Companies operating in different countries have numerous opportunities to improve their competitive advantage as they penetrate new markets, reach more customers, and enhance their profitability. Such operations often involve the work of expatriates who can be defined as employees performing tasks in a state other than their home country for a prolonged period of time (Kang & Shen, 2017).
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However, people tend to be unwilling to take up this job in many cases as being an expatriate is linked to potential losses career opportunities within the company and personal issues (Bonache & Zárraga-Oberty, 2016). Several expatriate compensation strategies exist, but it is necessary to choose the most appropriate method that could be beneficial in a specific situation. This paper includes a brief analysis of a compensation plan that can be used for first-wave expatriates of Jenkins, who will work in Hong Kong.
When considering the most suitable compensation package for expatriates, it is necessary to pay attention to several external factors. For instance, the cost of living in Hong Kong should be taken into account as the employee needs to have certain standards of living that cannot be lower than their existing ones. One of the primary concerns related to this area is dwelling, so HR specialists have to study available options. It is also important to ensure that the compensation plan, as well as other terms of the expatriate’s work, are consistent with the existing legislation in the host country (Kang & Shen, 2017). In addition to these aspects, companies may also examine the existing infrastructure, which is specifically critical for expatriates who will travel to a new country with their families.
The management of the company under consideration can choose from several types of compensation to their expatriates. The most common approaches to compensation include home- or host-based methods, and global market strategy. The home-based method is the oldest and one of the most widely utilized compensation technique (McNulty, 2016). Approximately 80% of American companies employ this framework, which implies the focus on the differences between the assignments performed at home and in a host country. Expatriates are compensated regarding these differences to ensure that they remain motivated.
In terms of the host-based approach, the expatriate receives the pay based on the compensation standards existing in the new place. This method is more cost-effective compared to the home-based strategy, but it is associated with difficulties related to the repatriation of the employee (McNulty & Brewster, 2017). The global market approach consists in the provision of a similar compensation package to all expatriate irrespective of the host country.
The Most Appropriate Approach
Since the company needs to ensure high productivity of its expatriates and their corresponding motivation, it is advisable to use the home-based compensation strategy. Reportedly, Jenkins employees have concerns regarding their career opportunities within the company, which makes them reluctant to take up the job. The other two frameworks mentioned above imply quite a significant degree of distancing from the employee, which may affect their motivation (Bonache & Zárraga-Oberty, 2016). Moreover, it can have a negative effect on expatriates’ loyalty, who may be eventually hired by competitors.
Although the use of the home-based approach is associated with higher costs, the company will ensure its’ employees’ high productivity and commitment, which will translate into effective penetration into a new market. It is noteworthy that the compensation plan should be adjusted to the needs of every employee.
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Exact Aspects to Consider
Since the needs of the expatriates may differ, compensation plans should also be different. However, they all must contain some basic components, including the salary that is similar to or higher than the one in the home country. Additional financial rewards can be offered based on the employee’s performance, the time spent in Hong Kong, and exact achievements. These additional payments will motivate expatriates to remain committed to organizational goals. Healthcare insurance and retirement plans can remain the same. Bonache and Zárraga-Oberty (2016) argue that the financial element is not the most important as seen by expatriates in the vast majority of cases. People need to feel their connection to the organization, their company’s support, and the prospects for professional growth.
Therefore, if the chosen employees have families, it is necessary to provide the necessary financial support to ensure their families proper living in Hong Kong (Lazarova, McNulty, & Semeniuk, 2015). Apart from appropriate dwelling, these employees will need to receive education compensation for their children and even certain compensation for the possible losses of expatriates’ spouses.
In addition, Jenkins should also provide support and training to expatriates. Both unmarried employees and those who will live in Hong Kong with their families must take an active part in the life of the company. Regular discussions and meetings can be implemented with the help of online conferences using available technologies. These people may also compete for the post of the head of the department aimed at the provision of services abroad. This career opportunity will motivate employees and help them feel committed to the established goals.
On balance, Jenkins should choose the home-based compensation approach since it will help its employees feel connected. Since potential expatriates have fears regarding their future in the company and potential losses of career opportunities, first-wave expatriates should receive considerable financial compensation and prospects of professional growth. Married expatriates need additional aid that will allow their families to have appropriate living standards in a new country. It is also essential to maintain regular meetings and rather close links with expatriate to improve their performance and loyalty.
Bonache, J., & Zárraga-Oberty, C. (2016). The traditional approach to compensating global mobility: Criticisms and alternatives. The International Journal of Human Resource Management, 28(1), 149-169. Web.
Kang, H., & Shen, J. (2017). International human resource management in South Korean multinational enterprises. Singapore: Springer Singapore.
Lazarova, M., McNulty, Y., & Semeniuk, M. (2015) Expatriate family narratives on international mobility: Key characteristics of the successful moveable family. In L. Mäkelä and V. Suutari (Eds.) Work and family interface in the international career context (pp. 29-51). Cham, Switzerland: Springer.
McNulty, Y. (2016). Why expatriate compensation will change how we think about global talent management. International Business and Management, 32, 125-150. Web.
McNulty, Y., & Brewster, C. (2017). Management of (business) expatriates. In C. Machado & J. Davim (Eds.), Organizational behaviour and human resource management (pp. 109-137). Cham, Switzerland: Springer.