Table of Contents
Introduction and Research Question
With the growing pace of globalisation and technological advancement, more businesses are going global. Like any other organisation, MNEs certainly want to develop a fair approach to compensation and benefits, but the organisational and cultural diversity of their international subsidiaries makes this task virtually impossible to accomplish. In their compensation and benefits modelling, MNEs face the issue of comparability, which means that the rewards and incentives for the same position in different countries may vary considerably.
The research question to be answered in the proposed study is “Do HR managers in multinational enterprises perceive the compensation and benefits paid to local non-managerial employees as fair?”
The problem of compensations and benefits in MNEs is not new. While MNEs strive to use their compensation and benefits systems to encourage greater mobility and productivity of their international staff, many systems suffer from considerable drawbacks and fail to accomplish their purpose. Comparability is, probably, the greatest issue facing multinational corporations in terms of compensation and benefits. Even when the level of compensation is the same, its structure and the amount of benefits can differ considerably across countries and MNE’s subsidiaries (Perkins & Hendry 2000).
The problem is particularly acute for expatriates, since many MNEs consider their compensation as time consuming and costly (Tornikoski 2011). Not surprisingly, many employees feel discouraged when they do not perceive their compensation as fair, especially when compared to the amount of compensation provided to international employees in similar positions. Payment of the same amount of benefits simplifies the task but does not meet the goal of equity and fairness, due to country-to-country variations in living conditions, perceptions of reward norms, etc. (Harmilapi 2012).
Literature review and plan of research
Despite the growing scope of HR problems in multinational business, the amount of research into compensation in MNEs is quite scarce. Tornikoski (2011) focused on the issue of expatriate compensation and its implications for MNEs’ performance: “compensation practices and strategy are one of the most powerful and salient means in the employment relationship to send clear messages to members of the organisation, informing them about expected attitudes and behaviours” (p.17). The importance of compensation problems in MNEs was also supported by Roth and O’Donnell (1996), who claimed that successful business expansion had to be coupled with a properly configured structure of rewards. Haile (2002) and Harmilapi (2012) analysed compensation problems in MNEs but still failed to provide a single solution to the equity issue. In light of these problems, this research will be based on the interviews with HR managers in several multinational enterprises to uncover the hidden facts of the equity and fairness problem in compensation.
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As of now, the biggest outstanding issue is creating a relevant sample of research participants to ensure the validity of primary data. Another issue is that of informed consent, as well as protecting future respondents from any employment risks due to their participation in the project.
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