Multinationals Go for Global Compensation Programmes

Most multinational organisations manage their employee pay programmes on a global basis reveals a recent survey by Mercer Human Resource Consulting.

The study shows that 85 percent of the 90 U.S. - and Europe-based multinationals surveyed have a global pay strategy in place.

About half of the organisations have had the strategy in place for less than four years, while the remainder moved to a global approach more than four years ago reports the survey.

"Pay strategies play an important role in the success of multinational organisations," said Mark Edelsten, a European partner at Mercer in London.

"Increasingly, pay is being managed from a global perspective - to facilitate global expansion efforts, better manage labour costs, create internal equity, or ensure effective governance," said Edelsten.

Of the minority — only 15 percent — of firms that do not have a global pay strategy, all say they intend to introduce one within the next three years.

Slightly less prevalent are strategy elements related to desired pay mix, benefits and consistent methodologies for salary structures — each cited by 45 percent of the approximately 90 multinational organisations in Europe and the US surveyed.

The survey showed that the elements not commonly found in global reward strategies include work/life programmes, perquisites, training and development, recognition programmes, and career programmes.

Respondents indicated that their global pay strategies are fairly detailed and specific, with most including either fixed guidelines, detailed policies for all employees, or detailed policies for senior employees only.

Despite the prevalence of global pay strategies, the report suggests that monitoring these strategies can be a challenge.

"Only half of the respondents said that the local HR function has a direct reporting relationship to corporate HR," said Corinne Carlson, a Chicago-based international consultant with Mercer.

"This can make it extremely difficult to monitor pay strategies on a global basis to ensure their implementation and effectiveness," she said.

Carlson sees the next step in the evolution of global compensation programmes will be employers devoting more time and attention to these governance issues over the next few years.

"As companies expand their global reach, they need to make sure their compensation and other reward programmes support their business strategy," said Carlson.

"An effective global compensation strategy creates consistency in pay management, facilitates global employee mobility, and ensures that the money spent on compensation is used wisely."

--Reprinted with the permission of Expatica HR (www.expatica.com/hr),a news and information source for international HR professionals.

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