Global Compensation and BenefitsStrategy. Your firm is a multinational consumer electronics organization whichhas five (5) profitable subsidiaries in Taiwan. Due to pandemic, the firmsuffered 40% decline in over-all revenue and whilst the business is still onprofitable path, all future expansion and acquisition projects were kept onhold until situation improves. The 3000 strong workforces are mostly localnationals with some expatriates (PCNs) in the management and highly skilledroles. Recently, the country where these five (5) subsidiaries are based, haspassed a landmark law enacting a minimum wage and standard benefits beginningnext month. This will significantly impact people cost and disrupt budgetsalready approved. The CEO at the headquarters is concerned with the feasibilityof maintaining significant number of local nationals. After a brief videoconference with the country manager, the CEO expressed his plans with the ideaof replacing half of the locals whilst simultaneously concerned on the risks ofhaving highly collectivist culture there. As the Chief People Officer at theheadquarters, discuss your action plans to the CEO relative to globalcompensation and benefits strategy and cultural management. Your plans shouldbe justified based on
The objective of this case is to evaluate how the studentwill connect different HR concepts discussed in LO3 and present them to the CEOin a coherent manner.
a. As the Chief People Officer at theheadquarters, discuss your action plans to the CEO relative to globalcompensation and benefits strategy.
The student isexpected to critically discuss the different concepts on Global CompensationApproaches. These approaches include:
a. Negotiation/Ad-hoc. Typically happens when first few assignees are sentheadquarters to other countries. This approach continues to evolve to meet theneeds of successive assignees. It also occurs on or ad-hoc basis as needarises. Each potential assignee is approach with explicit or implicit question“What will it take to move you to another country?”. While this approach isappropriate for few assignees who are sent from the headquarters, this willbecome problematic, specifically on the issue of equality, as the organizationgrows and more assignees are sent for international assignments.
b. PureLocalization. Most Straightforward method of assignee compensation.Pays assignee exactly what local nationals receive in equivalent positions inthe host country. This approach is easy to manage and implement. However,issues only arise when the international assignee receives more compensationfrom the home country. This presents challenges on persuading an internationalassignee to take the role if the employee believes that he/she will be ofdisadvantaged position if he/she takes the assignment.
c. Higherof Home or Host Country. This approach is a variation oflocalization strategy. Assignee who moves from high-salary country tolow-salary country receives compensation package that is most beneficial toher/him. Assignees from low salary country will be elevated to the compensationof the host country. Assignee from the high salary country will continue toreceive relatively high home country compensation
d. HomeCountry Based Balanced Sheet. Employer pays differential betweenhome country and cost and assignment cost. International assignees maintaintheir home country standard of living or purchasing power as they move from onecountry to another.
e. HeadQuarter Based Balanced Sheet. Employer pays employee lump suminstead of allowances and differentials. Employee may spend lumpsum as they seefit. Employer offers assignee several options subject to overall limit. Listvaries by country depending of which options can be delivered more taxeffectively than cash payments.
The abovediscussion will be meaningless though without connecting them to the problem ofthe case. In order to advise the CEO on appropriate strategic decision whetherto replace the majority of the local nationals or to maintain them, the studentis required to present a detailed comparison of compensation cost “prior” and“after” the landmark minimum wage law is implemented and if the organizationopt to increase its expatriates. The student has to understand that as per thecase, the CEO is concerned with the feasibility of maintaining significantnumber of local nationals. The learner therefore is expected to create 3hypothetical comparisons to justify any decision thereof based on thefollowing:
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