Guide to Creating an International Compensation and Benefits Policy
International compensation and benefits are one of the most essential things to consider when developing global expansion strategies. There are statutory and supplementary requirements that must be included in any employee compensation package. Organizations must efficiently plan and develop their comp&ben policy to stand a chance against competitors, attract and retain employees, ensure good reviews from workers, maintain high-level performance. They are special packages employees must enjoy during their working term with an organization. Organizations with global expansion plans must however understand that the payment structure and framework used in their home country cannot be replicated in another country of project. The difference in labor laws, culture, country’s policies, etc are some of the factors warranting companies to develop overseas packages that must meet the new country’s standard.
In this article, we’ll guide you through the process required in creating a comp and benefits structure for your organization in foreign countries.
What is International Compensation and Benefits?
Compensation and benefits are otherwise known as “comp and benefits” are special employment compensation packages that an employee enjoys at a certain time and level in an organization. Some compensation and benefits package examples include merit pay, travel allowances, health insurance, short-term disability insurance, bonuses, free breakfast and lunch, etc. These packages, however, may come as tangible or intangible rewards, that is, some come in monetary value, and while others come as special benefits or indirect pay.
However, all these rewards are country-specific, that is, the compensation system used in your US branch might not fit into the system practiced in Azerbaijan. Due to the differences in compensation focus, companies need to make appropriate adjustments to all plans in each of their country of projects to ensure proper adherence with all statutory. Thus, international benefits and compensation are specific overseas packages that have been prepared for employees to retain and boost them in each of the employer’s company country of project. These packages are so essential because it helps in developing a great sense of motivation and energy among employees to keep work effectively and efficiently. Thus, if your company is ready to expand internationally, you must be ready and prepared to pay special attention to developing fair, standard, and broad reward packages for your employees.
But, how can an organization develop a global compensation and benefits structure?
Creating an International Compensation and Benefits Structure
Companies must use a detailed, fair, and standard international compensation structure to rightly cover all employees according to the available foreign provisions. This structure is also used to strategize and review how employees are paid, and the available rewards for their work. This structure should the roadmap and framework with which organizations will clearly outline their compensation strategies. In this section, we will walk you through developing international compensation and benefits plans and structure.
- Study your Country of Interest
This is one of the steps that distinguish international payment methods from domestic ones. Companies must ensure that they carefully research the foreign system they are expanding to. A proper study must be made into the country’s market and economy, culture, available skillsets and workers readiness, qualification range, supporting laws and policies, etc. For instance, if your company is moving to Germany, you must properly examine the German market, comply with their equal protection laws and collective bargaining, German compensation strategies, etc. A shallow study might result in improper allocation, disbursement of wrong benefits, and potential legal and financial penalties.
- Apply DIY approach or Consult Experts
You can decide to create the comp and benefits structure yourself via your company’s HR, or you can simply outsource the whole process to employment experts and/or organizations. Doing it yourself is a tasking and challenging decision even with the help of qualified professionals that will create and manage the structure. Also, consulting an external local expert will help you in getting insights about the new market and the available policies. However, these experts will just provide you with the advice and little assistance needed. They can not help in monitoring and managing the structure.
Meanwhile, outsourcing your compensation and benefits strategies to an employment organization like WeHireGlobally will save you the stress of undergoing the challenging process involved in compensation management. They will also assist you in matching your home country standards with the foreign country system. they will help you in localizing and customizing the benefits in terms of the foreign country legal and labor provisions.
- Study your Competitors
Developing a standard and fair employee package requires a thorough study of your company’s competitor systems. You must ensure that whatever you will be dishing out to your employees must be attractive, relative to the work done, and has an edge over your competitors’ standards. Don’t limit yourself to the competition in your home country alone, but pay rapt attention to those in your targeted country. This will help you in developing the competitive posture that is best for your company and make you outstanding among your competitors.
- Budget and Salary
Develop an extensive budget and salary structure that is in line with your market and job analysis. You should consider the number of employees you’ll be needing, the extent of work, foreign compensation system, the foreign country standard and cost of living, currency conversion rate, etc when you are developing your budget and salary structure. It must have extensive coverage for all employees including those working overtime and remotely. You must structure all compensation within your budget.
- Classify your employees and match them with the appropriate compensation
Your employees must be properly classified based on skill, qualification, contribution to the company, etc. this classification will help you to properly provide standard rewards for employees with misclassification or misappropriation. For instance, proper matching and classification will help you in differentiating between the benefits in which a company’s driver can enjoy compared to the ones that are available for the company’s managing director. However, before you start matching employees and their rewards together, you must select the expected compensation your company will be paying its employees. This is a very important step and it differs from country to country.
- Define all terms
When creating a structure for compensating your employees for their labor, you must rightly define all the terms used. This is an important aspect that must be carefully carried out. When the term used in the reward structure is not properly defined, the company is at the risk of facing severe penalties. For instance, define what you mean by “employee”, “wages”, “bonuses”, etc in your prepared plan because terms are defined differently in various countries.
How to Create a Compensation Plan
After you’ve developed the compensation structure, you’ll be using in the foreign country you’re expanding to, you must create a plan through which the rewards will be distributed. Your compensation plan will consist of your allocation and disbursement plans, workers’ salaries, payment conditions, and time of action. You should follow the steps in creating a good compensation plan:
- Develop a company outline to know the number of employees needed, your business targets, employment objectives, available positions, etc
- Formulate an extensive job description for the positions you intend to fill. Your job description must be simple, easy-to-read, relative to competitors’ patterns, etc.
- Equip your HR department with the required skills, and assign them to manage your compensation plans. You can also outsource this planning to an International PEO like WeHG for an easy, fast, and compliant process.
- Plan, prepare and select the right compensation for all the positions you intend to fill. This must be done according to all the available foreign customs and laws. You can leverage your competitor’s method to gain insights on similar positions that are available in your company.
- Arrange jobs hierarchically, and allocate the right compensation/rewards to each of them.
- Define and develop your salary structure and compensation plans which must be relative to the employee’s qualification, skills, age, ability, contributions, etc.
- Authorize the time in which the rewards will be disbursed to an employee. For instance, sabbatical leave is granted to employees in some countries after 5 years of service.
- Always stay updated and compliant with all statutory.
- Keep a focused eye on the compensation structure, adjusting it when needed.
- Organize regular reviews and communication activities among employees to monitor the activeness of the plan, and also employees’ satisfaction.
Create and Manage a Standard Compensation Structure with WeHG
As you’ve read from the article, creating international compensation and benefits structure can be difficult due to globalization and variation in foreign laws and policies. It is more challenging when you can’t replicate your home country’s system in another country. However, with WeHireGlobally, you are assured of safety and compliance in developing a new structure. We will help you to properly manage your international compensation structure, and match your domestic system with the available foreign framework. We will also provide you with local experts and insights in foreign countries.
FAQ Compensation and benefits
A compensation package consists of attractive and motivating plans which employers offer their employees based on their responsibilities to the organization. These packages may include salaries, bonuses, allowances, etc.
The major objectives of compensating employees internationally are to make the companies attractive to talents, increase the retention rate of current employees, and consistently motivate workers to be productive.
One of the major factors affecting international compensation is the country specificity in the system. Companies must customize their reward system to the available provisions in their country of interest. Other factors include employee’s qualifications, skills, company’s industry, etc.