Standardization of rewards and work conditions in multi-national companies. Should the pay and work conditions of employees be standardized?

Hausarbeit, 2013

15 Seiten


Table of Contents

I. Introduction

II. Roles of pay and reward

III. Reward approaches and practices
1. Reward approaches
Home-based approach
Host-based approach
Region-based approach
2. Reward practice

IV. Role and implications of different countries and cultures in development of reward practices
1. Employment regulations, worker rights and protection
1.1. Roles of employment regulations, worker rights and protection
1.2. Implications of different countries in employment regulations, worker rights and protections.
2. Different in culture values in development of reward and compensation practice

V. Conclusion and Recommendations


I. Introduction

Reward employees is one of the most significant yet most challenging of human resource management (hereafter HRM) functions. Reward management triggers a number of controversies not only in term of the assumptions but the drivers of human incentive and work performance also. One of the critical debates is related to standardization of rewards and work conditions in multi-national companies. Despite several agreements, Du Plessis and Beaver (2008) asserted that the pay and work conditions of employees should not be standardized.

To logically discuss this argument, this paper is divided into four goals. Initially, the important roles of rewarding people will be introduced and explained. Equally significant, the paper examines the reward and compensation approach and practices. Thirdly, the differences between company and country in term of regulations, employees’ rights and protections as well as the difference of culture values are carefully considered. Lastly, the paper comes to the conclusions and recommendations.

II. Roles of pay and reward

The term “reward” normally covers all of the financial support for the employees such as cash pay and other benefit package. According to Margaret Foot and Caroline Hook (2008), reward is regularly used to mention to the payment system, which is designed to motivate the employees and then reward them for the additional effort. While, the payment term is more straightforward term including the monetary and non-monetary payment for staffs such as the sickness and maternity pay and pension agreement. Sharing the same ideas, Michael Armstrong (2014) asserted that the rewarding activities involves the reward management processes including design, implementation and maintenance the reward system which are prepared to enhance the performance of organization and individual.

Depending on Robin Kramar and Jawad Syed (2012), there are four main purposes of reward system, which are to attract the right employees for the right jobs at the right time, to recognize employees’ contribution , to build the required workforce capabilities and to motivate them. Additionally, the reward system should consist of requirements such as needs- fulfilling, equitable, legal, affordable, cost-effective and strategically aligned. Agreeing with several ideas, Michael Armstrong (2014) also emphasized the aim of reward management in term of developing the performance culture, developing a positive relationship and psychological contract.

Reward system is an effective and important tool that management can utilize to motivate employees in desired ways. It is also the indispensable strategies to create employee’s commitment. Researches have proved that employees who are motivated and committed to the company less likely to leave the jobs (Mowday, 1998). The appropriate perceptions of reward have relationship with the positive human resource outcomes in term of job satisfaction, high commitment, productive performance and company’s effectiveness. For instance, Google is one of the best companies that employees desire to work for. In order to remain the high job satisfaction and high profitability, Google’s employee management usually utilizes the monetary and non-monetary rewards. Besides receiving the average salary of £86800 a year, Google’s employees are also provided the flexibility of working time, harmonious working environment.

III. Reward approaches and practices

1. Reward approaches

According to Kramar and Syed (2012), reward is possibly categorized into ‘extrinsic’ and ‘intrinsic’ reward. Initially, extrinsic rewards are financial rewards, developmental rewards and social rewards. Financial reward obviously the most common form of extrinsic reward but it is not necessarily the most important one. The developmental rewards are related to the personal training, development and career growth while the social one are those associated with social esteem, positive working environment, working support or supervision. Intrinsic rewards come from the job’s contents, which are the challenges and the interest, the significance assigned to the job. There are a lot of argument and debate about the merits of intrinsic and extrinsic reward. Many narrators claimed that the extrinsic reward and the performance-related pay are the most influential elements (Deci and Ryan, 1985). However, others asserted that it is intrinsic reward that is more important as the supervision motivation and performance (Gupta and Mitra, 1998). According to Shields (2007), there are five theories named agency, reinforcement, expectancy, goal-setting and equity theory which emphasize the centrality of worker’s cognitive processes in managing and understanding the relationship between reward and task motivations. The equity theory states that the reward satisfaction originates from assessing the employees’ individual outcomes corresponding to the inputs, which means the more effective employees possibly are paid more then the non-effective one.

Another approach of reward is total reward concept, which is the combination of financial and non-financial rewards for employees. According to Manus and Graham (2003), total reward consists of both indirect and direct reward, intrinsic and extrinsic reward. The total reward depends on the impacts of two main parts namely total remuneration and non-financial intrinsic rewards. The total remuneration combines base pay, contingency pay and employee benefits while the non-financial intrinsic reward includes learning and development, and the work experience.

In term of international reward management, the multi-national companies have to meet the reward challenges which are very various and different (Kramar and Syed, 2012). The international reward management is related to three major groups of employees. The first group is the employee that the host country national (HCNs) employed to work in the MNC’s operation in the host country. The second one is the home country employee so-called expatriate who is sent abroad to manage or work in host country. The last one is employee from third country national (TCNs) who is hired to work in both host country and home country operation. Depending on the difference in social, cultural, economical, and political context, HCN employees have the variety of expectations. Hence, there are some debates around the way to apply reward management in multinational context. Some MNCs remain the same reward practice to the operation of subsidiaries in other countries, which is called ‘ethnocentric approach’. In other words, they are prone to standardize the reward system. Nevertheless, others MNCs apply the adaptation to local conditions so-called ‘polycentric’ approach. Basically, there are three reward approaches in the case of expatriation, which are the home-based approach, host-based approach and region-based approach.

Home-based approach

This approach provides the expatriate employees with the compensation package, which equalizes cost differences between the international task and the same assignment in home country. Home-based approach covers four major reward factors. Initially, the base salary will be covered. The second factors are a foreign service inducement and a relocation premium to draw home country staffs to accept the expatriation. Allowance to compensate the living standard differences between foreign country and the home country including housing expenses, cost of goods and services and income tax. Finally, this approach also takes the benefit factors such as the pension, health and medical insurance, education expense into account.

Despite the fact that the home-based approach remains an fair relationship between the employees reward levels in the parent company and those who are expatriated, this approach may generate the difference between expatriate and the employees who take the same roles in HCNs.

Host-based approach

The host-based approach means that the expatriate employees will be under the host country payroll and receive the base and incentive pay based of the host country regulation and compensation practice. The companies in this case maintain the equitable relationship of reward levels between the HCNs and parent company. However, this approach seems to be non-attractive to the expatriate employees because they must be under the local host salary structure.

Region-based approach

Different from the home-based approach, the region-based approach requires the labor mobility on the region or global scale. The selection of employees will focus on choosing the best person for the position regardless of the nationality. The remuneration level will depend on the main international currency such as US dollar, and Euro. This approach also relies on the reward principles of MNCs, which are accordance with the global strategies, structures and cultures. The subsidiaries managers will be allowed to organize the base pay, benefit and incentive in accordance with the local standards. There must be definitely consistency in the global application of core reward princely including reward differentiation and performance-based recognition.

2. Reward practice

China is one of the successful countries that plays the center role in global economic growth. According to Shen (2004), Shen identified four approaches of international management of reward in Chinese companies, which are host-based, home salary plus host-based, contract-based and post-based approaches. Shen studied 10 Chinese MNCs with subsidiaries in UK by using the semi-structure and interview-based survey. All companies utilized host-based approach for non-executive and a contract-based approach for HCN executive accordance with the pay levels for HCNs, which are normally set high by UK standard. The pay package included the fix salary in addition to an individual merit bonus, normally of 2 months’ additional wage based on individual performance for the non-executive. Applying for the executive, the contract-based system was used in the way that the pay package was negotiated directly between the firm headquarters and the individual manager.


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Standardization of rewards and work conditions in multi-national companies. Should the pay and work conditions of employees be standardized?
Coventry University
ISBN (eBook)
ISBN (Buch)
908 KB
The author is not a native speaker of English. Please excuse any inconsistencies in grammar or expression.
standardization, should
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Viet nguyen hoang (Autor:in), 2013, Standardization of rewards and work conditions in multi-national companies. Should the pay and work conditions of employees be standardized?, München, GRIN Verlag,


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