Global Pay Systems: Compensation in Support of a Multinational Strategy

Abstract

Multinational companies have always faced challenges with respect to compensation. This article outlines two of the most widely used systems: the balance-sheet approach and the going-rate approach. Although the balance-sheet approach provides the benefits of equity for the expatriate between assignments and better facilitates repatriation, it generally comes at a high cost to the company. Another challenge with the balancesheet approach is the complexity in administering the program as more expatriates from different home countries are sent abroad. With respect to the going-rate approach, assignments to multiple locations likely result in variation of pay. This is particularly evident when an employee is transferred from an economically advanced location to a developing country. To address these challenges, an argument is advanced for a global pay system such as the one at Seagram Spirits and Wine Group. This article concludes that a global pay system must provide the ingredients to achieve the overall strategy of the multinational company.