What are the objectives of an international compensation policy?

Question

What will be an ideal response?

Answer 1

1. The first objective for an MNE is to align its compensation administration with the strategy of the firm. Of course, compared with the domestic firm, this alignment is much more complex for the MNE. It requires the MNE to have accurate and up-to-date labor market compensation information for all of the countries in which the MNE has a presence. This requirement is one of the most powerful advantages of having an HRIS with labor market information for the IHRM department. Labor market statistics, such as average compensation, as well as forecasted shortages and surpluses for jobs, are available for most countries and can be stored in the HRIS.
2. The MNE’s second objective is more complicated since multiple cultures are involved. Although most cultures see monetary rewards as motivational, there are clear differences across world cultures in terms of the other factors that motivate employee behaviors. For example, the meaningfulness of the work may be very important in some cultures, whereas the opportunity for promotion would be most important in other cultures.
3. The final objective of compensation policy for an MNE is that it must be perceived as fair by the employees. This notion of fairness or equity has been shown to be a powerful motivator of human behavior, and it may be the most important objective of an international compensation policy. With the mix of employees from different companies (PCNs, HCNs, TCNs), perceived or real differences in wages or benefits between groups of employees could lead to considerable dissatisfaction among the less privileged groups and consequently affect retention of employees.