Global Compensation: The First Challenge of International Growth
As companies take their first steps into international markets and begin building global teams, their primary challenge is figuring out how to design a comprehensive global compensation strategy. In order to successfully design compliant, retention-driven benefits plans, HR departments must consider potential nuances, trends, and local expectations.
In this session of PANGEO, moderator Laura Maffucci, Senior Director of Global Total Rewards at G-P, joined Roni Rizzo, Managing Director at BDO USA, Cleo Valeroso, Vice President of Global Operations at ZEDEDA, and Michelle Demetrius, Director of Total Rewards at Demand Science, to discuss the pros and cons of various base pay options for global teams, the best practices to create competitive benefits packages, and the compensation challenges global employers face.
How can companies prepare for currency fluctuation around the world?
In today’s business world, currency fluctuations affect companies with global ambitions. How can companies prepare for this volatility? On this topic, Michelle Demetrius commented on the correlation between currency fluctuation, inflation, and retention. She explained that when inflation raises the price of goods, and salaries do not increase accordingly, it oftentimes prompts employees to consider alternative employment opportunities. Companies that adjust compensation to local inflation rates will better support their employees and likely increase retention.
How can companies navigate the different in-country obligations related to salary and benefits?
Understanding compliance, compensation, taxes, and other requisites on a domestic level is challenging as it is, but on a global stage, these obligations vary from country to country, adding even more complexity to the matter. Cleo Valeroso noted that a good solution is to partner with someone with in-country expertise to ensure compensation packages are aligned with local standards and meet each global employee’s expectations.
Payment based on location or the company’s HQ
On this topic, Ronii Rizzo, Managing Director at BDO USA, exposed the challenges of determining the best way to pay global team members. “Employees themselves are getting educated on what is a proper salary to get paid for their performance,” explained Rizzo. They are aware of the worth of their skills and the value they add to organizations, so being paid less just because they are based outside of the U.S. might seem unfair to many. Others may agree that receiving competitive pay based on the local job market is reasonable, so which approach is better?
The truth is, there is no right or wrong answer to this question. Companies should consider their short- and long-term goals, their philosophy, and their budget when designing a compensation strategy for dispersed teams. Regardless of the approach, it’s always a good idea to research the local job market and get a grasp on regional compensation standards, and then work in additional fringe benefits to craft a competitive offer for candidates across the board.
Closing statements
There is no one-size-fits-all solution to global compensation. It requires market experience and in-country knowledge to create a comprehensive strategy that’s customized to each employee’s country. Understanding local markets, considering external variables such as inflation and currency fluctuation, and determining pay structure requires a unique plan tailored to each company.
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