Question

what are some of the challenges faced by MNCs in their global compensation practices?

Answer 1

Some of the challenges faced by MNC in global compensation practices are as follows: -

- The labour laws of different country sets up diverse rates for standard and wages in the country. The company has to follow all such minimum wage policy else there is possibility of legal litigations on the company.

- In various countries union plays a very significant role in determining the rate of compensation at which the workers will work. To make matters worse there are often multiple unions functioning in different locations, each demanding differently. Adhering to all such labours in different locations creates extra hurdles for the company.

- The tax laws of countries are different and often blank following of similar compensation plans can be tax disadvantageous for the employees resulting to higher turnover of labour. Thus organisation must ensure the compensation structure is tax efficient for the employees.

- The standard of living, health care expenses are different for all countries. In such scenario if the payment causes hurdles in maintaing a descent standard of living the employee will be bound to leave the organisation resulting in higher turnover of labour.

- Often during busy production season there arises need for working overtime, this is often governed by country specific laws resulting in different overtime rate for different organisation.

- The workers of different countries have different expected packages from their employers with regard to the same job, non fulfillment of such expectations, result in employees leaving the organisation. Ex: Computer engineer working in America may ask for more than twice the salary than those working in african countries

These are all the major challenges faced by MNC in designing global compensation packages.