Shock and Awe

Posted on January 22, 2010 by | 3 comments

Author:
Chuck Csizmar – CMC Compensation Group

When you first look to purchase compensation surveys for your international population, it’s going to be a real wake-up call.  For those accustomed to only US surveys you will find that the available data in many countries is more limited than what you’re accustomed to seeing, as are the number of companies involved.  What won’t be reduced though is the expense.  Quite the opposite.  If you have multiple countries to deal with, your budget for credible compensation data will likely become a multiple of your US experience.

When I worked overseas my budget for compensation surveys was 3-4 times my previous US budget – and I only had to worry about Europe.  What a shock that was – spending much more and arguably receiving less.

Think on it, though: each country is a separate USA, a unique national entity having country-specific labor laws, employment regulations, tax structure, competitiveness challenges and variations of economic strength.  For each you will need a country-specific survey to assess the local competitiveness of your employees.

International HR practitioners will need to adjust their thinking to react effectively in smaller countries, where the working population is limited and so is the number of survey participants.  It will be difficult to slice surveys by geography, industry or employee segment, as the data points grow smaller and smaller with each criteria.  For example, a well-regarded Mercer survey for Sweden showed 202 participating companies, while the Netherlands counted 81.  Meanwhile the US survey totaled 500 companies.

To compound this dilemma of accessing credible data you will typically be required to pay “list” costs for each survey, as compared to the US where I was able to gain lower 2nd copy costs and often times managed to wheedle discounts or “anticipated” participation rates.  Such tactics are not as readily available overseas.

Availability of locally-grown survey data is another challenge.  I have tried to locate such sources, even those provided in the local language, in order to create a greater “buy-in” sense from management, but with very limited success.   Even global companies with non-US headquarters tend to use the multi-national consulting firms.

Accessing International Resources

Should you require information for international compensation practices, below are a number of useful sources, each of which can be tapped via a Google search.  Note: many of the non-US sources focus on limited employee segments or functional areas, which may limit their usefulness during a general search.

Towers Perrin Mercer Culpepper
Hewitt Associates PwC CSi Remuneration
(AUS)
AON Hay Group VenCon Int’l
Reseach (GER)
Radford McLagen Economic Research
Institute
IPAS TymWork (SWE) Western Management
Group
Taylor Root (UK) CFA Institute EuroComp
(Western Mgmt)
Federation of
European Employers		 Executive Resources
Limited		 Watson Wyatt
Birches Group LLC Euro Remuneration
Network (GER)		 Organization Resources
Counselors (ORC)
Ernst & Young Croner Reward (UK) Robert Walters (UK)
Baumgartner & Partner
(GER)		 Interconsult Ltd
(UK)		 Australian Institute of
Management

Should you only have a few positions (2-3) in a given country you can reduce costs through individual job pricing, vs. the purchase of an entire survey.  More than a few positions though, would render this tactic economically unfeasible.  A few notable sources (though others from the above list may also be able to help):

  • ER Limited
  • ORC
  • Birches Group

Note that I have not included sources from the current vogue of online surveys, like PayScale and Salary.com.  To my mind these sources still have credibility problems to overcome before they would be accepted by senior management as a viable resource.

Another effective strategy for reducing costs is to age current data forward, coupled with the use of biennial purchasing.  However, if utilizing this strategy have a care to limit its use to countries with stable economies.  Using such standard growth figures would miss the mark in countries showing greater volatility.

The Cost of International Operations

Too many HR practitioners and their Managers fail to take into account the expenses involved in keeping their international compensation programs competitive, especially where the organization has a small footprint in a given country.  For companies new to the international scene, and for those with small populations in several countries, the shock of survey costs could be daunting.  Many times the result is a reluctance to purchase the data, in some cases letting matters on the ground continue to fester – potentially overspending and / or creating debilitating equity problems for themselves.

Call it the cost of doing business, but if you’re going to maintain effective operations overseas, and you want to provide a competitive reward package (of course you do!), it would be unwise to shortchange the process by guesstimating or otherwise trying to make-do without credible information.

The cost of surveys is a fraction of the possible financial impact that could result from retaining non-competitive reward programs.

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Posted in Compensation, Global HR Expertise, International Expertise

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HR and Reward Challenges in Developing Markets – Beyond BRIC

Posted on January 20, 2010 by | 5 comments

 

Author:
Warren Heaps – Birches Group LLC

We are all hopeful that 2010 will be a better year for business than 2009. When that hoped for upturn finally takes hold, where will your company find growth?  If your company is like many others, the answer to that question points to developing markets in Africa, Asia and Latin America, where growth rates are higher and opportunities are great.

Growth is Robust
Post-recovery estimates from the IMF for 2010 indicate worldwide GDP growth of 5.7% is expected, while GDP growth in developing countries is expected to climb 9.5%.

Regional comparisons are even more dramatic:

  • Sub-Saharan Africa – 9.6%
  • Latin America & Caribbean – 10.5%
  • Middle East – 14.9%
  • Central and Eastern Europe – 1.4%
  • Euro Zone – 3.6%

As you can see from these figures, growth in the developing world is expected to be almost three times greater, on average, than in the Euro Zone.  Investors have already discovered this; according to Bloomberg Business Week, the top ten performing stock market indices since December 31, 1999 are all developing markets, ranging from 901% gain in Ukraine, to just 318% in Brazil. With potential like this, it’s not surprising that more and more companies are focusing on new markets in these regions.

HR Challenges
The landscape for operating in developing countries is different from what many companies may be accustomed to in Western Europe, the US and elsewhere in the developed world.  For HR, the most prominent challenges are in two areas – talent and reward.

The Talent Challenge
Developing country markets are smaller than big developed country markets.  Fewer employers participate in the market, and not all sectors are represented, but those that do are all vying for the same people – the best talent.  Highly educated professionals are often in short supply, especially those with advanced degrees which are often obtained in the US or Europe.  While professionals may have training and education in a particular occupation, it is very common for these individuals to switch occupations for advancement opportunities.  They become generalists rather than specialists, and switch between sectors often as well.

Leading Employers Play a Key Role
Certain employers are found in a lot of developing countries, and help to define the labor market.  These employers include companies from the banking; consumer products; oil, gas and mining; and telecom and technology sectors.  Many of these companies are global multi-nationals which have been operating in developing countries for many years, and have a lot of experience with the conditions.  The other major players are international public sector organizations.  This group includes employers such as embassies, development banks, multi-lateral agencies such as the UN, and leading international NGOs.

Know Your Competition for Talent
Many private sector companies are surprised when we suggest they consider the international public sector as part of the group of leading employers with which they compete for talent.  After all, what do oil companies or banks have to do with embassies or the World Bank?  The answer is a lot!

International public sector employers are involved in a lot of the same activities as private sector companies.  For example, an MBA graduate being recruited by a consumer goods company for a brand manager role is the ideal profile for an embassy public information officer.  The engineers that the oil sector seeks can be deployed as project managers for infrastructure development funded by the World Bank, or an NGO such as the Global Water Project.  In addition, of course, there are occupations that are common to all employers, in areas such as administration, finance, human resources, IT, etc.  The lesson is to expand your focus in developing countries to include not only companies outside your sector, but some of the relevant international public sector institutions as well.

How Can I Be Competitive?
The second significant challenge for companies in developing markets is figuring out the reward structure.  Compensation schemes are different in each country, but there are some common themes across developing countries which differ from more developed countries.  For example, the span of salary ranges is often much wider than the typical 50% to 67% often found in developed countries.  The differential from one grade to the next can vary dramatically depending on the levels — often the jump from manager to executive can be 35% or more.

Base Salary is Just the Beginning
It is quite common to provide cash allowances, such as 13th and 14th month, as well as transportation allowances or housing allowances in many countries.  In addition, in-kind benefits such as beverages or meals, transportation (commuter buses) and subsidized loans are found in many markets.  The value of allowances and in-kind benefits can be substantial, ranging up to 30% or more in some countries.

Good Market References Are Important
One way to ensure a competitive position in the market is to establish your position with reference to the leaders, using a high-quality compensation survey.  The survey should include values for base salary, cash allowances, in-kind benefits and short-term incentives.  In addition, you’ll need to be aware of the social benefits and other statutory pay practices, how pensions and insurance are provided, and how the income tax scheme influences how compensation is structured.

In Summary
Developing markets are exciting, diverse and challenging.  Human resources professionals need to become aware of the unique market dynamics in smaller developing countries, including the role of leading employers and the complexities of how rewards are provided.

Note:  Birches Group conducts total compensation surveys in 147 developing markets.  Visit our website for more information.

More About Warren

Warren Heaps

Warren on LinkedIn

Developing Markets Compensation and Benefits Group on LinkedIn

Email Warren

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Posted in Africa, Compensation, Developing Markets, Global HR Expertise, International Expertise, Talent Management

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How to Develop Effective International Assignment Policies

Posted on January 17, 2010 by | 8 comments

Author:
Alan Freeman – LOF International HR Solutions

During a recent conversation a colleague shared some frustration she was feeling. “I’ve read lots of articles and attended conferences where we’re told what we “should” be doing with our International Assignments (“IA”) policies on the basis of what everybody else is doing with theirs. What I’m not hearing is how to go about structuring our program in a way that really makes sense for our company. Where do we start? Who should be involved? What steps are necessary?”

“True”, I said. “We hear a lot about best practices such as keeping the spouse happy, increasing flexibility, controlling costs, keeping exceptions to a minimum and conducting benchmarking studies to find out what everyone else is doing. That’s all well and good but if your company sells luxury consumer goods in the best department stores in the largest cities of the world, do you think that practices that work well for mining companies in rural West Africa or at 14,000 feet in the Andes Mountains will be relevant and useful?”

“Exactly – they wouldn’t!” she said, “so what should we do?”

Let’s start with The Prime Directive. Simply put, your IA policies and program exist to help your company achieve its business objectives by having the right talent, in the right places, at the right times, doing the right things. Clearly, your company’s business objectives define what the various “right items” will be. Is this another way of saying you must start by truly understanding your business? Yes, of course!

“OK, that makes sense” she said, “then what?”

Well, now it’s time to go about structuring your program. A process that has proven to work well follows these steps:

Assemble a Policy Development Team

To often, policy development is left up to a Global Mobility department or single HR staffer working in a vacuum.  This generally is not effective. Utilizing teams of key stakeholders provides greater breadth of ideas, broader input from key functions and business operating units, and greater understanding of and buy-in to the end product. The team must be led by someone with significant depth of IA program expertise and include Global Mobility, Tax, Accounting, Payroll, HR Business partners from units that utilize international assignments, etc. Bringing in expert consultants and specialty service providers, e.g. immigration, international tax, global security firms, etc. can pay large dividends as well.

Conduct Benchmarking

There are two types of benchmarking to consider. First, conduct internal surveys of line managers who make use of IAs, and current and former assignees themselves. These groups can provide a wealth of information as to what has been working and what has not. They further can often make great suggestions for new approaches worth considering.

Second, do take a look at market practices through both generally available surveys and, potentially, custom surveys more precisely focused upon your company’s industry and competitors. This can help generate ideas and help gauge competitive positioning. Be careful, however, to not only look at what companies are doing but also to ask how well those practices are working. It’s amazing how many times I’ve heard a colleague say “we do ____” and in the next breath, say “and I’d change that practice in a heartbeat if my management would allow me to!” Another caution about benchmarking is that it’s imperative to consider the policy package as a whole and how the many provisions work together in total. There is a definite tendency toward getting caught up on individual line items and, hence, “lose sight of the forest for staring at the trees”.

Draft a Policy Structure

Put together the first array of policy provisions that make sense given the demographic, geographic and time variables dictated by The Prime Directive. Make sure they integrate and work together in a consistent and holistic manner.

Model the Costs

The first question executive management is likely to ask when the new program is presented for approval is not, “how does it meet our business needs?” It’s assumed that it will. The first question is, “what’s it going to cost?” If you are reengineering an existing IA program you’ll need to show the difference in costs between the proposed and existing programs.

Fortunately, there are many applications and providers that make cost modeling relatively straightforward.

Test Your Ideas as You Go

One of the worst ways to achieve buy-in on your ideas is to keep them to yourself and spring them on someone only at the end. If you communicate as you go through the process, sharing what you’re thinking about and soliciting inputs, that engagement frequently gives the other a sense of having had input and influence on the final product. Those who feel they had input are much more likely to respond positively. Their inputs may well have a lot of value as well.

In a larger corporate environment this could be done via periodic progress update meetings.

Finalize and Implement

In pursuing the steps above, you’ll ultimately obtain approval to proceed. Prepare the necessary communications and implementation materials. If you are reengineering an existing program, you’ll have already determined whether current assignees will be “grandfathered” under their old terms, converted to the new terms, or converted with some sort of buy-out provision.

When you have it all in place, move ahead.

Continually Evaluate and Improve

Finally, when you implement your new program, be sure you’ve also built in metrics and processes for determining how well it’s working on an ongoing basis. You can’t have anticipated everything that will ultimately be encountered and change happens! Be ready to be flexible and make program adjustments “on the fly”.

More About Alan:

LOF International HR Solutions web site

Alan on LinkedIn

email Alan

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Posted in Expatriate Payroll, Expatriate Taxation, Expatriates, Global Mobility Services, Policy Development, Relocation

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Five Secrets to Reduce Benefits Cost, Part 3

Posted on January 13, 2010 by | 3 comments

Author:
George Bashaw – Atlas Global Benefits

I didn’t know you have kids.  Seriously, aren’t you single? I need to see some documentation.

Ok, that is a bit overboard. However, if you want to get serious about saving money on benefits, a dependent audit may be a bumpy but lucrative road.   This blog is the third in a series of five techniques to lowering your benefits cost without changing your plan design or carrier.  Prior posts in this series include Know Your Claims and Duplication of Coverage.

Secret Three:  Dependent Eligibility Audit
The intention of a dependent eligibility audit is to ferret out those who are ineligible for benefits.  Examples of ineligibles may include non-resident step children, college grads who may feel like dependents but technically are not, or the classic unemployed ex-husbands who will not get off the couch, but like an old hound, you feel sorry for them.  Joking aside, these people add up quickly. Finding one ineligible participant in your plan can save up to $6,000 per year.  Finding a slew of them will have a noticeable impact and go straight to the bottom line.

Communication is Key
Caution!  People get a pit in their stomach when they hear the word audit. Second, they do not like sharing personal information. Therefore, the way you deliver the message about the audit is key. In other words, you do not want to blast out an email today saying “proof of your dependent status is due by the close of business Friday.”

Sell the benefits of an audit to the participant.  The participants’ costs are going up and their benefits are getting cut, too.  Explain, as an employer and plan sponsor, you have a fiduciary responsibility to make sure all dependents are eligible, and to misrepresent is fraud.  Therefore, it is necessary to make sure the plans are in compliance.

Steps to Successful Audit

  1. Positive Communication
  2. Communicate at least a month before you start your audit to set expectations
  3. Create a plan and review with your employment attorney
  4. Communicate “the plan” (don’t call it an audit)
    • The definition of eligibility requirements
    • Methods to prove eligibility
    • Halo period where the participant may change status without penalty or embarrassment
    • Final deadline (here is where you may decide to define the nature of fraud)

Please share any stories you have about your experience with employee dependent audits.  If you happen to try one and you do not find any ineligibles, I may respond, “Look closer, the employees committing fraud may have left the building out of embarrassment.”

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Posted in Benefits, Expatriates, Insurance, International Benefits

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Five Facts About International Schooling

Posted on January 12, 2010 by | 4 comments

 

Author:
Liz Perelstein – School Choice International

Most companies sending employees overseas offer some kind of cross-cultural training.  But we rarely think of cross- cultural training for school children, even though education can be a make or break issue for many families considering an overseas assignment.

As you can see from the facts below, even expats who send their children to international schools encounter cultural differences that may be significant, and may clash with family customs.  Schools – local and even international – are a microcosm of the culture they inhabit.  Without understanding the host country’s educational system children can be disadvantaged in the admissions arena, in academic performance and in the ease of transition.

Consider these facts:

1) Did you know that 8th graders in Belgium, Korea and Japan do not use calculators in math classes?

Curriculum differences like these make it hard for children trained on calculators to adapt to local mathematics instruction in these countries.

2) Did you know that German parents give their children a Schultuete, or a cone filled with treats on the day they start first grade?

Children unfamiliar with local customs can feel awkward or embarrassed, affecting the transition to their new school.

3) Did you know that in Brazil children either go to school in the morning OR in the afternoon?

Spouses may find it difficult to work in countries with a school schedule alien to them.

4) Did you know that Saudi Arabia is enforcing a law that requires expat children to attend a school of their own nationality?

Many families choose a curriculum other than their national curriculum, often to preserve curriculum continuity with former or future schooling.

5) Did you know that admissions for 4-to-10 year olds for New York City independent schools requires an entrance examination that is ONLY administered in New York City?

Admissions opportunities may be limited for children if parents are unaware of requirements.

To learn more about educational customs in different parts of the world, visit our School Choice International blog or our Fact of the Week Collection.

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Posted in Cross Cultural Insights, Expatriates, General, Global Mobility Services, International Expertise, Relocation, Repatriation

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The Gift of Time

Posted on January 11, 2010 by | 2 comments

Imported Photos 00033Author:
Yendor Felgate – Emergence Consulting

I am continually reminded in my coaching that folk remain under pressure as we enter the new year. Rather than refreshing over the holiday period, many of us have brought our work, life and family challenges straight into the new year.

We probably don’t sufficiently acknowledge in difficult times that it requires huge amounts of additional energy and effort to produce the same results. This means that if we do not change the way we work and live, time will vanish even faster and we will not achieve as much.

In an effort to work smarter and enjoy the journey more in our never ending search for better results, I offer two approaches that have benefited me personally.  The first refers to the gift of time and the other is about living in the moment.

“Stop, Start, Go” Test

I often ask people what they can stop doing.  This tends to be an uncomfortable question.  Few of us seemingly want to stop being ridiculously busy.  It is almost as if being busy is the same as being valuable.  Being busy in this sense is both addictive and a habit.  As with all addictions, it is seductive and comes at a price.

The test is an easy one.

  • List all your activities for the last week.
  • Identify those activities that directly relate to your purpose or objectives.
  • The rest you can stop.

The difficulty is implementing this. The world will simply not understand at first what you are doing. However, keep going, they will catch on.

This is a tremendous team building opportunity.  Not surprisingly, people respond better to this than the traditional approach of being told to do more, or being harangued about needing to improve.  It does, though, require a willingness to simplify.

Simplicity is about having clarity on what is really important, rather than dumbing down.

Stop

The next hurdle is being told that there is nothing that can be stopped.  Let’s test this.  We ran the stop, start, go test on executive meetings at a banking client.  By simply doing away with unnecessary meetings and reducing meeting times, we gave back 20% of executives’ time.  How valuable would this be to you and your organisation?

Some other thoughts on stopping:

  • Stop emailing instead of doing real work
  • Stop doing things in triplicate
  • Stop being accessible 24/7
  • Stop asking your team leader to sign or see everything
  • Stop rework
  • Stop second guessing others
  • Stop worrying about things you have no control over

Start

Start saying “NO” to things that are not important.  The discomfort arises when we ask people when last they said ‘no’ to anything.

The conversation often starts with I cannot stop anything (you already know the answer to this) and ends with I cannot remember when last I said ‘no’.  Start saying “YES” to important things, but just be clear on what this is.

There is of course an art to saying “NO” and includes things like:

  • Not taking other people’s monkeys
  • You cannot live other people’s lives for them
  • Empowering others to make their own decisions
  • Sharing knowledge and information for others to implement

If people understand that you are trying to help them to help themselves, saying “NO” is easy.  Just remember, ‘no’ means ‘no’.

Go

The point is not to fill the time you have freed up with more work.  The “GO” aspect is about getting and keeping your balance.  You get the balance that you deserve.  In other words, if you allow work to intrude, you end up working.  The “GO” adage is go live your life.

This is almost impossible unless you live in the moment.

Living in the Moment

Living in the moment is a coaching term that refers to acknowledging and being present – the here and now.  When I ask this question, I am often told that “of course I am here and focused”, “just let me check my email”.

I think being able to parallel process is a wonderful gift, but the larger skill is ensuring people receive your full attention.  If you are not sure what this means, then watch children at play.

By being in the moment, you make better decisions, people respond better and you are more alive to possibility, than by keeping half your mind on the next meeting, and the next…….

I look forward to hearing your stop, start, go stories, so please share them with us.  Here is to the possibility of living in the moment this year!

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Posted in General, Global HR Expertise, Leadership Development

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International Employment Law “Quick Facts”: Brazil

Posted on January 7, 2010 by | 26 comments

Author:
Mariana Villa da Costa – Littler Mendelson

Happy New Year readers!  We are excited to launch a new series of posts on the basics of global employment law called “International Employment Law Quick Facts.”    The series will bring basic, but important information on what an employer needs to know when hiring someone in a different country, using an easy to follow Q&A format.  We will capture information such as definition of employer and employee, requirements for written employment agreements, consequences of discrimination and harassment in the workplace, minimum wage requirements, etc.

We will kick off 2010 with the first country in the series – my native country of Brazil.   I would be more than happy to get suggestions from you, readers, on which other countries you want to see next!  Add a comment, or send me a note to let me know your suggestion.  We will try to publish upcoming installments in this series based on what you request, so keep checking back!

Q. What are the definitions of employee, employer and independent contractor?

A.

Employee:  The legal definition of employee by the Labor Code is  every individual (natural person, never a legal entity) that personally renders services on a non eventual basis (continuity), under the employer subordination (obedience to rules and orders given by the employer), and that receives a salary.  If one of these requirements is not present in the relationship, it is not an employment relationship.  As in most countries, it is very important to correct classify the relationship to avoid the common issues with independent contractors vs. employee definition.

Employer:  An employer is the sole-proprietorship or joint-proprietorship company that, in assuming the risk inherent to the economic activity, hires, remunerates and manages the personal provision of services.

Independent Contractor:  The difference between employee and an independent contractor lies on the requirements that one must have to be an employee.  An individual will be considered an independent contractor and, therefore, will not be covered by the labor legislation, if he or she has independence to perform the work and it is not subordinate to a company’s directives and regulations, and there is no exclusivity in the relationship between the parties.

Q. Is it necessary to have written employment contracts in Brazil?

A. According to the Brazilian law, the execution of an employment contract is not mandatory; however, it is important to note that this is common procedure in Brazil and should be observed as a good practice.

Q. Are there any specific rules in regards to the duration of employment contracts?

A. In Brazil, and due to the principle of continuity, the general rule is that the agreement is entered between the parties for an indefinite term. The agreement for a definite term is an exception to the general rule and should be entered in writing.

According to the Labor Code, an employment for a definite term can only be executed in a few circumstances:

  • A maximum of two years, provided that the nature of the work justifies the transitory nature, or the if the contract is for the performance of temporary business activities; or
  • A probationary or trial period (cannot exceed 90 days and must be in writing).

Q. Are there any rules in regards to discrimination in employment?

A. Yes, the Brazilian Federal Constitution prohibits discrimination, although it does not define what that is.  It simply says that any difference in salary or unequal treatment in relation to recruitment and employment is prohibited.

Q. What are the rules regarding working hours?

A. In Brazil, the Federal Constitution and the Labor Code provides that the maximum hours per week are 44 hours, or 8 hours per day.

An employee cannot work more than two overtime hours per day since the workday cannot exceed the legal limit of ten hours; however, the law provides some very exceptional situations for overtime in the excess of two hours.

The minimum additional overtime pay is 50% of the regular hourly rate, but it may be higher if established in a collective agreement.

Employers must allow an interval of 11 hours of rest between two working days.

Q. Are there any minimum wage requirements in Brazil?

A. Yes, the Brazilian Federal Constitution has established a system of national minimum wages.  The minimum wage is fixed every year by law, but some categories also put in place their own professional minimum wage that cannot be inferior to the national one.

Q. What are the rules regarding the terminations of contracts?

A. Employers in Brazil may terminate contracts in Brazil with or without a cause, provided that all termination and severance amounts are paid.

The only exception is that the employer cannot terminate an employment contract when the employee is under a provisional job tenure, for example, female employees during and after pregnancy, and employees who are union leaders.

In Summary

I hope this quick summary can be used as a road map for employers doing business in Brazil.  Please post your questions and comments.

Important Note:  This posting is intended to provide a brief overview of employment law in Brazil.  It is not intended as a substitute for professional legal advice and counsel.

More About Mariana

Mariana Villa da Costa

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Littler Mendelson

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Posted in General, Global HR Expertise, International Employment Law

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Base Salary – Not So Basic!

Posted on January 6, 2010 by | 9 comments

Author:
Chuck Csizmar – CMC Compensation Group

Ever find yourself confused when asked to provide an international employee’s annual rate of pay?   Compared to the US, you will find scant uniformity between countries as to when and how monies are paid to employees, and this diversity can lead to confusion, misreporting of data and the potential for internal equity squabbles.  It is especially a concern when a US Manager attempts to hire a foreign local national without being certain of country-specific pay practices.

To a US employer, the term “annual base wage” or “annual salary” is simply the cumulative amount of payroll dollars (regular paychecks) dispensed over a twelve month cycle.  However, in many parts of the international community, it’s a bit more complicated.

Numerous countries consider statutorily required or common practice holiday (vacation) pay and Christmas (December) payments as part of what they term “basic salary” – which they report as a monthly calculation.  So what is the annual salary?

Defining Your Terms

In the US, annual salary is a common reporting term, an identifier to the company and the employee of the value paid to each position. To quote an annual salary is common practice.

The trick when considering global practices is to remember the distinction between the two annual terms:

  • Base pay – the amount of non-incentive wages or salary paid out over a twelve month period for work performed
  • Basic pay – the amount of non-incentive wages or salary paid out over a twelve month period for work performed, but including additional payments (usually in monthly increments) not directly related to the work effort

Some US companies prefer not to deal with the issue, relying instead on the US model of quoting an annual salary – then dividing by the total number of monthly payments due in order to calculate the monthly gross paycheck.

A client of mine once insisted on offering a candidate 75,000 euro, but no more for a key position.  When informed that in Belgium an extra month (13th) is common, and in fact mandated in many collective agreements, the response was “fine, as long as the total base pay isn’t higher than 75,000 euro.”

That candidate did not accept the position.

Here are a few representative examples to illustrate the diversity of practices across the globe.

  • Singapore:  While a 13th month payment (Annual Wage Supplement) is not mandated, it is common practice.  Executives typically receive 1 to 2 months pay as an additional bonus.
  • Mexico:  Companies are mandated to give employees a Christmas bonus equal to 15 days pay.  Common practice is to grant 30 days.
  • Peru:  Employees are entitled to a 13th and 14th month bonus; the 1st extra month is paid in July and the 2nd in December
  • Italy:  In December, employees are paid a Christmas bonus equal to a month’s salary.  In many contracts a 14th month’s salary is included and is paid in June.

The extra payments are not rewarding work performance, but typically provide extra monies for either vacation time or Christmas.  These practices are not commonly followed in the US.

What to do

To avoid confusion when dealing with local national employees it is helpful to talk in terms of monthly pay, the term commonly used by the employees.  No matter how many monthly payments are made, for whatever reason, simply multiply the payments to reach the annual figure.  To your international employee that is considered an annual pay entitlement, though not an annual salary as practiced in the US.

When reading compensation surveys make sure to check the definitions used; oftentimes the survey will report both an annual salary and a “guaranteed annual cash” – the latter inclusive of holiday bonuses and extra month’s pay.

Avoid setting a US-style annual salary and then dividing by the number of required payments to derive a monthly pay.  Instead, determine what you will pay on a monthly basis and multiply those payments by country-specific statutory requirements and common practice to derive (build-up) the annual salary.  It’s a bit more confusing for US companies, but it will be more meaningful for your international employees and likely save you employee relations issues down the road.

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Posted in Compensation, International Employment Law, International Expertise

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Intercultural Training Best Practices

Posted on January 5, 2010 by | 10 comments

Author:
Michael Tucker, Ph.D – Tucker International

[Editor’s Note:  We are very pleased to introduce Dr. Michael Tucker as a guest author.  Dr. Tucker is the Principal at Tucker International, a full-service international human resources development company.  He is the author of the Overseas Assignment Inventory (OAI), and Tucker Assessment Profile (TAP), which are validated instruments used to assess, select, and develop personnel and their spouses for international assignment.]

Your company is embarking on a new venture in a new market.  Management has asked you develop a program for assessment and intercultural training for the team that will be deployed there from all over the world.  Where to start?

The best practice to address this situation is to partner with an intercultural consulting firm that understands international business and your company.  Using a well-planned and customized approach will deliver the best results.  Here’s a real example from one of Tucker International’s clients, which illustrate the most effective approaches.

Case Study
An international HR Director at her global company’s headquarters contacted Tucker International to discuss a new company project in Africa.  We knew the client organization well in terms of its international business strategy and international assignment policy and practices.  She invited us to a meeting at headquarters to discuss the project.  During the meeting, a review of the project was conducted – its business goals and schedule, organizational structure and staffing plans (some sixty-eight expatriate positions were planned).  The start-up had just been approved, and there were very short time frames.  Tucker International staff were dispatched to South Africa, where a situation and project assessment was conducted with client representatives, local informants and current expatriates from other companies.

The next step in the process was the provision of an intercultural assessment and selection program among multiple candidates for the project along with their spouses.  About one hundred and forty candidates were assessed for the sixty-eight positions.  The most culturally adaptable candidates and spouses were chosen to go on a look-see and home finding visit.  They then completed written and telephone needs assessments with the consulting company.

Tucker International designed a five-day intercultural training program, which was delivered for everyone assigned to the project —- employees, spouses and youth.  Immediate post-program evaluations were conducted and subsequent programs were modified based on the evaluations.  The training program was very staff-intensive, and included the following resources:

  • Highly Qualified Senior Master Trainer
  • Expert on the Assignment Country
  • Business Culture Consultant
  • Belief Systems Consultant
  • Host Country Resource People
  • Returned Expatriate Spouse
  • Assessment and Development Consultant
  • Highly Qualified Youth Trainers

About one-year into their assignments in South Africa, Tucker evaluated the success of the expatriate employees and their families’ intercultural adjustment, as well as expatriate job performance.  We also looked at the success and usefulness of the intercultural training program, and areas which required additional attention.

The project was a success from many perspectives – no early returns, business objectives were met on time and high levels of intercultural adjustment and expatriate job performance were achieved.

This approach is illustrated as follows:

  • Company and Project Situation Assessment
  • Participant Needs Assessment
  • Intercultural Assessment and Selection
  • Custom Design
  • Three or More Training Program Days
  • Training Staff Intensive
  • Short and Long-Term Evaluations and Feedback

Summary
This case represents a true service approach to preparing expatriates for international assignments.  In an ideal world, every global company would utilize a comprehensive and even elegant intercultural service like the one presented in this case.  Unfortunately, corporate budgets don’t always allow International Human Resource Professionals to take their expatriate programs to this level.

The intercultural services approach illustrated here is certainly most applicable and affordable when a fairly large group is being mobilized.  However, many of the aspects of this approach can be applied even for “one-off” assignments. With a global company’s success often depending to a great extent on the successful intercultural adjustment of their expatriates, it is critical that they try and provide as many of the services from this “Best Practices” approach as possible.

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Posted in Cross Cultural Insights, Expatriates, Leadership Development

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International HR Forum Year in Review 2009 – Best of Leadership Development and Cross-Cultural

Posted on January 4, 2010 by | Comments Off on International HR Forum Year in Review 2009 – Best of Leadership Development and Cross-Cultural

This is the final installment of our three-part “Best of …” series, where we will feature links to our best posts on selected topics. This part is focused on Leadership Development and Cross-Cultural topics.   If you missed the first post about Compensation and Benefits, you can take a look at it here.  The second in the series covered Expatriates and International Assignments.

The posts below are some of the most popular ones featured on the International HR Forum.

We hope you find these summary posts to be a helpful way to explore some of the best content on our blog.

Best of Leadership Development and Cross-Cultural topics from the 2009 Archives of the International HR Forum:

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