Multiple Country Compensation Programs

Base Salary

Throughout the world, compensation professionals rely greatly on compensation surveys to set pay. (See DLC Course 73, Analyzing Salary Surveys, to find out more about using compensation surveys.)

In some developing countries, though, compensation surveys are non-existent, data is highly suspect, or obtaining accurate data is extremely expensive. Some practitioners will rely on consultants or local senior management to estimate what they believe base salaries should be. After introducing this practice, it can be difficult to transition to reliable market data when it becomes available and can be costly to an organization in the long run. ERI provides international pay data through our Assessor series, Salary Surveys, and Global Salary Calculator.

Bonuses and Incentives

Discretionary bonuses and performance-based incentive plans may be used throughout the world. They are especially common for managerial roles. Organizations often prefer plans that are aligned with specific performance measurements and quantifiable results, rather than plans based solely on individual performance appraisals. The primary reason is that a well–designed performance–based incentive plan will provide line–of–sight for an employee to be engaged in their work while understanding the impact it has on the business. When considering such a plan, be aware that the definition of performance varies from country to country and communicating specific performance expectations effectively will be essential. For instance, in Japan, performance is a more qualitative long–term evaluation of an employee, taking into account background and training, current activity, and future promise.

In some countries, law or market practice supports the payment of 13th or 14th month "fixed" bonuses as part of an employee's total remuneration. Since it is typically paid without regard to business profits or employee performance, these payments are often referred to as 13th Month Pay. The most common situation is the payment of an extra month's pay that coincides with an important holiday. This additional pay may be legally required within a country and is included as part of the basic employment contract. Companies need to be aware of the 13th month payroll for calculating labor costs when conducting due diligence related to international expansion as this is a fixed cost and part of total cash compensation. This practice is common in Latin America, Asia, and some countries in Europe and Africa.

The annual base salary should be divided by 13 or 14 rather than a standard 12-month payroll to calculate the monthly fixed pay. It is very helpful within a multi-national organization to have a placeholder within the HRIS identifying the countries on a 12, 13, 14, or even as high as an 18-month payroll.

Equity Compensation Plans

Equity variable pay plans are common in global, public organizations. Tax, accounting, and employment regulations will vary from country to country. In some cases, it may be cost prohibitive to introduce equity plans and the organization may likely offer another "cash-based profit sharing-type" compensation plan. Restricted stock awards, employee stock ownership plans, employee stock purchase plans and stock options have become popular in the United States and for those that have a global presence, these equity plans may be offered on a global basis where feasible. In some industries, as well as in specific business cycles (e.g. start-ups), equity plans may be offered to all levels of employees within organizations. Some organizations may provide equity only to senior professionals, managers and executives to better manage their stock and burn rate. It’s always a good idea to review market data on Long Term Incentive Compensation to review amounts and eligible groups for these types of awards. The appropriateness of any compensation component should always give consideration to whether it will have the intended impact (e.g. increase profit, improve employee performance and results).