Hrmn 467 dq 6

International HRM Considerations
LEARNING OBJECTIVES

1. Be able to explain how the selection process for an expatriate differs from a domestic process.

2. Explain possible expatriate training topics and the importance of each.

3. Identify the performance review and legal differences for international assignments.

4. Explain the logistical considerations for expatriate assignments.

In an international environment, as long as proper research is performed, most HRM concepts can be

applied. The important thing to consider is proper research and understanding of cultural, economic, and

legal differences between countries. This section will provide an overview of some specific considerations

for an international business, keeping in mind that with awareness, any HRM concept can be applied to

the international environment. In addition, it is important to mention again that host-country offices

should be in constant communication with home-country offices to ensure policies and practices are

aligned with the organization.

Recruitment and Selection

As we discussed in Section 14.2 “Staffing Internationally”, understanding which staffing strategy to use is

the first aspect of hiring the right person for the overseas assignment. The ideal candidate for an overseas

assignment normally has the following characteristics:

1. Managerial competence: technical skills, leadership skills, knowledge specific to the company operations.

2. Training: The candidate either has or is willing to be trained on the language and culture of the host

country.

3. Adaptability: The ability to deal with new, uncomfortable, or unfamiliar situations and the ability to adjust

to the culture in which the candidate will be assigned.

As we discussed earlier, when selecting an expatriate or a third-country national for the job, assuring that

the candidate has the job factors, relational dimensions, motivational state, family situation, and language

skills (or can learn) is a key consideration in hiring the right person. Some of the costs associated with

failure of an expatriate or third-country national might include the following:

1. Damage to host-country relationships

2. Motivation of host-country staff

3. Costs associated with recruitment and relocation

4. Possible loss of that employee once he or she returns

5. Missed opportunities to further develop the market

Because success on an overseas assignment has such complex factors, the selection process for this

individual should be different from the selection process when hiring domestically. The process should

start with the job analysis, as we discussed in Chapter 4 “Recruitment”. The job analysis and job

description should be different for the overseas assignment, since we know that certain competencies

(besides technical ones) are important for success. Most of those competencies have little to do with the

person’s ability to do the job but are related to his or her ability to do the job in a new cultural setting.

These additional competencies (besides the skills needed for the job) may be considered:

1. Experience working internationally

2. Extroverted

3. Stress tolerance

4. Language skills

5. Cultural experiences

Once the key success factors are determined, many of which can be based on previous overseas

assignments successes, we can begin to develop a pool of internal candidates who possess the additional

competencies needed for a successful overseas assignment.

To develop the pool, career development questions on the performance review can be asked to determine

the employee’s interest in an overseas assignment. Interest is an important factor; otherwise, the chance

of success is low. If there is interest, this person can be recorded as a possible applicant. An easy way to

keep track of interested people is to keep a spreadsheet of interested parties, skills, languages spoken,

cultural experiences, abilities, and how the candidates meet the competencies you have already developed.

Once an overseas assignment is open, you can view the pool of interested parties and choose the ones to

interview who meet the competencies required for the particular assignment.

Training

Much of the training may include cultural components, which were cited by 73 percent of successful

expatriates as key ingredients to success. [1]

Training isn’t always easy, though. The goal is not to help someone learn a language or cultural traditions

but to ensure they are immersed in the sociocultural aspects of the new culture they are living in. Roger N.

Blakeney, [2] an international business researcher, identifies two main pathways to adapting to a new

culture. First, people adjust quickly from the psychological perspective but not the social one. Blakeney

argues that adjusting solely from the psychological perspective does not make an effective expatriate.

Although it may take more time to adjust, he says that to be fully immersed and to fully understand and

be productive in a culture, the expatriate must also have sociocultural adaption. In other words, someone

who can adjust from a sociocultural perspective ends up performing better because he or she has a deeper

level of understanding of the culture. Determining whether your candidate can gain this deeper level

would figure in your selection process.

Figure 14.3 Sample Selection Process for Overseas Assignments

lection Process for Overseas Assignments

One of the key decisions in any global organization is whether training should be performed in-house or

an outside company should be hired to provide the training. For example, Communicaid offers online and

on-site training on a variety of topics listed. Whether in-house or external training is performed, there are

five main components of training someone for an overseas assignment:

1. Language

2. Culture

3. Goal setting

4. Managing family and stress

5. Repatriation

Figure 14.4 Blakeney’s Model of Psychological versus Sociocultural Adaption

Source: Roger Blakeney, “Psychological Adjustment and Sociocultural Adaptation: Coping on International

Assignments” (paper, Annual Meeting of Academy of Management, Atlanta, GA, 2006).

Training on languages is a basic yet necessary factor to the success of the assignment. Although to many,

English is the international business language, we shouldn’t discount the ability to speak the language of

the country in which one is living. Consider Japan’s largest online retailer, Rakuten, Inc. It mandated that

English will be the standard language by March 2012. [3] Other employers, such as Nissan and Sony, have

made similar mandates or have already implemented an English-only policy. Despite this, a large

percentage of your employee’s time will be spent outside work, where mastery of the language is

important to enjoy living in another country. In addition, being able to discuss and negotiate in the

mother tongue of the country can give your employee greater advantages when working on an overseas

assignment. Part of language, as we discussed in Chapter 9, isn’t only about what you say but also includes

all the nonverbal aspects of language. Consider the following examples:

 In the United States, we place our palm upward and use one finger to call someone over. In Malaysia, this

is only used for calling animals. In much of Europe, calling someone over is done with palm down, making

a scratching motion with the fingers (as opposed to one finger in the United States). In Columbia, soft

handclaps are used.

 In many business situations in the United States, it is common to cross your legs, pointing the soles of

your shoes to someone. In Southeast Asia, this is an insult since the feet are the dirtiest and lowest part of

the body.

 Spatial differences are an aspect of nonverbal language as well. In the United States, we tend to stand

thirty-six inches (an arm length) from people, but in Chile, for example, the space is much smaller.

 Proper greetings of business colleagues differ from country to country.

 The amount of eye contact varies. For example, in the United States, it is normal to make constant eye

contact with the person you are speaking with, but in Japan it would be rude to make constant eye contact

with someone with more age or seniority.

The goal of cultural training is to train employees what the “norms” are in a particular culture. Many of

these norms come from history, past experience, and values. Cultural training can include any of the

following topics:

1. Etiquette

2. Management styles

3. History

4. Religion

5. The arts

6. Food

7. Geography

8. Logistics aspects, such as transportation and currency

9. Politics

Cultural training is important. Although cultural implications are not often discussed openly, not

understanding the culture can harm the success of a manager when on overseas assignment. For example,

when Revlon expanded its business into Brazil, one of the first products it marketed was a Camellia flower

scented perfume. What the expatriate managers didn’t realize is that the Camellia flower is used for

funerals, so of course, the product failed in that country. [4] Cultural implications, such as management

style, are not always so obvious. Consider the US manager who went to Mexico to manage a production

line. He applied the same management style that worked well in America, asking a lot of questions and

opinions of employees. When employees started to quit, he found out later that employees expect

managers to be the authority figure, and when the manager asked questions, they assumed he didn’t know

what he was doing.

Training on the goals and expectations for the expatriate worker is important. Since most individuals take

an overseas assignment to boost their careers, having clear expectations and understanding of what they

are expected to accomplish sets the expatriate up for success.

Because moving to a new place, especially a new country, is stressful, it is important to train the employee

on managing stress, homesickness, culture shock, and likely a larger workload than the employee may

have had at home. Some stress results from insecurity and homesickness. It is important to note that

much of this stress occurs on the family as well. The expatriate may be performing and adjusting well, but

if the family isn’t, this can cause greater stress on the employee, resulting in a failed assignment. Four

stages of expatriate stress identified in the Selyes model, the General Adaption Syndrome, are shown

in Figure 14.5 “General Adaption Syndrome to Explain Expatriate Stress”. The success of overseas

employees depends greatly on their ability to adjust, and training employees on the stages of adjustment

they will feel may help ease this problem.

Spouses and children of

the employee may also

experience much of the

stress the expatriate feels.

Children’s attendance at

new schools and lack of

social networks, as well as

possible sacrifice of a

spouse’s career goal, can

negatively impact the

assignment. Many

companies offer training

not only for the employee

but for the entire family

when engaging in an

overseas assignment. For

example, global

technology and

manufacturing company

Honeywell offers employees and their families a two-day cultural orientation on the region they will be

living in. [5] Some of the reasons for lack of adjustment by family members might include the following:

1. Language issues

2. Social issues

3. Schooling

4. Housing

5. Medical services

Figure 14.5 General Adaption Syndrome to Explain Expatriate Stress

Source: Bala Koteswari and Mousumi Bhattacharya, “Managing

Expatriate Stress,”Delhi Business Review 8, no. 1 (2007): 89–98.

The ability of the organization to meet these family needs makes for a more successful assignment. For

example, development of an overseas network to provide social outlets, activities, schooling and housing

options, assignment of mentors to the spouse, and other methods can help ease the transition.

Finally, repatriation is the process of helping employees make the transition to their home country. Many

employees experience reverse culture shock upon returning home, which is a psychological phenomenon

that can lead to feelings of fear, helplessness, irritability, and disorientation. All these factors can cause

employees to leave the organization soon after returning from an assignment, and to take their knowledge

with them. One problem with repatriation is that the expatriate and family have assumed things stayed

the same at home, while in fact friends may have moved, friends changed, or new managers may have

been hired along with new employees. Although the manager may be on the same level as other managers

when he or she returns, the manager may have less informal authority and clout than managers who have

been working in the particular office for a period of time. An effective repatriation program can cost

$3,500 to $10,000 per family, but the investment is worth it given the critical skills the managers will

have gained and can share with the organization. In fact, many expatriates fill leadership positions within

organizations, leveraging the skills they gained overseas. One such example is FedEx president and CEO

David Bronczek and executive vice president Michael Drucker. Tom Mullady, the manager of

international compensation planning at FedEx, makes the case for a good repatriation program when he

says, “As we become more and more global, it shows that experience overseas is leveraged back home.” [6]

Repatriation planning should happen before the employee leaves on assignment and should be a

continuous process throughout the assignment and upon return. The process can include the following:

 Training and counseling on overseas assignment before leaving

 Clear understanding of goals before leaving, so the expatriate can have a clear sense as to what new skills

and knowledge he or she will bring back home

 Job guarantee upon return (Deloitte and Touche, for example, discusses which job each of the two

hundred expats will take after returning, before the person leaves, and offers a written letter of

commitment. [7])

 Assigning the expatriate a mentor, ideally a former expatriate

 Keeping communication from home open, such as company newsletters and announcements

 Free return trips home to stay in touch with friends and family

 Counseling (at Honeywell, employees and families go through a repatriation program within six months

of returning. [8])

 Sponsoring brown bag lunches where the expatriate can discuss what he or she learned while overseas

 Trying to place expatriates in positions where they can conduct business with employees and clients from

where they lived

It is also important to note that offering an employee an international assignment can help develop that

person’s understanding of the business, management style, and other business-related development.

Working overseas can be a crucial component to succession planning. It can also be a morale booster for

other employees, who see that the chosen expatriate is further able to develop his or her career within the

organization.

While the focus of this section has been on expatriate assignments, the same information on training is

true for third-country nationals.

If it is decided that host-country nationals will be hired, different training considerations might occur. For

example, will they spend some time at your domestic corporate headquarters to learn the business, then

apply what they learned when they go home? Or, does it make more sense to send a domestic manager

overseas to train the host-country manager and staff? Training will obviously vary based on the type of

business and the country, and it may make sense to gain input from host-country managers as opposed to

developing training on your own. As we have already discussed in this chapter, an understanding of the

cultural components is the first step to developing training that can be utilized in any country.

Compensation and Rewards

There are a few options when choosing compensation for a global business. The first option is to maintain

companywide pay scales and policies, so for example, all sales staff are paid the same no matter what

country they are in. This can reduce inequalities and simplify recording keeping, but it does not address

some key issues. First, this compensation policy does not address that it can be much more expensive to

live in one place versus another. A salesperson working in Japan has much higher living expenses than a

salesperson working in Peru, for example. As a result, the majority of organizations thus choose to use a

pay banding system based on regions, such as South America, Europe, and North America. This is called

alocalized compensation strategy. Microsoft and Kraft Foods both use this approach. This method

provides the best balance of cost-of-living considerations.

However, regional pay banding is not necessarily the ideal solution if the goal is to motivate expatriates to

move. For example, if the employee has been asked to move from Japan to Peru and the salary is

different, by half, for example, there is little motivation for that employee to want to take an assignment in

Peru, thus limiting the potential benefits of mobility for employees and for the company.

One possible option is to pay a similar base salary companywide or regionwide and offer expatriates an

allowance based on specific market conditions in each country. [9]This is called

the balance sheet approach. With this compensation approach, the idea is that the expatriate should have

the same standard of living that he or she would have had at home. Four groups of expenses are looked at

in this approach:

1. Income taxes

2. Housing

3. Goods and services

4. Base salary

5. Overseas premium

The HR professional would estimate these expenses within the home country and costs for the same items

in the host country. The employer then pays differences. In addition, the base salary will normally be in

the same range as the home-country salary, and anoverseas premium might be paid owing to the

challenge of an overseas assignment. An overseas premium is an additional bonus for agreeing to take an

overseas assignment. There are many companies specializing in cost-of-living data, such as Mercer

Reports. It provides cost-of-living information at a cost of $600 per year. Table 14.6 “The Balance Sheet

Approach to Compensation” shows a hypothetical example of how the balance sheet approach would

work.

Table 14.6 The Balance Sheet Approach to Compensation

Chicago, IL Tokyo Allowance

Tax rate 30% 35% 5% or $288/month

Housing $1250 $1800 $550

Base salary $5400 $5,750 $350

Chicago, IL Tokyo Allowance

Overseas premium 15% $810

Total allowance $1998

Total salary and allowance $5400 $7748

Other compensation issues, which will vary greatly from country to country, might include the following:

1. The cost of benefits in another country. Many countries offer universal health care (offset by higher taxes),

and therefore the employee would have health benefits covered while working and paying taxes in that

country. Canada, Finland, and Japan are examples of countries that have this type of coverage. In

countries such as Singapore, all residents receive a catastrophic policy from the government, but they

need to purchase additional insurance for routine care. [10] A number of organizations offer health care for

expatriates relocating to another country in which health care is not already provided.

2. Legally mandated (or culturally accepted) amount of vacation days. For example, in Australia twenty paid

vacation days are required, ten in Canada, thirty in Finland, and five in the Philippines. The average

number of US worker vacation days is fifteen, although the number of days is not federally mandated by

the government, as with the other examples. [11]

3. Legal requirements of profit sharing. For example, in France, the government heavily regulates profit

sharing programs. [12]

4. Pay system that works with the country culture, such as pay systems based on seniority. For example,

Chinese culture focuses heavily on seniority, and pay scales should be developed according to seniority.

In Figure 14.6 “Hourly World Compensation Comparisons for Manufacturing Jobs”, examples of hourly

compensation for manufacturing workers are compared.

5. Thirteenth month (bonus) structures and expected (sometimes mandated) annual lump-sum

payments. Compensation issues are a major consideration in motivating overseas employees. A

systematic system should be in place to ensure fairness in compensation for all expatriates.

Performance Evaluations

The challenge in overseas performance evaluations is determining who should rate the performance of the

expatriate. While it might make sense to have the host-country employees and managers rate the

expatriate, cultural differences may make this process ineffective. Cultural challenges may make the host

country rate the expatriate more harshly, or in some cases, such as Indonesia, harmony is more important

than productivity, so it may be likely an Indonesia employee or manager rates the expatriate higher, to

keep harmony in the workplace. [13]

If the home-country manager rates the performance of the expatriate, he or she may not have a clear

indication of the performance, since the manager and expatriate do not work together on a day-to-day

basis. A study performed by Gregersen, Hite, and Black suggests that a balanced set of raters from host

Figure 14.6 Hourly World Compensation Comparisons for Manufacturing Jobs

Source: Bureau of Labor Statistics, Division of International Labor Comparisons,

International Comparisons of Hourly Compensation costs in Manufacturing,

2009,http://www.bls.gov/news.release/ichcc.toc.htm (accessed September 16, 2011).

and home countries and more frequent appraisals relate positively to the accuracy of performance

evaluations. [14] They also suggest that the use of a standardized form relates negatively to perceived

accuracy. Carrie Shearer, an international HR expert, concurs by stating that the standardized form, if

used, should also include special aspects for the expatriate manager, such as how well the expatriate fits in

with the culture and adaptation ability. [15]

Besides determining who should rate the expatriate’s performance, the HR professional should determine

the criteria for evaluating the expatriate. Since it is likely the expatriate’s job will be different overseas, the

previous criteria used may not be helpful in the evaluation process. The criteria used to rate the

performance should be determined ahead of time, before the expatriate leaves on assignment. This is part

of the training process we discussed earlier. Having a clear picture of the rating criteria for an overseas

assignment makes it both useful for the development of the employee and for the organization as a tool. A

performance appraisal also offers a good opportunity for the organization to obtain feedback about how

well the assignment is going and to determine whether enough support is being provided to the

expatriate.

The International Labor Environment

As we have already alluded to in this chapter, understanding of laws and how they relate to host-country

employees and expatriates can vary from country to country. Because of this, individual research on laws

in the specific countries is necessary to ensure adherence:

1. Worker safety laws

2. Worker compensation laws

3. Safety requirements

4. Working age restrictions

5. Maternity/paternity leaves

6. Unionization laws

7. Vacation time requirements

8. Average work week hours

9. Privacy laws

10. Disability laws

11. Multiculturalism and diverse workplace, antidiscrimination law

12. Taxation

As you can tell from this list, the considerable HRM factors when doing business overseas should be

thoroughly researched.

One important factor worth mentioning here is labor unions. As you remember fromChapter 12 “Working

with Labor Unions”, labor unions have declined in membership in the United States. Collective bargaining

is the process of developing an employment contract between a union and management within an

organization. The process of collective bargaining can range from little government involvement to

extreme government involvement as in France, for example, where some of the labor unions are closely

tied with political parties in the country.

Some countries, such as Germany, engage in codetermination, mandated by the government.

Codetermination is the practice of company shareholders’ and employees’ being represented in equal

numbers on the boards of organizations, for organizations with five hundred or more employees. The

advantage of this system is the sharing of power throughout all levels of the organization; however, some

critics feel it is not the place of government to tell companies how their corporation should be run. The

goal of such a mandate is to reduce labor conflict issues and increase bargaining power of workers.

Taxation of expatriates is an important aspect of international HRM. Of course, taxes are different in

every country, and it is up to the HR professional to know how taxes will affect the compensation of the

expatriate. The United States has income tax treaties with forty-two countries, meaning taxing authorities

of treaty countries can share information (such as income and foreign taxes paid) on residents living in

other countries. US citizens must file a tax return, even if they have not lived in the United States during

the tax year. US taxpayers claim over $90 billion in foreign tax credits on a yearly

basis. [16] Foreign tax credits allow expatriates working abroad to claim taxes paid overseas on their US tax

forms, reducing or eliminating double taxation. Many organizations with expatriate workers choose to

enlist the help of tax accountants for their workers to ensure workers are paying the correct amount of

taxes both abroad and in the United States.

Table 14.7 Examples of HRM-Related Law Differences between the United States and China

United States China*

Employment

Contracts Most states have at-will employment

Contract employment system. All employees must

have a written contract

United States China*

Layoffs

No severance required

Company must be on verge of bankruptcy before it

can lay off employees

Two years of service required to pay

severance; more than five years of

experience requires a long service

payment

Termination Employment at will

Employees can only be terminated for cause, and

cause must be clearly proved. They must be given

30 days’ notice, except in the case of extreme

circumstances, like theft

Overtime

None required for salaried

employees

Employees who work more than 40 hours must be

paid overtime

Salary Up to individual company

A 13-month bonus is customary, but not required,

right before the Chinese New Year

Vacation No governmental requirement

Mandated by government:

First year: no vacation

Year 2–9: 5 days

Years 10–19: 10 days

20 years or more: 15 days

Paid Holidays None required by law

3 total. Chinese New Year, International Labor

Day, and National Day. However, workers must

“make up” the days by working a day on the

previous weekend

Social Security

Required by law for employer and

employee to pay into social security

Greater percentages are paid by employer: 22% of

salary paid by employer, 8% paid by employee

Discrimination

Laws

Per EEOC, cannot discriminate

based on race, sex, age, genetic

information, or other protected

groups Laws are in place but not enforced

United States China*

Maternity Leave

Family and Medical Leave Act

allows 12 weeks 90 days’ maternity leave

*In China, all employees are covered by the Labor Contract Law.

Source: Harris and Moure, pllc, “China Employment Contracts, Ten Things to Consider,” China Law

Blog,http://www.chinalawblog.com/2010/04/china_employment_contracts_ten.html(accessed August

13, 2011) and Cindy Zhang, “Employment Law in China,” June 21,

2011, http://www.attorneycz.com/ (accessed August 13, 2011).

Logistics of International Assignments

As you learned earlier, providing training for the expatriate is an important part of a successful

assignment. However, many of the day-to-day aspects of living are important, too.

One of the most important logistical aspects is to make sure the employee can legally work in the country

where you will be sending him or her, and ensuring his or her family has appropriate documentation as

well. A visa is permission from the host country to visit, live, or work in that country. Obtaining visas is

normally the job of an HR professional. For example, the US Department of State and the majority of

countries require that all US citizens have a valid passport to travel to a foreign country. This is the first

step to ensuring your host-country national or third-country national can travel and work in that country.

Next, understanding the different types of visas is a component to this process. For example, the United

States offers a Visa Waiver Program (VWP) that allows some nationals of thirty-six participating countries

to travel to the United States for stays of less than ninety days. Iceland, Singapore, and France are

examples of countries that participate in this program. For most host-national assignments, however, this

type of visa may not be long enough, which then requires research of the individual country. It is

important to mention that most countries have several types of visas, such as the following:

1. Visas for crew members working on ships or airlines

2. Tourist visas

3. Student visas

4. Employment visas for long-term employment at a foreign company

5. Business visas

The visa process and time line can vary greatly depending on the country for which the visa is required.

For example, obtaining a visa to work in China may take six months or longer. The best place to research

this topic is on the country’s embassy website.

Besides ensuring the expatriate can legally work in the country, other considerations are worth

mentioning as well:

1. Housing. Where will I live is one of the most important questions that an expatriate may ask. The HR

professional can help this process by outsourcing a leasing or rental company in the city where the

expatriate will live to find a rental that meets the expectations of the expatriate. Choosing a place to live

ahead of time can reduce stress (one of the causes of failure for assignments) for the expatriate and his or

her family. Allowances may be made for housing costs, as discussed in the compensation section.

2. Moving belongings. Determination of how belongings left behind will be stored at home or if those items

will be brought to the host country is another logistical consideration. If items will be brought, beyond

what can be carried in a suitcase, the HR professional may want to consider hiring a moving logistics

company that specializes in expatriate moves to help with this process.

3. The possibility of return trips home. As part of the initial discussion, the option of offering return trips

home can make repatriation and performance reviews with home-country managers easier. This also

gives the expatriate and his or her family the opportunity to visit with family and friends, reducing reverse

culture shock upon return.

4. Schooling. Some organizations may want to provide information on the schooling system to the

expatriate, if he or she has children. Schools begin at different times of the year, and this information can

make the registration process for school easier on the family.

5. Spousal job. We know already from earlier in this chapter that one of the biggest challenges facing

expatriates (and reasons for failure) is unhappiness of the spouse. He or she may have had a career at

home and given that up while the spouse takes an assignment. HR professionals might consider offering

job search services as part of the allowance discussed earlier in this chapter. Lockheed Martin, for

example, offers job search services to spouses moving overseas. [17]

In any situation, support from the HR professional will help make the assignment a success, which shows

that HRM practices should be aligned with company goals.

HOW WOULD YOU HANDLE THIS?

Visa Blues

Your manager has just notified you that one of your marketing managers has taken an assignment in

China to work for one year. You tell your manager you will begin the visa process for employment. She

disagrees and tells you it will be quicker to just get a tourist visa. You mention this is illegal and could

get the employee and company in trouble, but she insists on your getting a tourist visa so the employee

can leave within the month. How would you handle this?

How Would You Handle This?

https://api.wistia.com/v1/medias/1361075/embed

The author discusses the How Would You Handle This situation in this chapter

at:https://api.wistia.com/v1/medias/1361075/embed.

KEY TAKEAWAYS

 Personality traits are a key component to determining whether someone is a good fit for an

overseas assignment. Since 73 percent of overseas assignments fail, ensuring the right match up

front is important.

 The ideal expatriate is able to deal with change, is flexible, and has the support of his or her

family. Ideal expatriates are also organized, take risks, and are good at asking for help.

 The adjustment period an expatriate goes through depends on his or her initial preparation.

Blakeney said there are two levels of adjustment: psychological adjustment and sociocultural

adjustment. Although the psychological may take less time, it is the sociocultural adjustment

that will allow the assignment to be successful.

 Training is a key component in the HRM global plan, whether expatriates or host-country

nationals are to be hired. Both will require a different type of training. Training can reduce

culture shock and stress.

 Consideration of the expatriate’s family and their ability to adjust can make a more successful

overseas assignment

 Compensation is another consideration of a global business. The balance sheet approach pays

the expatriate extra allowances, such as living expenses, for taking an international assignment.

 Other considerations such as vacation days, health-care benefits, and profit-sharing programs

are important as well.

 Laws of each country should be carefully evaluated from an HRM strategic perspective. Laws

relating to disabilities, pregnancy, and safety, for example, should be understood before doing

business overseas.

 Labor unions have different levels of involvement in different parts of the world. For example,

Germany has codetermination, a policy that requires companies to have employees sit on

various boards.

 The United States has treaties with forty-two countries to share information about expatriates.

The United States offers foreign tax credits to help expatriates avoid double taxation. However,

US citizens must file taxes every year, even if they have not lived in the United States during that

year.

 Logistical help can be important to ensuring the success of an overseas assignment. Help with

finding a place to live, finding a job for a spouse, and moving can make the difference between a

successful assignment and an unsuccessful one.

 The Visa Waiver Program (VWP) is a program in which nationals of thirty-six countries can enter

the United States for up to a ninety-day period. This type of visa may not work well for

expatriates, so it is important to research the type of visa needed from a particular country by

using that country’s embassy website.

EXERCISE

1. Research the country of your choice. Discuss at least five of the aspects you should know as an

HRM professional about doing business in that country.

[1] The Economist Intelligence Unit, Up or Out: Next Moves for the Modern Expatriate, 2010, accessed April 28,

2011, http://graphics.eiu.com/upload/eb/LON_PL_Regus_WEB2.pdf.

[2] Roger Blakeney, “Psychological Adjustment and Sociocultural Adaptation: Coping on International

Assignments” (paper, Annual Meeting of Academy of Management, Atlanta, GA, 2006).

[3] Jeff Thredgold, “English Is Increasingly the International Language of Business,” Deseret News, December 14,

2010, accessed August 11, 2011,http://www.deseretnews.com/article/700091766/English-is-increasingly-the-

international-language-of-business.html.

[4] Sudipta Roy, “Brand Failures: A Consumer Perspective to Formulate a MNC Entry Strategy” (postgraduate

diploma, XLRI School of Business and Human Resources, 1998), accessed August 12,

2011, http://sudiptaroy.tripod.com/dissfin.pdf.

[5] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/.

[6] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/

[7] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/

[8] Leslie Gross Klaff, “The Right Way to Bring Expats Home,” BNET, July 2002, accessed August 12,

2011, http://findarticles.com/p/articles/mi_m0FXS/is_7_81/ai_89269493/

[9] J. Cartland, “Reward Policies in a Global Corporation,” Business Quarterly, Autumn 1993, 93–96.

[10] Countries with Universal Healthcare (no date), accessed August 11,

2011,http://truecostblog.com/2009/08/09/countries-with-universal-healthcare-by-date/.

[11] Jeanne Sahadi, “Who Gets the Most (and Least) Vacation” CNN Money, June 14, 2007, accessed August 11,

2011, http://money.cnn.com/2007/06/12/pf/vacation_days_worldwide/.

[12] Wilke, Maack, und Partner, “Profit-Sharing,” Country Reports on Financial Participation in Europe, 2007,

worker-participation.eu, 2007, accessed August 12, 2011, http://www.worker-participation.eu/National-Industrial-

Relations/Across-Europe/Financial-Participation/Profit-sharing.

[13] George Whitfield, “Do as I Say, Not as I Do: Annual Performance Appraisal and Evaluation in Indonesia” n.d.,

Living in Indonesia, accessed August 11, 2011,http://www.expat.or.id/business/annualperformanceappraisal.html.

[14] Hal Gregersen, Julie Hite, and Steward Black, “Expatriate Performance Appraisal in US Multinational

Firms,” Journal of International Business Studies 27, no. 4 (1996): 711–38.

[15] Carrie Shearer, “Expat Performance Appraisal: A Two Tier Process?” October 8, 2004, Expatrica.com, accessed

August 12, 2011, http://www.expatica.com/hr/story/expat-performance-appraisal-a-two-tier-process-10529.html.

[16] Internal Revenue Service, “Foreign Tax Credit,” accessed August 13,

2011,http://www.irs.gov/businesses/article/0,,id=183263,00.html.

[17] Maureen Minehan, “Six Job Search Tips for Expatriate Spouses,” n.d., Expatica, accessed August 12,

2011, http://www.expatica.com/nl/essentials_moving_to/essentials/six-job-search-tips-for-expatriate-spouses-

327_9125.html.

Compensation and Rewards

There are a few options when choosing compensation for a global business. The first option is to

maintain companywide pay scales and policies, so for example, all sales staff are paid the same no

matter what country they are in. This can reduce inequalities and simplify recording keeping, but it

does not address some key issues. First, this compensation policy does not address that it can be much

more expensive to live in one place versus another. A salesperson working in Japan has much higher

living expenses than a salesperson working in Peru, for example. As a result, the majority of

organizations thus choose to use a pay banding system based on regions, such as South America,

Europe, and North America. This is called a localized compensation strategy. Microsoft and Kraft Foods

both use this approach. This method provides the best balance of cost-of-living considerations.

However, regional pay banding is not necessarily the ideal solution if the goal is to motivate expatriates

to move. For example, if the employee has been asked to move from Japan to Peru and the salary is

different, by half, for example, there is little motivation for that employee to want to take an assignment

in Peru, thus limiting the potential benefits of mobility for employees and for the company.

One possible option is to pay a similar base salary companywide or regionwide and offer expatriates an

allowance based on specific market conditions in each country.
[9]

This is called the balance sheet

approach. With this compensation approach, the idea is that the expatriate should have the same

standard of living that he or she would have had at home. Four groups of expenses are looked at in this

approach:

1. Income taxes

2. Housing

3. Goods and services

4. Base salary

5. Overseas premium

The HR professional would estimate these expenses within the home country and costs for the same items in

the host country. The employer then pays differences. In addition, the base salary will normally be in the same

range as the home-country salary, and an overseas premium might be paid owing to the challenge of an

overseas assignment. An overseas premium is an additional bonus for agreeing to take an overseas assignment.

The Balance Sheet Approach to Compensation

Chicago, IL Tokyo Allowance

Tax rate 30% 35% 5% or
$288/month

Housing $1250 $1800 $550

Base salary $5400 $5,750 $350

Overseas premium 15% $810

Total allowance $1998

Total salary and
allowance

$5400 $7748

Other compensation issues, which will vary greatly from country to country, might include the
following:

1. The cost of benefits in another country. Many countries offer universal health care (offset by higher

taxes), and therefore the employee would have health benefits covered while working and paying taxes

in that country. Canada, Finland, and Japan are examples of countries that have this type of coverage. In

countries such as Singapore, all residents receive a catastrophic policy from the government, but they

need to purchase additional insurance for routine care. A number of organizations offer health care for

expatriates relocating to another country in which health care is not already provided.

2. Legally mandated (or culturally accepted) amount of vacation days. For example, in Australia twenty

paid vacation days are required, ten in Canada, thirty in Finland, and five in the Philippines. The average

number of US worker vacation days is fifteen, although the number of days is not federally mandated by

the government, as with the other examples.

3. Legal requirements of profit sharing. For example, in France, the government heavily regulates

profit sharing programs.

4. Pay system that works with the country culture, such as pay systems based on seniority. For

example, Chinese culture focuses heavily on seniority, and pay scales should be developed

according to seniority.

5. Thirteenth month (bonus) structures and expected (sometimes mandated) annual lump-sum

payments. Compensation issues are a major consideration in motivating overseas employees.

A systematic system should be in place to ensure fairness in compensation for all expatriates.