It is becoming popular to globalize compensation/benefits plans that, back in the old days, would have remained completely local. The reason is to ensure companies have a globally aligned and integrated compensation/benefits strategy and to prevent duplication of effort.
Putting plans in place globally may or may not make sense but one thing is certain. The mechanics can get complex. Each of the world’s 190+ countries regulates many aspects of pay and benefits plans locally.
Here are some examples of plans that might be considered for globalization: sales commission, profit-sharing, variable compensation/ pay-for-performance, severance pay, equity/stock, tuition reimbursement and employee assistance to mention a few. It is as though Corporate Compensation/Benefits looks at each plan it has in the U.S. (or other headquarters country) and asks: Shouldn’t we offer them to our employees worldwide?
Ripple effects: “Total compensation” includes base pay, bonuses and often the value of some fringe benefits. Many countries roll bonuses and even benefits into their definition of “total compensation” for calculating local mandatory extras like vacation pay, overtime pay, “thirteenth-month pay,” pension contributions and severance pay. This can make a bonus plan much more expensive than bargained for. Companies sometimes try to solve this problem by inserting a clause to exclude plan pay-outs from these calculations. But local law in many places ignores these clauses.
Global alignment: Back to the question: Shouldn’t we offer them to our employees worldwide?
Maybe, maybe not. The first step is determine whether these plans are common practice in each country. For example, U.S. employees get medical insurance and employee assistance plans because the U.S. doesn’t have a broad-based national health care system. Even though almost every country outside the U.S. does have national health care, U.S. companies may decide to offer supplemental plans locally because other multinationals offer them. Another example is that some U.S. companies offer severance pay plans in the U.S. because even though the U.S. does not require severance pay, it is common practice for companies to do so. However, labor laws overseas mandate specific severance payouts.
Consultation: In many countries proposing new plans (or terminating them) requires an upfront consultation or bargaining with the local works council or trade union committee. These discussions are legally required.
Cross-border data transfers: Administering any global compensation/benefits plan, particularly an employee equity/stock plan, can require transmitting local participant data back to corporate so it can administer them and track employee participation. But in Argentina, Canada, Europe, Israel, Hong Kong, Mexico, the Philippines and Uruguay transmission of participant data mandates that companies meet special legal requirements such as having an acceptable safe harbor program. Otherwise, employees have to sign data processing consent forms as part of the enrollment process.
Language: Laws in Chile, Belgium, France, Quebec, Poland, Portugal and Turkey require that most all employee communications—including written compensation/benefits plans—be communicated in the local language. For a multinational to say “English is our official company language” is not an excuse. It is recommended that companies maintain documents in every country in both English and the local language. In this way corporate doesn’t have to worry about keeping up with new laws as more and more countries mandate this.
These are only four issues that you need to understand and examine when globalizing. There are others. But these four should give you a good idea of the complexity you will face when you consider globalizing your plans.
As everything you do in compensation is communication, you need to make sure any new plans are communicated to employees by managers, local HR, on the company intranet and via various other means. Ignoring communication can work against you. Something that is meant to be a positive can easily turn neutral or negative.
Are your compensation/benefits plans globalized correctly?
Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career. Her true love is working with local national issues. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA. She belongs to SHRM, Human Capital Institute and World at Work. Jacque has been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.