GODAVARI’S FOUNDATION

GODAVARI INSTITUTE OF MANAGEMENT AND RESEARCH, JALGAON

406 C- INTERNATIONAL HUMAN RESOURCE MANAGEMENT

SEMESTER IV

Dr. ANUBHUTI P. SHINDE

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 1
 Chapter 4
Human Resource Practices in International environment

Dimensions Involved in HR Practices in International Context

Some of the major dimensions involved in practices in international HRM are as follows:
1. Planning
2. Recruitment and Selection
3. Training
4. Compensation.

A researcher Dowling having reviewed the literature available on international HRM concluded that it
included more “functions and activities, broader perspectives, more involvement in employee’s personal
life, changes in emphasis as the work force mix Parent Company Nationals (PCNs) varies.

Host Country National (HCNs) varies, risk exposure, more external influences. Depending on the distinct
international context, there cannot be a single approach as perfect and foolproof for managing human
resources at international level.

However, the various dimensions involved in the context have to be considered before implementing a
particular approach or mix of approaches for managing HR at the local level or corporate headquarters.

Planning:

Human Resource planning in general were properly requires certain measures relating to the activities of
Human Resource planners towards a competitive company. These steps are:
• Collection and analysis of data to forecast the demand and supply of human resources for the expected
future business planners

• Develop Human Resources planning purposes

• Design and implement programs that can Facilitate the achievement of the company in Human Resources
planning purposes

• Supervision and Evaluate programs that are running.

The fourth stage can be implemented for the achievement of shortterm goals < 1 year, 2-3 years medium,
and long term > 3 years. As well as planning activities, Human Resources in general above, in International
Human Resource planning is required an external labour market analysis from, whether they are local or
domestic or international. This analysis is Necessary to determine the needs or in the provision of labour
associated with the skills and expertise required in international business. In the framework of this plan need
to consider several aspects, Including:

• Determination as well as the identification of potential or criteria that must be met at each level of the
management.

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Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 2
• Process of identifying crucial factors in business International.

• Formulation of steps that must be done to Strength then the commitment to the development of an
international career.

• Linking Human Resources planning by strengthening the skills required by the executive using strategic
business planning.

• Expansion of opportunities for self- development workers.

• Distribution of units in the business held by focusing efforts on international business goal achievement.

There are usually three approaches to HR planning in multination. These are: ethnocentric, polycentric, and
geocentric. In ethnocentric policy, all key management positions are filled by parent company nationals and
foreign subsidiaries are being locally staffed or what is termed as HCNs (Home Country Nationals).

The reasons given for following ethnocentric planning policy include lack of managerial talent in the host
country, desire to maintain a unified corporate culture and tighter control and desire to disseminate the
parent firm’s core competencies across foreign subsidiaries. This policy is usually followed at an early stage
of “internationalisation”.

In polycentric approach, the foreign subsidiaries are managed by host country nationals and home-office
headquarters by parent-country nationals. This approach may reduce the local cultural misunderstandings
that expatriate managers may exhibit. The advantage of this approach is that adjustment and language
learning problems are eliminated. American Express and Nestle follow this approach for staffing their
foreign subsidiaries.

In contrast to the former approaches, the geocentric approach has accent on ability rather than on
nationality. This approach seeks the best people for key jobs throughout the organization regardless of
nationality. This approach seems to identify with the spirit of the times and enable a firm to develop an
international executive cadre and reduce the tendency of national identification o managers with units.

The drawbacks of this approach, if any, are it faces conflict with polices of local governments who desire
foreign subsidiaries to employ their citizens, cumbersome paper work, and increased relocation and training
costs.

Morgan” has presented these three planning policies as shown :

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 3
International Division of Labor
The need for the international division of labor and its extent are determined
by the level of development of a
society’s productive forces. The character of the international division of labor, like that of
other forms of economic relations between countries, is decisively influenced by the relations of production
prevailing in thosecountries. The international division of labor is of central importance for the
expansion of trade between countries andconstitutes the objective basis for the development of the world
market.
In the early stages of the development of human society only certain elements of the international division
of labor existed- elements related to the different natural conditions in different countries.
Advanced forms of the international division of labor appeared in the age of industrial capitalism.
The mechanized industry led to greater differentiation inproduction and to the development of
specialization and cooperation that transcended national boundaries. The internationaldivision of labor was
promoted by the increased demand of industrial countries for massive quantities of agricultural products
and raw materials, which were supplied to them by the economically less developed states.
Consequently, the less developed countries became suppliers of agricultural goods and raw materials. In
the epoch of imperialism the export of capital has a decisive influence on the international division of labor.

Capital is exported from the advanced capitalist countries, increasing the specialization of the economically
underdeveloped countriesin the production of food and raw materials. The international monopolies, which
divide the world capitalist market among themselves, also affect the international division of labor. Under
capitalism the international division of labor is shaped bynoneconomic as well as by economic factors. The
rise of the capitalist colonial system was accompanied by the destructionof the traditional economic
structures of the colonies, which were forced to produce primarily those commodities needed by
the monopolies.

Issues in supply of international human resources

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 4
Human resources managers face a number of common challenges, including legal requirements, diversity
and employee motivation.

1. Distance
Distance is one of the greatest international human resources issues. Building a cohesive company culture
and providing consistent policies and training around the world is difficult.

2. Culture
Organizational culture is the intangible atmosphere that develops in a business from shared norms and
values. HR professionals often assume primary responsibility for helping build an effective, positive and
cohesive culture.

3. Expenses
Managing HR globally is more expensive than doing so locally. It takes much more research and
development to put together policies that are fair and consistent across the board, addressing different
laws and standards in local markets. Travel costs to send employees to different locations or for training
are also typically higher. The technology, including computer systems, virtual team software and other
hardware and software programs is expensive as well.

4. Legal Parameters
Employee laws vary significantly around the world. The United States is generally a pro-employee
society. Several laws, including Title VII, the Americans with Disabilities Act and the Age
Discrimination Act protect employees in hiring, promotion and management. Wages are notoriously low
in some Asian markets. Maintaining a consistent standard company-wide but abiding by each country's
laws and regulations is a major undertaking.

5. Ethics
Business ethics is a hot-button topic in the U.S. The Enron accounting scandal and collapse of 2001 kick-
started much of the modern concern for the ethical nature of business. A challenge with a global,
diversity-laden company is that different employees, countries and cultures have varying views toward
ethical issues. In some countries, such as India and Brazil, for instance, under-the-table money is common
when you want public officials to help your company.

6. Talent
Companies sometimes find it difficult to recruit and hire people with the talent, education and experience
to fill critical jobs. This is especially true in emerging industries or business systems. Larger retailers, for
exampled, often run into difficulty because they have more need than supply of skilled, capable and
interested workers. This causes HR leaders to get creative in recruiting and to focus on building an
employee-friendly culture, with pay that helps attract and retains good workers.

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 5
Recruitment and Selection in International Context

Recruitment
Recruitment is defined as searching for and obtaining job candidates insufficient numbers and quality so
that the organization can select the most appropriate people to fill its job need.

While recruiting people for international operations, the international HR managers must identify the global
competitiveness of the potential applicants at the time of the recruiting process. It is essential that the
workforce of an international organization is aware of the nuances of international business.
Understandably, the company must keep international knowledge and experience as criteria in the
recruitment and selection process. The international HR department must have a fairly good idea about the
skills and availability of human resources in different labour markets in the world.

The HR department must have the capacity to foresee the changes in these markets and exploit those
changes productively. A truly international HR department would insist on hiring people from all over the
world and place them throughout the international business operations of the organization.

Approaches to Recruitment in IHRM Though the general aim of any recruitment policy is to select the right
people for the right task at the right time, the HR department of international companies may adopt one of
the following three specific approaches available for recruiting employees for global operations:

The Immigration Reform and Control Act of 1986 (IRCA) bars employers from hiring individuals who
are not legally entitled to work in the U.S. Employers must verify work eligibility by completing Form I-9
along with required supporting documents. IRCA also prohibits employers from discriminating in hiring,
firing, recruiting, or referring on the basis of national origin or citizenship status.

H-1B workers may be employed temporarily in a specialty occupation or as a fashion model of

distinguished ability. A specialty occupation requires theoretical and practical application of a body of
specialized knowledge along with at least a bachelor’s degree or its equivalent.

An H-1B alien may work for any petitioning U.S. employer for a maximum period of six years.

International recruitment methods

1. Ethnocentric Approach- Countries with branches in foreign countries have to decide how to select
management level employees. Ethnocentric staffing means to hire management that is of same nationality
of parent company. When a company follows the strategy of choosing only from the citizens of the parent
country to work in host nations, it is called an ethnocentric approach. Normally, higher-level foreign
positions are filled with expatriate employees from the parent country.

The general rationale behind the ethnocentric approach is that the staff from the parent country would
represent the interests of the headquarters effectively and link well with the parent country. The recruitment
process in this method involves four stages: self-selection, creating a candidate pool, technical skills
assessment, and making a mutual decision. Self-selection involves the decision by the employee about his

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 6
future course of action in the international arena. In the next stage, the employee database is prepared
according to the manpower requirement of the company for international operations. Then the database is
analysed for choosing the best and most suitable persons for global assignments and this process is called
technical skills assessment. Finally, the best candidate is identified for foreign assignment and sent abroad
with his consent.

The ethnocentric approach places natives of the home country of a business in key positions at home and
abroad. In this example, the U.S. parent company places natives from the United States in key positions in
both the United States and Mexico.

2. Polycentric Approach- When a company adopts the strategy of limiting recruitment to the nationals of
the host country (local people), it is called a polycentric approach. The purpose of adopting this approach is
to reduce the cost of foreign operations gradually. Even those organizations which initially adopt the
ethnocentric approach may eventually switch over to the polycentric approach. The primary purpose of
handing over the management to the local people is to ensure that the company understands the local market
conditions, political scenario, cultural and legal requirements better.

The companies that adopt this method normally have a localized HR department, which manages the human
resources of the company in that country. Many international companies operating their branches in
advanced countries like Britain and Japan predominantly adopt this approach for recruiting executives to
manage the branches. The polycentric approach uses natives of the host country to manage operations in
their country and natives of the parent country to manage in the home office. In this example, the Australian
parent company uses natives of India to manage operations at the Indian subsidiary. Natives of Australia
manage the home office.

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 7
3. Geocentric Approach- When a company adopts the strategy of recruiting the most suitable persons for
the positions available in it, irrespective of their nationalities, it is called a geocentric approach. Companies
that are truly global in nature adopt this approach since it utilizes a globally integrated business strategy.
Since the HR operations are constrained by several factors like political and ethnical factors and government
laws, it is difficult to adopt this approach. However, large international companies generally adopt the
geocentric strategy with considerable success.

For international recruitment, especially on foreign soil, organizations generally use manpower agencies or
consultants with international connections and repute to source candidates, in addition to the conventional
sources. For an effective utilization of the internal source of recruitment, global companies need to develop
an internal database of employees and an effective tracking system to identify the most suitable persons for
global postings.

The geocentric approach uses the best available managers for a business without regard for their country of
origin. In this example, the UK parent company uses natives of many countries at company headquarters
and at the U.S. subsidiary.

4. Regiocentric Approach- The Geocentric Approach is one of the methods of international recruitment

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 8
where the Multi National Companies recruit the most suitable employee for the job irrespective of their
Nationality. The regiocentric approach uses managers from various countries within the geographic regions
of business. Although the managers operate relatively independently in the region, they are not normally
moved to the company headquarters.

The regiocentric approach is adaptable to the company and product strategies. When regional expertise is
needed, natives of the region are hired. If product knowledge is crucial, then parent-country nationals, who
have ready access to corporate sources of information, can be brought in.

One shortcoming of the regiocentric approach is that managers from the region may not understand the view
of the managers at headquarters. Also, corporate headquarters may not employ enough managers with
international experience. The regiocentric approach places managers from various countries within
geographic regions of a business. In this example, the U.S. parent company uses natives of the United States
at company headquarters. Natives of European countries are used to manage the Italian subsidiary.

International Selection
The selection criteria for international jobs usually revolve around the five core areas of behaviour,
attitudes, skills, motivation and personality. More specifically, the focus of selection for international
operations normally includes cultural adaptability, strong communication skills, technical competence,
professional or technical expertise, global experience, country-specific experience, interpersonal skills,
language skills, and family flexibility. Employers around the world usually rank personal interviews,
technical competency and work experience in similar jobs as important criteria for selection. International
firms, while choosing employees for overseas operations, usually prefer people with

 highly developed technical skills

 good language and communication skills
 tolerance towards other culture, race, creed, colour, habits, and values
 high level of motivation
 stress resistance
 goal-oriented behaviour

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 9
Finally, at the time of selection for international assignments, an organization should consider the previous
overseas experience, family circumstances and cultural-adaptability level of the candidates aspiring for the
global jobs.

In view of the direct and indirect costs of expatriate failure, and knowing the reasons for their failure in their
assignment,

MNCs spend considerable time and effort in screening employees and their families before selecting them
for foreign postings. However, the criteria and the selection procedures used vary from one MNC to another
and from one country to another. International selection is a two way process between the individual and the
organization. A prospective candidate may reject the expatriate assignment either for personal reasons, such
as family considerations, or for situational factors. However, after an extensive review of literatures on the
selection of expats, the researcher identified 18 variables and grouped them into four categories:

Technical Competency
Relational Skills
Ability to cope with variables and
Family Situation

Selection techniques of expatriates:

Global companies require the human resources adaptable not only to the job and organizational
requirements, but also to the cultural requirements of various countries. As such, the selection techniques for
global jobs vary from those of domestic jobs. These techniques include:

Interview- Structured Interview

The monitoring and targeting of disadvantaged group – (staffing practices are strongly influenced by
norms and values that are not covered by the law)

Psychological Testing- mentally fit for international assignment

Assessment centre – Competency assessment

Selection Techniques in General, important steps are:

 Screening the applicant’s background on the basis of work experience with cultures other than one’s
own, previous overseas travel, knowledge of foreign language and overall Performance.
 Testing the candidate's ability to adapt to the new culture and environment.
 Testing the ability of the spouse and family members of the candidates to the foreign culture and
environment. Predicting the adjustment of the candidate.
 Physical and Emotional Health- “Most organizations require that their overseas managers have
good physical and emotional health. Some examples are fairly obvious. An employee with a heart
condition would be rejected for overseas assignment; likewise, an individual with a nervous disorder
would not be considered. The psychological ability of individuals to withstand culture shock also
would be considered, as would the current marital status as it affects the individual’s ability to cope
in a foreign environment.

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Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 10
  Testing the skill of adjustment with the host nationals.
 Job duties and responsibilities.
 Motivation for a Foreign Assignment- Although individuals being sent overseas should have a
desire to work abroad, this usually is not sufficient motivation. International management experts
contend that the candidate also must believe in the importance of the job and even have something of
an element of idealism or a sense of mission. Applicants who are unhappy with their current
situation at home and are looking to get away seldom make effective overseas managers.

Some experts believe that a desire for adventure or a pioneering spirit is an acceptable reason for
wanting to go overseas. Other motivators that often are cited include the desire to increase one’s
chances for promotion and the opportunity to improve one’s economic status. For example, many
U.S. MNCs regard international experience as being critical for promotion to the upper ranks. In
addition, thanks to the supplemental wage and benefit package, U.S. managers sometimes find that
they can make, and especially save, more money than if they remained stateside.

Training and Development in International HRM

In order to compete successfully in a global market, more firms are focusing on the role of human resources
as a critical part of their core competence and a source of competitive advantage.

As Kamoche reminds us: “the human resource refers to the accumulated stock of knowledge, skills, and
abilities that the individuals possess, which the firm has built up over time into an identifiable expertise.”
The question for the multinational firms is how to maintain and leverage its human resources so that
suitably trained, internationally oriented personnel are available to support its strategic responses and
contribute to its core competencies.

International Strategy and Training and Development

When a organization is contemplating an international strategy, it must balance the desires of what it wants
to do with the knowledge, skills, and abilities it currently possesses, as well as the ones it believes it can
acquire within the requisite time frame. This is where training and development can come in handy. It has
been said that strategy is based upon knowing three things: where you currently are, where you want to be,
and how you want to get there. For an international organization, it is more difficult because of the variety
of international factors that need to be considered. Cultural subtleties must be taken into account, as must
various government regulations, international cultural practices, exchange rates, political issues, and a host
of other factors.

It is imperative that international organizations communicate with its international offices, suppliers, and
beneficiaries. With the availability and relatively low cost of telephone, fax, and email, international
partners can be kept informed of important information on a daily basis. There are many computer
programs that can translate one language into another very rapidly and without much loss of context.

The training and development function can act as a clearinghouse for this information. It can research,
direct, maintain, edit, and promulgate information on a regular or need-to-know basis. By being “in the

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Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 11
loop,” it can use the information to establish training classes, develop information categories, and act as
internal consultants and facilitators. It can act as an organizational resource where various departments and
functions can go for “one-stop shopping” of information and methodologies to translate information into
action.

Importance of Training and Development

An indication of the importance of training and developing staff is the increasing number of multinationals
that establish their own “universities.” or “Schools.” Motorola, McDonald’s Hamburger, and Disney
universities are good examples of these in-house training centers; several European, Japanese, and Korean
firms have similar arrangements. Training aims to improve current work skills and behavior, whereas
development aims to increase abilities in relation to some future position or job-usually managerial.

Expatriate Training

Most expatriates, whether PCNs (Parent-country nationals), or TCNs (Third Country Nationals), are
selected from with the multinational’s existing operations, some expatriates may be hired externally. In view
of the fact that the primary selection criterion is technical ability, it is not surprising to find that most of the
literature is devoted to expatriate pre-departure training activities that are mainly concerned with developing
cultural awareness. Once an employee has been selected for an expatriate position, pre-departure training is
considered to be the next critical step in attempting to ensure the expatriate’s effectiveness and success
abroad, particularly where the assignment country is considered culturally tough.

Effective cultural training also enables individuals to adjust more rapidly to the new culture. As early points
out, “A major objective of intercultural training is to help people cope with unexpected events in a new
culture.”

Components of Effective Pre departure Training Programs

Studies indicate that the essential components of pre departure training programs that contribute to a smooth
transition to foreign post include cultural awareness training, preliminary visits, language instruction, and
assistance with practical, day-today matters.

Cultural Awareness Programs

It is generally accepted that to be effective, the expatriate employee must adapt and not feel isolated from
the host country. A well-designed cultural awareness training program can be extremely beneficial, as it
seeks to foster an appreciation of the host-country’s culture so that expatriates can behave accordingly, or at
least develop appropriate coping patterns. Sieveking, Anchor, and Marston cite the culture of the Middle
East to emphasize this point. In that region, emphasis is placed on personal relationships, trust, and respect
in business dealings; coupled with this is an overriding emphasis on religion that permeates almost every
aspect of life. As discussed in previous units, without an understanding (or al least an acceptance) of the
host country culture in such a situation, the expatriate is likely to face some difficulties during the

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 12
international assignment. The components of cultural awareness programs vary according to country of
assignment, duration, purpose of the transfer, and the provider of such programs.

Preliminary Visits

One useful technique in orienting international employees is to send them on a preliminary trip to the host
country. A well-planned overseas trip for the candidate and spouse provides a preview that allows them to
assess their suitability for an interest in the assignment. Such a trip also serves to introduce expatriate
candidates to the business context in the host location and helps encourage more informed pre departure
preparation.

Language Training

Language training is a seemingly obvious, desirable component of a pre departure program. However, there
are three interrelated aspects related to language ability that need to be recognized.

The Role of English as the Language of World Business

It is generally accepted that English is the language of world business, though the form of English is more
“international English” than that spoken by native speakers of English. Multinationals from English
speaking countries such as the United States, the United Kingdom, and Australia often use this fact as a
reason for not considering language ability in the selection process, and for not stressing language training
as part of pre departure programs. Such an attitude may lead to the downplaying of the importance of
foreign language skills.

Host-Country Language Skills and Adjustment

Clearly, the ability to speak a foreign language can improve the expatriate’s effectiveness and negotiating
ability. As Baliga and Baker point out, it can improve manager’s access to information regarding the host-
country’s economy, government, and market. Of course, the degree of fluency required may depend on the
level and nature of the position that the expatriate holds in the foreign operation, the amount of interaction
with external stakeholders such as government officials, clients, trade officials, as well as with host-country
nationals.

Knowledge of the corporate language

Usually, the corporate language is English. Given its place in international business, quite often it becomes
the common language within the multinationals. Thanks to the expatriates and their ability to speak the
corporate language, communication conduits well between subsidiary and headquarters. An expatriate fluent
in the parent-company language and the language of the host subsidiary can perform a gate-keeping role,
whatever the formal position he may hold. It’s a plus, very positive point: It gives added-power to his
position.

For international training assignments, expatriates are usually required to know the corporate language
(cause these trainings would normally be conducted in the corporate language).
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Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 13
 International Compensation Management

Designing and developing a better compensation package for HR professionals for the international
assignments requires knowledge of taxation, employment laws, and foreign currency fluctuation by the HR
professionals. Moreover, the socio-economic conditions of the country have to be taken into consideration
while developing a compensation package. It is easy to develop the compensation package for the parent
country national but difficult to manage the host and third country nationals. When a firm develops
international compensation policies, it tries to fulfills some broad objectives:

1. The compensation policy should be in line with the structure, business needs and overall strategy of the
organization.
2. The policy should aim at attracting and retaining the best talent.
3. It should enhance employee satisfaction.
4. It should be clear in terms of understanding of the employees and also convenient to administer.

The employee also has a number of objectives that he wishes to achieve from the compensation policy of
the firm

 He expects proper compensation against his competency and performance level.

 He expects substantial financial gain for his own comfort and for his family also.
 He expects his present and future needs to be taken care of including children’s education, medical
protection and housing facilities.
 The policy should be progressive in nature.

Objectives of international compensation

The major focus of most international compensation programme is to keep international employees at a
sufficient financial level during their international assignments so that they do not lose ground
economically.

Components
1. Base salary:
For expatriates, the term base salary means the primary component of a package of allowances which are:

(a) Foreign service premium,

(b) Cost-of-living allowance,

(c) Housing and utility allowance,

(d) Basis for in-service benefits and pension contributions.

Base salary may be paid in home or local currency or in some hard currency like pound or dollar.

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Godavari Institute of Management and Research, Jalgaon Page 14
2. Foreign Service inducement/hardship premium:
Parent-country nationals often receive a salary premium as an inducement to accept a foreign assignment or
as compensation for any hardship caused by the transfer. Such payments vary depending upon the
assignment, actual hardship, tax paid to foreign governments and length of the assignment.

3. Allowances:
Various allowances are paid to expatriates depending upon the assignment. They include:

(a) The cost-of-living allowance (COLA):

It involves a payment to compensate the differences in expenditures between the home country and the
foreign country.

(b) Housing allowance:

Implies that employees should be entitled to maintain their home-country living standards (or, in some
cases, receive accommodations)

(c) Home leaves and travel allowances:

Is given to cover the expense of trips (usually once in a year) back home. These trips allow the expatriates
the opportunity to renew family and business ties, thereby helping them to avoid adjustment problems when
they are repatriated.

4. Education Allowances for Children:

Education allowances are given towards fees for the education of expatriates’ children. Education
allowances include items such as tuition, language class tuition, books, transportation and uniforms.

5. Relocation Allowances and Moving:

Relocation allowances usually cover moving, shipping; temporary living expenses, and down payments or
lease-related charges.

6. Tax Equalisation Payments:

Many international compensation plans attempt to protect the expatriate from negative tax consequences by
using a tax equalisation plan. Under this plan, the company adjusts an employee’s base income so that the
expatriates will not pay any more or less tax than if they had stayed in the home country.

7. Spouse Assistance:
To help guard against or offset income lost by an expatriate’s spouse as a result of relocating abroad.
Multinationals generally pay allowances in order to encourage employees to take up international
assignments.

It can be extremely expensive to live in some countries. Therefore determining equitable wage rates in many
countries is not a simple matter of equality in pay.

Most expatriate compensation plans are designed to achieve four major objectives:

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Godavari Institute of Management and Research, Jalgaon Page 15
1. Attract employees who are qualified and interested in international assignments. Thus the compensation
policy works to attract and retain staff in the areas where the multinational has the greatest needs and
opportunities.

2. Facilitate the movement of expatriates from one subsidiary to another, from home to subsidiaries, and
from subsidiaries back home. To achieve this policy must be competitive and recognise factors such as
incentives for Foreign Service, tax equalisation, and reimbursement for reasonable costs.

3. Provide a consistent and reasonable relationship between the pay levels of employees at headquarters,
domestic affiliates, and foreign subsidiaries and4. The policy must be made cost-effective by reducing
unnecessary expenses. It must give due consideration to equity and ease of administration.

Besides the above major objectives, the international employee will also have a number of objectives that
need to be achieved from the firm’s compensation policy:

1. The employee will expect that the policy offers financial protection in terms of benefits, social security,
and living costs in the foreign location.

2. The employee will expect that a foreign assignment will offer opportunities for financial advancement
through income and/or savings.

3. The employees will expect that issues such as housing, education of children and recreation will be
addressed in the policy. Determining equitable wage rates in many countries is no simple matter. One of the
greatest difficulties in managing total compensation on a multinational level is establishing a consistent
compensation measure between countries that builds credibility both at home and abroad.

There are four basic approaches to compensation:

1. HQ-based model: Expatriates are paid according to the headquarters compensation structure.

2. Modified home-country model: Expatriates are paid according to their home- country salary structures,
and their living standard is protected so as to be comparable to the home country or some other chosen
standard.

3. Better of home or host model: Expatriates receive the higher of the home-country system or the host-
country system.

4. Host-country/local-market package: Expatriates are paid according to the host- country compensation
structure.

Factors affecting International Compensation

These include Cultural Factors, the internal and external factors affecting the MNC, the Founder’s
philosophy as well as a host of others. The differences of culture are a very obvious factor that can and does
influence compensation and even the way compensation is perceived.

Other factors that also affect International Compensation are:

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 16
  The firm’s strategy.
 The Organizational Culture.
 The Structure of the HR function.
 The labor market characteristics.
 The roles and rule of both Home and Host country governments.
 And the Industry that the firm is in.

Women Expatriates

Female expatriates are becoming more and more prominent today, as traditional roles are shifting, and the
world is changing, allowing for new ways to live and work.

The career path

Most women opting for expatriation share qualities and traits that make them the ideal candidates for an
international assignment or any other professional experience abroad.

These characteristics are also linked to the entrepreneurial spirit, that pushes women to create a business,
work for themselves and stray from a more conventional career path. Indeed, those expats usually
demonstrate great levels of creativity, strong determination, a certain dose of restlessness, and a taste for
adventure

Additionally, they have generally established a previous professional career, display self-confidence, and
are skilled managers.

Expatriation, for these women, marks a transition in several ways. First, and quite clearly, it steers their
career in a new direction, redefining their employment status and responsibilities.

Also, their roles when it comes to relationships and family are bound to change when moving to a new
country for work, whether they do it by themselves or with their spouse and children.

This can change their perception of themselves and how they define their identity as a wife and mother.
However, and not surprisingly, an impressive 89% of women in expatriation are single.

Unfortunately, stereotypes are still present in the corporate world, and discrimination based on gender is a
reality many women have to face. This, in turn, undermines their confidence and makes them less likely to
take the plunge, for fear of failure.

Motivations for women to do their expatriation

Selection criteria

The most crucial and common criterion used by companies selecting candidates for expatriation is technical
competence.

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 17
The reason is simple: not only are technical skills the most obvious factor for success or failure, they are
also the easiest to determine, since companies usually assess their employees as part of the application
process.

Then, relational abilities are essential when it comes to a successful international experience, as they denote
a capacity to communicate with and relate to locals in the host country, which constitutes a huge part of the
expatriate experience.

Centered around psychological characteristics, they also include cultural awareness and emotional
intelligence.

Another key criterion is the ability to adapt to new environments, especially in terms of corporate, legal,
political, social and economic structures. Indeed, those could be extremely different from what the
expatriate knows, and it's important to understand them clearly.

An element than can be significant in certain countries and regions of the world if the ability to build strong
bonds and establish lasting friendships with locals, as it is ultimately a way to constitute a network in the
host country.

Finally, women's family situation, while often neglected by employers, should be an essential part of the
selection process. Ensuring the male trailing spouse approves the relocation and is likely to adapt to their
new environment is a way to avoid failure and repatriation, an issue that is quite prevalent.

The challenges women face before or during expatriation

One of the main hurdles on the path to an international career is a limited access to opportunities abroad due
to a lack of female networks in foreign countries.

Another personal challenge comes in the form of an inability or a struggle to achieve the sometimes elusive
work-life balance that is so crucial to a fulfilling professional career.

Still touching upon individual issues, loneliness constitutes a great hindrance when living and working
abroad, and could lead to an early return.

Lack of support, either from your own company at home or from the locals once you are in the new country
is also very detrimental, as feeling isolated and left to your own devices will probably create anxiety and
impact performance.

A lack of planning before relocating is most likely a recipe for failure, where women feel unprepared and
not ready for whatever awaits them in their new environment.

Finally, in terms of repatriation, failing to devise a strategy is also likely to generate feelings of frustration
when things don't work out once you are back in your home country.

Glass ceiling phenomenon

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 18
The term “Glass Ceiling” was coined in 1986 Wall Street Journal report on corporate women by
Hymnowitz and Schellhardt (1986) The term “glass ceiling” refers to invisible barriers that keep some
people from advancing in the workplace. The glass ceiling keeps people from getting certain jobs, despite
being well qualified and deserving. It's a phenomenon that affects career trajectory, status, and lifetime
earning potential.

The glass ceiling effect is the pervasive resistance to the efforts of women and minorities to reach the top
ranks of management in major corporations. It is unclear exactly who named the phenomenon, but the term
was heavily used during the mid-1980s. Women who entered the workforce in large numbers during the late
1970s and early 1980s found themselves unable to advance beyond a certain level of management.

In the 1980s, the term “glass ceiling” was often used in tandem with another term, “mommy track.” At that
time, it was common for women of childbearing age to be considered less motivated and less disciplined
than male employees or older females. The perception was that women would take extensive time off or
leave the workforce altogether once they had children. If women did return to work, they were believed to
be less dedicated employees because of their maternal duties. Thus, many companies shunted young women
onto the “mommy track,” a sort of sideline in which promotions and raises never resulted in the woman
being granted duties that could have a real effect on the company.

406 C-International Human Resource Management

Dr. Anubhuti Shinde
Godavari Institute of Management and Research, Jalgaon Page 19