Describe and critically evaluate the types of pay and reward systems a multinational company could adopt to remunerate expatriate managers.
Some of the major problems that may come across the way of expatriates while going abroad for the assignments include inter-cultural management, managing the social inclusion of expatriates in the host country, providing standard health benefits, security and education, utilities and incentives keeping the exchange rates, and national/international compensation scale in considering and also facilitating their re-entry within the home country after the completion of the assignment. Thus, the major concern for the multinational corporation is to find out ways that keep the expatriates motivate and retain for the optimal period of time (Reiche, 2011, n.d).
There are some methods that multinational corporations can utilize to manage the problems of expatriates. Some of the most efficacious solutions to the problem of expats can be solved through multicultural trainings, language training and incentive package to retain expatriates. Cultural differences can affect the productivity and performance of the employees. In this situation, multicultural trainings can help expatriates understanding the cultural differences. Likewise, language drills and trainings can also help in overcoming the language barriers. Moreover, organizations can also offer incentives to motivate their performance (Reiche, 2011, n.d).
The two most common approaches adopted by the multinational corporation in order to develop an inclusive pay and reward system for the expatriate managers include the ‘Balance Sheet Approach’ and ‘The Regional Rate/Ongoing Rate Approach’. Other systems that are occasionally adopted including Lump-Sum Payment of the expatriate assignment, Cafeteria Method, and Global Compensation System. No matter what systems a multinational adopts, the primary objective of each of this system is to offer the maximum level of assistance and ease to the candidates with the best possible package. However, by applying the two major types of the expat pay and reward systems adopted by multinational i.e. the ‘Balance Sheet Approach’ and the ‘Regional Rate/Ongoing Rate Approach’; it must not be overlooked that each of these approaches has distinguished features and constrained benefits. Analyzing them critically, we can distinguish the two on the basis of their pros and cons to the business (Reiche, 2011, n.d).
Like for instance, the ‘Balance Sheet Approach’ aims at maintaining the living standards of the home country for the expatriate while managing the financial enticements for the business. In other words, it is all about facilitating expats with the similar purchasing power as they used to uphold within the home country so that they can maintain their existing lifestyle in the host country. Another considerable factor of this approach is the focus on harmonizing the compensation of expatriates with their peers in the home country and not with their colleagues in the host country. These factors usually tend to result in developing disparities among the expats of the different nation as well as between the expats and local employee (Reiche, 2011, n.d).
When in Rome, Do as the Romans do. This is what the Regional Rate/Ongoing Rate Approach is all about. On contrary to the balance sheet approach, the Regional Rate/Ongoing Rate Approach focuses on associating the remuneration of the expatriates with the compensation structures and pay scales of the host country. It primarily takes into account the local compensation rates and market levels for deciding over the packages. In this way, it aims at treat the expatriates equally with the host country employees. The approach is easier and simpler to manage and it eradicates the barrier of identification for the expats while working in a foreign country. Moreover, it cultivates the equality among the expatriate from various nations while also promoting the workplace harmony and impartiality. Apparently, the approach also has few negative aspects as well. For instance, it does not address the variations of foreign assignments for the same expat and also does not address the variations of same nationalities in diverse countries. It also creates potential problems of the re-entry after the completion of assignment (Reiche, 2011, n.d).
References
Reiche, S., 2011. Expatriate Compensation: A Review. IESE Business School. University of Navarra.
