The International human resource directors and other top management teams of multinational companies have nowadays realized that globalization is the most critical problems many multinational enterprises are facing today. They also acknowledge that it has become difficult to determine the internalization strategies and factors that they will employ in setting wages for their employees. The IHRM director of a British Multi-National Food Processing Company, which is now planning to open new sites in Australia, Russia and India need to evaluate effective factors for setting wage payment for their employees. Many companies get stuck in the job evaluation process because of the complexity nature of job evaluation process. Many grading and wage payment structures for varied employment aspects have evolved over time and this can be hard for IHRM director to justify why one job is graded or paid higher than the other job. It is vital to employ unique methods for job evaluation and identify effective factors for setting wage payment of expatriate managers, engineers, manager’s engenders and manufacturing staffs. Therefore, before determining wage payment of employees, it is crucial to determine the organizational needs by carrying out job evaluation, job relevant skills, work experience for applicants and understand the economic conditions of the region in which the company will function.
Literature Review
Many multinational companies evaluate varied factors before making a decision of what to pay the new recruited employees. Thus, varied literatures have attempted to reveal the way many companies carry out labor evaluation process or employ varied factors when setting the wages for their employees. When setting the level of monetary compensation of employees, one need to take into consideration varied factors. Snell and Bohlander (2010, p. 121) argue that one of the first factors that should be taken into considerations when setting wage is setting the wage high in order to motivate and attract good labor force. The wage should be equitable meaning that it should accurately reflect the value of the labor performance. Sparrow, Brewster and Harris 2004, p.49) also add that in order for employers to determine wage payment of new employees, they should ensure that the wages are equitable and sustainable for firms. The company must first understand the responsibilities and requirements of the position which is under the review. This is vital because occupations vary from one organization to another and some positions are critical; thus effective job evaluation process should be carried out. Other aspect is reviewing the prevailing rates and classifications for similar occupation (Jehn and Jonsen 2010, p.314). This process is vital and it requires significant research of the competitive rate for a certain occupation within the geographical location. This is where carrying out wage surveys can help in defining wage payment structures, but IHRM should examine this aspect in a professional manner in order to produce better results.
Galuscak, Keeney, Nicolitsas, Smets, Strzelecki and Vodopivec (2010, p. 7) argue that an employer can either offer new employees a predetermined wage or they can bargain with the employers over the wage payment. However, in most cases, predetermined wage can be either due to the wage paid to existing employees with the same qualifications or some other wage. The economies of scale in wage bargaining is likely to be in the contract wage form (Bratton and Gold 2000, p.71). The characteristic level of the firm may influence the pay flexibility including the working contract, variable payment, workforce tenure, turnover or number of working hours. However, many firms prefer skill composition of the workforce more than the other workforce characteristics. Product features such as the product market features where the firm operates can also impact the flexibility of the hiring wage; thus should be taken into consideration.
Moreover, Galuscak et.al (2010, p. 8) argue that it is significant to determine the external factors of wage payment for newly hired works. The authors reveals the research study that was carried out and data drawn from the replies of HRM from around 1500 firms to a firm-level survey on wage and price setting procedures, in 15 EU countries. The research survey was conducted and questionnaires developed by the survey group in order to determine the implications and factors influencing wage payment in varied firms. From the research analysis, it was found that the wages of newly hired employees are influenced by the internal wage payment structure or the labor market. However, the relative significant of the given external factors vary depending to labor market conditions. The firms can follow labor market conditions or the bargaining power of employees or existing laws of labor unions (Soulsby and Clark (2007, p. 1419). The wage payment also differs from one country to another depending on the bargaining structures. However, the argument of literature presented is that wage payment may not only depend on the bargaining structures but also on the prevailing institutional settings (Galuscak et.al (2010, p. 13).
OECD (2004, p.128) evaluates some of the evidence underlying the job strategy recommendations concerning wage setting. He reveals the way wage collective bargaining affect wage payment and employment level in many organizations. From the large empirical research survey analysis that was carried out on wage setting, the author indicates that unions reduce wage inequalities. The research evidence also reveals that collective bargaining and wage differentiation is stronger in regions or countries where there are strong union membership and strong bargaining coverage (OECD 2004, p.134). The empirical research carried out provided the theoretical prediction that the bargaining wage tends to be lower in places where there are high rate of unemployment. Therefore, many employers tend to follow the prevailing rate of unemployment level in a certain region and the excessive demand undermining employment performance before setting wage payment.
Khanna, Palepu and Sinha (2005, p.73) argue that companies employ varied strategies to each country’s context; thus capitalize on their strengths of a certain location before setting wage payment. They also compare the benefits of doing so through carrying out marketing research and analyze the additional cost they will incur. For multinational companies to succeed in the global competitive market, they must modify their business models in each nation. Among the varied aspects that companies compare before setting the wage payment is the political or social system of a given country, openness, product markets, labor markets and capital market. Khanna, Palepu and Sinha (2005, p.74) further argue that multinational companies may adapt the voids in a country’s products, capital or labor markets or both. However, they should retain their core business propositions even as they adopt their business models in business activities. Since companies cannot utilize the same strategies in different countries where they want to operate their business, they can then generate synergies through treating varied markets as part of a system.
Factors to Consider In Setting the Wages
a) For British expatriate managers and engineers
There are varied factors that IHRM director of a British Multi-National Food Processing Company can take into considerations before setting the wages for British expatriate manager and engineers. One of the factors that the IHRM should take into considerations is the availability of expatriate managers and engineers capable of fulfilling the obligations and responsibilities of the job. Skilled and capable employees who are committed to their responsibilities offer the company a crucial competitive advantage such as higher productivity and lower labor force turnover. Therefore, finding the right people to perform the right job is essential because it offer the company a competitive advantage. Dartey-Baah and Amoako (2011, p.2) reveal that engaging employees in the workforce generates effective business results and employees practices such as task design, recruitments, compensation and performance management are vital. For instance, the message that the company conveys while seeking to attract job applicants can influence future employees’ commitment and engagement. The company can set high wages in order to attract skillful and capable people since this is one way of motivating employees to work hard; thus increasing the organizational productivity.
Secondly, determining the level of job demand for prospective employees or unemployment level in a certain country is a crucial factor for setting wage payment of employees. The director of the company should take into considerations the demand level of job and determine the employment level in the area where they are planning to locate an industry. Capozzi (2013. Pr. 3) argues that the level of unemployed labor force in a given location dictates the compensation and benefits. This is significant because it will enable them to determine the wage to be set either at the minimum or maximum level depending on the job demand level.
Lastly, employment setting and organizational needs should also be taken into considerations when setting wage for employees. Capozzi (2013 Pr. 4) argues that understanding the organizational needs can enable an employer to recruit effective employer with required skills and also determine the compensation or benefit level. For example, contracting work to a foreign industry results not because the company has issues of employee benefits, but offering high compensation level to motivate employees meet the organization needs. Employment settings can enable the company director to set wage for their employees. This is because there are unique aspects that drive wage decision making in varied employment settings. For instance, compensation in business settings can be heavily influenced by contracts bargained through labor unions.
b) For Local manager’s engineers and manufacturing staff
There are other factors that the company can take into considerations before setting wage for local manager’s engineers and manufacturing staff. First, the wage compensation laws prevailing in a given area and the attractiveness of the community where the company want to operate its business. Compensation laws vary from one state to another and the local employments, as well as, tax regulations can impact the compensation levels. The compensation laws may influence how much an employee earns and this will shape the general benefits of the wage plan. Some states have FLSA (Fair Labor Standard Acts), which have been implemented and they play significant roles in compensation laws (Appelbaum 2011, p. 91). Therefore, the IHRM should first examine and understand the major compensation acts governing minimum wage, equal payment, over time and child labor laws before setting wage.
Secondly, the cost of living and benefits that the company would realize from their employees should be taken into considerations. Many countries have different standards of living and the cost of living differ from one state to another. For instance, the cost of living in Australia and Russia is higher than the cost of living in India. Thus, when the director of the company is setting wage payment for employees in such areas, he should ensure that local managers and manufacturing staff living in Australia or Russia receives higher wage than those in India. This is because the cost of living will be high and this will influence the consumption patterns of production and motivate employees to work hard. Moreover, the benefits should be taken as the significant aspects of the total compensation package of labor force when setting wage payment. Brewster, Sparrow and Vernon (2007, p.101) argue that benefit packages are crucial because they attract, retain and also motivate employees; thus increasing competitive advantage.
Lastly, performing job evaluation and also understanding what terms it means for the employers; thus comparing the revenues of other contractors. HR Council. (2013, pr.5) asserts that employers should consider payment term and compare it with the revenues to the other contractors. This is because courts always consider a worker being employed under series of fixed contracts as a permanent worker. In addition, carrying out job evaluation or job classification is crucial because it will enable the company to determine the relative worth of jobs within the industry (HR Council 2013, pr.8). Job evaluation concept is significant because it enables the company to examine the available jobs for employees; thus analyze the position tasks, knowledge and skills necessary for performing a certain task.
Conclusions
The research analyzed the way it is crucial to determine the organizational needs by carrying out job evaluation, job relevant skills, work experience for applicants and understand the economic conditions of the region in, which the company will function before setting wage payment. The research provided varied factors that IHRM director can take into considerations before setting the wages for British expatriate manager and engineers. These included the availability of expatriate managers and engineers capable of fulfilling the obligations, job demand de termination and employment setting and organizational needs. For Local manager’s engineers and manufacturing staff, the factors included the wage compensation laws prevailing in a given area, the attractiveness of the community, the cost of living, benefits that the company would realize and job evaluation.
Bibliography
Appelbaum, E. (January 01, 2011). Macroeconomic policy, labor market institutions and
employment outcomes. Work, Employment and Society, 25, 4, 596-610.
Bratton, J., & Gold, J. (2000). Human resource management: Theory and practice. Mahwah,
N.J: Lawrence Erlbaum.
Brewster, C., Sparrow, P., & Vernon, G. (2007). International human resource management.
London: Chartered Institute of Personnel and Development.
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