), p.100776. Available from https://www.sciencedirect.com/science/article/pii/S1075425320301113 [Accessed 29 April 2022]

Suutari, V. and Tornikoski, C., 2000. Determinants of expatriate compensation–Findings among expatriate members of SEFE. Finnish Journal of Business Economics, 49(4). Available from https://www.researchgate.net/profile/Christelle-Tornikoski-2/publication/236881145_Determinants_of_Expatriate_Compensation_Findings_among_Expatriate_Members_of_SEFE/links/544f54c70cf29473161c0b3e/Determinants-of-Expatriate-Compensation-Findings-among-Expatriate-Members-of-SEFE.pdf [Accessed 28 April 2022]

 

 

Performance Management of Multi National Organizations

2. Performance Management of Multi National Organizations

The process of performance management in Multinational Organizations involves certain additional factors than a local organization as they have employees from different countries around the world. Performance Management is a process that enables the MNE to evaluate and continuously improve individual, subsidiary unit and corporate performance, against clearly defined pre- set goals and targets (Dowing, et al., 2013).

2.1The staffing strategy of MNC could be of three types;

2.1.1. Parent Country National (PCN)

Staffing from the employees from the country where the MNC is originated. This will allow better communication and control by the parent firm while on the other hand it could be expensive and will demotivate local employees.

2.1.2. Host Country National (HCN)

Host Country is the other country in which a particular multinational operates. Staffing from host country will be relatively inexpensive and encourage local talents while it will be difficult to recruit and will have communication barriers.

2.1.3. Third Country National (TCN)

This involves staffing from other countries in which a MNC operates other than the Parent country and Host country. They will be less expensive than Parent Country National and more familiar with the region on the other hand they will have low attachment to the firm.

In addition to these the global environmental factors could also impact the staffing strategy which was evident specially during Covid 19 pandemic which involved travel restrictions among countries.

2.2Factors affecting the performance management of International Employees

Except staffing from HCN strategies both PCN and TCN staffing would involve international employees. Expatriate managers remain the chief source of employees based in foreign markets (Brewster, et al., 2014) According to Dowing, et al., (2013) following will affect the performance management of them.

2.2.1.Compensation Package

For International employees the compensation package would not be limited to the salary and statutory benefits. It would involve a number of other elements that would prompt a potential employee to accept an offer in another country. These elements would include Salary premium, cost of living adjustment, housing allowance, tax assistance and spousal assistance.

2.2.2. The task and the role of the job

What is expected of the expatriate in the new job assignment will also affect their performance. Satisfaction of IHRM practices and career development opportunities predicted the high performance of their expatriates (Kim & Kamalanabhan, 2021).Therefore it is important for MNC to communicate what the organization expects and how those assignments could develop their career.

2.2.3. Headquarters Support

Expatriates and their families will not succeed unless there is adequate follow through in the form of direct and indirect support from their organization. (Andreason, 2003) Regular feedback on career development through international assignments by parent companies will improve both task performance and satisfaction of IHRM practices. (Kim & Kamalanabhan, 2021).

2.2.4. Host Environment

The external environmental factors of the host country could affect the performance of the expatriates. For example most expatriates of leading Korean MNCs Samsung Electronics, LG Electronics and Hyundai Motors do not consider India as an attractive destination (Kim & Tung, 2013)

·         Political environment – Political parties, Government Policies, Political stability

·         Economic environment – Economic Stability, Inflation

·         Sociocultural environment – underdeveloped infrastructure, languages, cultural diversity

·         Legal environment – Rules and regulations, Labour laws

2.2.5. Cultural Adjustment

Cultural adjustment is how well they are able to function in the new environment to which they are transferred, cooperate with locals, apply their competences and knowledge, learn new things, and cope with uncertainty. (Koveshnikoy, A. et al., 2014).It is important to consider how well not only the expatriate but his family could adopt to the new culture.

Although MNCs turn to staffing through expatriates for key roles of their subsidiaries the extent to which they perform in the host country is impacted by all above. Therefore it is important to consider all of them before making a decision on international assignment since incorrect decisions could incur substantial costs.

 

References

Andreason, A.W., 2003. Direct and indirect forms of in-country support for expatriates and their families as a means of reducing premature returns and improving job performance. International Journal of Management, 20(4), p.548. Available From https://www.proquest.com/docview/233232194 [Accessed 28 April 2022]

Brewster, C., Bonache, J., Cerdin, J.L. and Suutari, V., 2014. Exploring expatriate outcomes. The International Journal of Human Resource Management, 25(14), pp.1921-1937. https://doi.org/10.1080/09585192.2013.870284 [Accessed 27 April 2022]

Kim, H.-D. and Kamalanabhan, T. J. (2021) ‘Task Performance of Expatriates Based on Emissary Model of Global Human Resource Strategy’, Management and Labour Studies, 46(1), pp. 78–93. doi: 10.1177/0258042X20959987.[Accessed 27 April 2022]

Kim, H.D. and Tung, R.L., 2013. Opportunities and challenges for expatriates in emerging markets: An exploratory study of Korean expatriates in India. The International Journal of Human Resource Management, 24(5), pp.1029-1050.https://doi.org/10.1080/09585192.2012.753551[Accessed 28 April 2022]

Koveshnikov, A., Wechtler, H. and Dejoux, C., 2014. Cross-cultural adjustment of expatriates: The role of emotional intelligence and gender. Journal of World Business, 49(3), pp.362-371.Available from https://www.sciencedirect.com/science/article/abs/pii/S1090951613000400 [Accessed 28 April 2022]

 

Introduction to Performance Management

1. Introduction to Performance Management

 

1.1Performance Management

In this dynamic and ever competitive era of the business world organizations have to focus on improving their performance continuously in order to face the challenges. In doing so managing the performance is done through a systematic process of improving individual, team and organizational performance (Armstrong, 2014,p. 331). According to Tabrizi (2020) employees are reporting alarming levels of stress and fatigue as a result of theCovid-19 pandemic indicates its  importance to monitor their performance and to improve them in order for a business to not just excel but also to primarily exist in their fields ,facing global environmental challenges. Microsoft and IBM are examples of organizations which have best performance management systems which indicates how much of an impact could a good performance management system make on the employees of an organization.

 

1.2 The cycle of performance Management

The Continuous process of improving performance by setting individual teams and goals which are aligned to strategic goals of the organization, planning performance to achieve the goals, reviewing progress and developing the knowledge, skills and abilities of the people(Armstrong, 2017) Accordingly performance management can be considered as a cycle with four key steps as follows.

Figure 1 Performance Management Cycle

1.2.1Planning

The initial step of performance management is planning. Planning of performance needs to be carried out according to the Goals and objectives of the organization. It is important for the goals to be Specific, Measurable, Attainable, Realistic and Time Bound as SMART goals in turn fosters a better-aligned workforce and a more transparent work environment. It also helps managers do a better job.(Rimon, 2017,p.p.102-104).In this phase, a personal development plan should be agreed with the employees which should include the actions required to achieve the agreed upon goals. 

1.2.2. Acting

The next phase of performance management cycle is carring out the agreed personal development plan. It is important for organizations to invest in their human capital. The British Boardcaster and telecommunications company Sky’s employee productivity performance has been influenced by the significant capital investments,  while Pearson’s employee productivity has remained below that of Sky and the industry partially  as such investments on employee productivity has not been made(Oliver, 2018, p.p.55-57).Organizations need to carryout various programmes intended to develop employees’ skills ,knowledge and attitudes that are required to achieve the agreed upon objectives hence requires capital investments during this phase of the cycle. The said investments needs to be well planned and organized because poor planning would lead the organization to spend money without achieving desired results.

 

1.2.3. Tracking

Tracking is the continuous process of making sure that performance is in line with the agreed upon personal development plan. It is important that Tracking of the employee productivity needs to be carried out parallelly and continuously throughout the performance management cycle so that expected objectives are achieved. If performance is monitored only at the reviewing phase of the cycle without tracking it might be too late to correct the deviations making the whole process ineffective.

 

1.2.4. Reviewing

 

Reviewing is the final element of performance management where it is reviewed annually, bi annually or within a certain agreed upon time period as if the employees’ performance has been developed as per the set goals. Historically this has been considered as the most important phase of the performance management programme as reviewing is linked to employee benefits and career development opportunities.

 

However although performance management is correctly indicated as a cycle in theory it is important for organizations to consider it as a step by step process. Rather they should make sure that all of the elements of Acting, Tracking and Reviewing of the employee performance is carried out parallel and throughout the year.  Plans should be set considering new trends in the environment and also be reviewed and updated frequently to cater to challenges the environment creates, being in line with organizations broad goals and objectives.

REFERENCES

Armstrong M. (2013) Armstrong’s Handbook of Performance Management, fifth edition. London: Kogan Page.

Clearreview (2020) What is an Effective Performance Management System?(2020 Guide).[online] Available from: https://www.clearreview.com/resources/guides/what-is-effective-performance-management [Accessed:07/04/2022].

Oliver, J.J. (2016), HR at work, The impact of strategic transformation on employee productivity Vol. 17No. 1, pp. 55-57

Rimon,G.(2017) Six surprising truths about how digital transformation will change HR. STRATEGIC HR REVIEW.VOL. 16 NO 2, pp 102-104

Tabrizi, B.(2020) Technology And Analytics. Put Employees at the Center of Your Post-Pandemic Digital Strategy. Harvard Business Review, (October 2020).