benefits and beyond c. 13 global ppt
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Global Benefits Expatriate Issues Europe The Americas Asia And, more
Benefits and Beyond C. 13
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New markets for products and services New sources of supply of raw materials
and labor Economies of scale, logistics, and
outsourcing New demand for similar products Trade Agreements open commerce
among nations (quotas and tariffs)
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What’s Driving Global Market
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Business is facing new competitors with varying cost structures
Importantly, wage and benefit costs – globally – are becoming very relevant from a competitive standpoint
Costs determine how and where they will locate and how they will compete.
How do we compensate expatriates?
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And. . .
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Domestic production – domestic markets
Then, it starts sending products abroad
Should it buy or build a plant or service center abroad?
Economics usually drives this answer Over time the company integrates all
of its operations (see Ford, P&G, Unilever, Convergys)
Query: What are the compensation and benefit implications of this change?Thomas E. Murphy 4
Evolution of Global Enterprise
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Access new markets, strategic relationships, M & A opportunities.
Access new raw materials or acquire inventory of products to sell.
Find lower labor costs?
Leverage supply chain
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What’s the Business Strategy?
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There are some very basic territorial, political, legal, and economic factors to consider.
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But . . .
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Work councils Layoff restrictions Intellectual property rights Taxation of total reward system Financing sources, different
capitalization process vis a` vis U.S.A. Risk averse reward systems Publically provided benefits.
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Factors: Political and Legal
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Industry wide union agreements
Strong Social Welfare Programs
Totally different reward system
Less emphasis on litigation
Importance of relationships
The Tribe
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Factors: Political and Legal
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Organizational differences between U.S. and EU businesses.
Shareholder-based versus bank ownership
Subsidization and privatization. The importance of employment
standards in EU; EEO in US.
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Factors: Political and Legal
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Economic: High Tax Rates Take-home pay Government
subsidies and mandates
Less emphasis on results based compensation
“Add-ons” -- one month’s pay, bonus, “vesting of benefits,” all of which affect cost of labor.
Short-term versus longer term results.
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Factors - Economic
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How do other countries approach publicly funded health and retirement plans?
What impact does this have on business? Does it mean higher taxes? Higher labor costs?
What are the approaches employers take with respect to the compensation and benefits of expatriate workers in host countries?
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So . . . There are three issues:
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Global Benefits
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Who has the higher labor costs?
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See: BLS International Wage Survey (3.1, 3.3)
Estimates: France, employee earning €3000 per month, pays €350 for health care, and the employer pays €1200 per month.
Labor Costs
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What impact do Social Security and Health Care systems have on overall labor costs?
Higher labor costs in Western European countries than in the U.S.
Direct relationship to higher payroll taxes used to finance such benefits.
China is well below western levels. See Table 13.4
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How do labor costs compare?
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Expatriates What is their pay? What are their benefits?
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Technology transfer Lack of talent in country Consistent application of company
policies Succession plan/Diversity
management Direct learning about the country
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Expatriates – The Issues
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The Palestinians (and Israelis)
Economic incentives (QIZ)
Madaba tour Abe Lincoln essay Career – shirt, tie,
government Brainstorming
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Jordan, France, and Italy
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No meetings outside of the plant
No delegation No agenda IBM No accounting or
knowledge of costs Auto Accident No addresses
Ramadan and off-days.
Hugs for Hesham Excuses –
Ottomans Conspiracies and
mistrust of government – Egypt Air
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More . . .
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WASTA Egypt Air In the “black.” The Notary and the
Germans Driving exam Bulgarian and
contract to buy Memorization
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Jordan, France, Italy
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Jordan, France, and Italy
All is in the “Black!’ Family is very important
Work, Life Balance Don’t let them wear
hats! Women – put your
picture on your CV! House builder’s pride Slow food Bi-lingual Entrepreneurial Residency process
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Lessons Learned
Face is important! Some great values . . .
Business is often based upon building relationships – be patient and respectful.
Cultural differences often are based upon enmity between ethnic groups. They can torpedo typical business incentives.
Bureaucracy is overwhelming – enforcement is not.
Tax avoidance is rampant – and one is encouraged to avoid tax compliance.
Family takes precedence over government.
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Passport Technical Expertise Cultural sensitivity Required experience for promotion -
part of the succession plan
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Expatriates – Selection
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What is the goal? What about cost of living? Make-whole policy? (“Balance
Sheet”) The host-country policy? (“Market
Rate”)
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Expatriate Compensation
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Ma, dove e come abiterremo?
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Factors that Affect Design Tax Laws (U.S. and Host Country) Employment and Social Insurance Laws Currency Fluctuations Cost of goods, services, transportation Culture and traditions What about the Benefits Model?
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Expatriate Pay
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How, and from where, will pay be delivered?
In what currency? Evacuation – emergency (political
or medical). Working hours and public holidays. International Compensation!
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Compensation Details
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Spouse and family accommodations, schools, careers, volunteering, leisure time.
Should expatriate continue to participate in parent company benefit plans? Which ones?
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Foreign Assignment Issues
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What do you do about rewards that are U.S. based and results are determined by U.S. operations?
What are the advantages and disadvantages of balance sheet vs. host country approaches?
Remember: the U.S. considers income of its citizens and residents to be taxable no matter where it is earned!
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Expatriates
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Advantages Equity between
assignments and other expatriates in same country.
Facilitates expatriate reentry.
Easy to communicate.
Disadvantages Disparities
among TCNs and HCNs.
Can be complex to administer.
Very Expensive
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Balance Sheet . . .
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Advantages Equality with
HCNs. Simplicity Identify with host
country. Equity among
different nationalities.
Disadvantages Variation
between assignments.
Variation between expatriates of same nationality in different countries.
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Market Rate . . .
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See: The Milan case (443-447)
Let’s analyze the adjustments that would be required.
Your apartment is ready :
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Remedy – a series of adjustments!
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Assignment could result in double taxation by U.S. and host country.
Most companies have Tax Equalization Policy –withhold an amount equal to home country of expatriate and company pays the rest.
§911 of the IRC = $91,400 (FEI Deduction)
What about Social Security taxes? What about Value Added taxes in host
country?
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Tax Issues
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Career blockage Essential for
promotion Burnout Family issues Technical vs.
leadership talent BIG Difficulties
on return
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Expatriates - Other Issues
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Length of assignment Defining “success and failure” Trailing spouses How to establish MBOs or other
Performance Management factors, e.g., different accounting, long-term goals, manager’s role, who conducts review?
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Other Issues
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ExpatriateApproaches
Select the best based upon careful research of cross-cultural sensitivity issues.
There is no “universal” management style, but there are generic competencies to consider.
Provide resources for housing location, spouse “development,” kids education.
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Some ideas . . .
I miss Italy, but I’m . . . Am glad to be back!
Provide significant cultural orientation.
Make sure expatriates are prepared for trade union issues in the new country.
Make a pre-assignment trip.
Plan for reentry – avoid the typical problems
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