Compensation is a systematic approach of providing monetary value and other benefits to employees in exchange for their work and service. To understand compensation within a global framework, recognition of the existing differences and similarities between the various contexts in which a company operates is important.
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Milkovich et al. (2008) posit that employee compensation design hinges on the variations presented by four key factors – institutional, economic, organizational, and individual. The aforementioned changes could be either small or big. When imposed in different countries, these factors are reflected in changes that the organization may have to undertake when designing different compensation systems in the different areas in which it works (Berrone et al. 2010). This paper seeks to analyze the global factors that influence compensation in the United States.
The demand for different skills is one of the factors that significantly influence the compensation of employees in the United States. Unlike in the ancient era when workers were limited to work in their nations, importation and exportation of human resources has been very rampant in the recent past (Henderson, 2006). Thus, poor compensation of employees in the United States as well as other nations could make employees move to regions with higher compensation.
As such, this has compelled the United States to review their compensation rates thus preventing cases of workers’ migration. In addition to this, the scarcity of certain experts in the United States and the entire world has influenced the compensation strategy of the United States (Henderson, 2006). This is because, if the United States fails to compensate the scarce employees satisfactorily, it could have deficiency in such experts who may have moved to other regions that offer better compensation.
Various global macroeconomic factors such as taxation, inflation, booms, and surges affect the economy of the United States. When this happens, the compensation strategy of the United States is affected because it is a key element of the national budget. For instance, high taxation global rates reduce the growth rate of the US economy thus reducing the compensation offered to employees. On the other hand, if most of the global nations import more from the United States, the economy grows, thus increasing the compensation offered to employees in the United States. It is therefore clear that whatever happens globally trickles down to each nation and in turn affects various sectors of the economy.
The relationship of the United States with other global nations also influences its compensation strategy among other issues. This relationship is referred to as social security. A good relationship with other nations of the world would mean that the United States shares most of its resources including human resources with other nations hence creating harmony in the compensation strategies (Berrone et al. 2010). On the other hand, if the relationship is not cordial, cases of conflict could arise thus negatively influencing the compensation strategy of the United States.
Finally yet importantly, effects of deregulation of restrictions on bank entry are felt in the global economy today (Berrone et al. 2010). Such restrictions have influence the national income, thus influencing the amount of compensation offered to employees. Additionally, the state-level deregulation on branching restrictions has in turn depicted a significant growth rate in the US economy. This has therefore increased the compensation strategy of employees in the United States.
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Berrone, P. et al. (2010). Compensation and Organizational Performance: Theory, Research and Practice. New York: M.E. Sharpe.
Henderson, R. (2006). Compensation Management in a Knowledge-Based World (Tenth Edition). Upper Saddle River, New Jersey: Pearson/Prentice Hall.
Milkovich, G. et al. (2013). Compensation. New York: McGraw-Hill.