Designing International Compensation Plans

Designing International Compensation Plans- Many multinational companies are struggling to design international compensation programs as globalization gains control over the international business environment. Companies need strategies that take competitive, cultural, and operational issues into account to remain competitive. A daunting task, this may be done successfully if the task is approached with a clear strategic plan; simple, flexible approach and top-notch communication. Companies are also beginning to recognize that well conceived global rewards strategies can achieve significant cost savings through economies of scale, as well as meet the needs of internationally mobile employees. For the development of a global compensation plan, a sound global rewards strategy that is aligned to business objectives must be developed. It is critical to develop a community of guidelines and practices with consistent communication of key messages. Other factors that need to be considered include employee expectations, cultural and socio-economic factors, tax, legal and regulatory requirements and local market practices.

• Ensure Alignment: Strategy alignment with regard to key business objectives is the first step in establishing an international compensation plan. A detailed understanding of current compensation plans must be obtained and it is important that the compensation philosophy is confirmed.
• Obtain Senior Management’s Ongoing Sponsorship: Guidance from senior management at the outset of the plan, as well as throughout the duration is critical.
• Build Cross Geographical and Functional Representation:A community of contacts, which includes representation from human resources, finance, tax, legal, communications, and key representatives from each major centre, may seem tedious and painstaking, but is well worth the effort.
• Communicate the Plan: A significant investment should be made each year in program communications, as a part of plan implementation. Branding, which manifests itself in a variety of media (e.g. intranet site, booklet, employee information sessions), has proven to be a very effective way of educating employees in all jurisdictions on their compensation package.
• Identify and Resolve Legal, Tax and Regulatory Issues: Just as customized communication development poses challenges, preparation of detailed analyses and summaries of all legal, tax and regulatory issues for each jurisdiction may prove difficult.
• Respect Local Cultural, Competitive, and Operational Issues: it is important that the company keep in mind the expatriates who work on assignments in various locations, as the number of internationally mobile candidates continues to grow.

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