OBJECTIVES OF INTERNATIONAL PAY SYSTEM IN COMPENSATION: It can be extremely expensive to live in some countries. Therefore, determining equitable wage rates in many countries is not a simple matter of equality in pay. Most expatriate compensation plans are designed to achieve four major objectives: 1. Attract employees who are qualified and interested in international assignments. Thus, the compensation policy works to attract and retain staff in the areas where the multinational has the greatest needs and opportunities. 2. Facilitate the movement of expatriates from one subsidiary to another, from home to subsidiaries, and from subsidiaries back home. To achieve this policy must be competitive unrecognize factors such as incentives for Foreign Service, tax equalization, and reimbursement for reasonable costs. 3. Provide a consistent and reasonable relationship between the pay levels of employees at headquarters, domestic affiliates, and foreign subsidiaries and 4. The policy must be made cost-effective by reducing unnecessary expenses. It must give due consideration to equity and ease of administration. Besides the above major objectives, the international employee will also have a number of objectives that need to be achieved from the firm’s compensation policy. Methodology The main international payment methods used around the world today include: a) Cash in Advance b) Letters of Credit c) Documentary Collections d) Open Account e) Consignment Cash in Advance Also known as pre-payments, cash in advance is as it sounds. The buyer completes the payment and pays the seller in full before the merchandise is delivered and shipped off to the buyer. Letters of Credit A Letter of Credit is one of the most secure international payment methods for the importer and exporter as it involves the assistance of established financial institutions such as banks as an intermediary and a certain level of commitment from both parties. Documentary Collections Documentary collections is a process in which both the buyer’s and seller’s banks act as facilitators of the trade. Open Account Under Open Accounts (also known as Accounts Payable), merchandise is shipped and delivered prior to payment, proving to be an extremely attractive option for buyers especially in terms of cash flow. Consignment The consignment process is similar to that of an open account whereby payment is only completed after the receipt of merchandise by the buyer. Recommendation Efficiency *More flexible compensation tools to simplify administration and less effort to adapt to the current rigid system. *Clarifying how employees are compensated and linking compensation to job performance should improve organizational performance and efficiency. *Formal compensation analyst personnel will provide more efficient determination of market‐based compensation Flexibility and Responsiveness *Linking employee pay to the marketplace will make the system more responsive to institutional need. *Flexible compensation tools will allow us to more accurately meet resource needs. *A new system should be flexible enough to adjust as needs change. Alignment *Flexible compensation tools to support recruitment of needed staff. *Compensation linked to employee performance to encourage employee participation and employee development over the employee lifecycle. *Compensation that recognizes employees based upon the marketplace for their current competence which should also encourage staff to develop skills to advance their compensation and at the same time benefit the organization. *Compensation analyst infrastructure will assist in aligning compensation structure with other universities and/or private sector as applicable for the university to remain competitive for talent. Consistency *The compensation system tools should be available across for all employee categories. The particular compensation system tools should be applied in a way that is appropriate for the job responsibilities. In the current system, different tools are available for different employee categories. Transparency *The current system is very complex. It is difficult for employees to understand how their compensation is determined. Clear compensation practices tied to identifiable markets and employee performance should improve employee understanding of how their compensation is determined. Clear compensation policies properly applied could leverage compensation as a tool to help encourage employee job performance. An accountability chart will be utilized and maintained so that all stakeholder groups are aware of their role and how compensation is administered. References Dougherty, C., “Young Women’s Pay Exceeds Male Peers,” Wall Street Journal, September 1, 2010. Ferris, G., Handbook of Human Resource Management (Cambridge, MA: Blackwell, 1995). Gomstyn, A., “Walmart CEO Pay,” ABC News Money, July 2, 1010, accessed July 23, 2011, http://abcnews.go.com/Business/walmart-ceo-pay-hour-workers-year/story?id=11067470. Indiana University, “Edward L. Thorndike,” accessed February 14, 2011, http://www.indiana.edu/~intell/ethorndike.shtml. McDonald’s Corporation, “Your Pay and Rewards,” accessed July 23, 2011, http://www.aboutmcdonalds.com/mcd/corporate_careers/benefits/highlights_of_what_we_offer/pay_ and_rewards.html. National Organization for Women, “Facts about Pay Equity,” accessed February 15, 2011, http://www.now.org/issues/economic/factsheet.html. Smith, A., “The 2010 Wall Street Bonus,” CNN Money, February 24, 2011, accessed July 23, 2011, http://money.cnn.com/2011/02/24/news/economy/wall_street_bonus/index.htm. US Department of Labor, “Child Labor,” accessed February 15, 2011, http://www.dol.gov/whd/childlabor.htm. Watson, B., “Global Pay Systems, Compensation in Support of a Multinational Strategy,” Compensation Benefits Review 37, no. 1 (2005): 33–36
