TM - August 2008 - (Page 30)

recruitment & retention assessment & evaluation compensation & beneﬁts performance management learning & development succession planning Figure 2: Disconnects in Total Remuneration Programs Global Total Remuneration Philosophy While examining country differences driven by government mandates, tax laws, history and culture, a center of conﬂict may evolve between corporate philosophy, design components and local country operations when designing and implementing a true global total remuneration program. Figure 2 shows where disconnects occur. The primary challenge for HR is to ﬁnd the best way to design a global total remuneration philosophy but implement it locally. The ﬁrst step is to conﬁrm the business strategy and clarify that company vision and employee remuneration messages are aligned. Essentially, is the organization performing above average? If so, do current remuneration programs support that performance? Finally, do all employees see a clear connection between organization performance and their pay levels? To obtain this type of information may require a quantitative benchmarking analysis of current remuneration programs against the typical talent market, locally or nationally. This type of analysis should spell out where key remuneration programs are compared to market (see Figure 3). Figure 3 shows client information in the ﬁrst three columns, compared to the 50th- and 75th-percentile practices of its selected market. The major components of base pay, actual and target incentives, LTIs (where applicable) and beneﬁts can be easily identiﬁed and compared on a quantitative basis. Now the organization must determine the correct mix of elements. Some organizations are heavily focused on performance and need to keep ﬁxed costs at a minimum. Design a philosophy that targets base pay at the 40th percentile but total cash at the 75th percentile or higher. Provide a clear message to employees: that they are paid a base salary to meet speciﬁc objectives, but the goal is to exceed standard levels and increase proﬁts. In this type of mix, examine beneﬁts programs for ﬁxed costs, unless compensation professionals develop some forms of proﬁt sharing, particularly in retirement areas. For most organizations, setting beneﬁts at the 50th percentile of the market is sufﬁcient, but the mix of key beneﬁt items can change ﬁxed cost levels. The level and costs of statutory beneﬁts also vary from country to country. For example, in the U.S., the level of statutory beneﬁts for most employees is fairly small as a percentage of their pay. Most organizations have small retirement beneﬁts — as long as we continue current levels — plus limited medical coverage after age 65 and a small death beneﬁt. In most of Europe, there are substantial deﬁned beneﬁt schemes that are funded through governmental programs. Further, socialized medical programs in most other countries provide not only coverage after retirement age but also basic coverage throughout one’s lifetime. These types of statutory programs can signiﬁcantly alter an employer’s outlay for these beneﬁts compared to U.S. costs. These variances require that any quantitative analysis look not at actual costs for programs, but rather the Local Country Local Country Local Country Local Country Local Country • Do reward practices align with other programs, operations and desired outcomes? • Are employee needs and desires met? • Are reward programs cost-effective? Challenges to Global Remuneration Initial challenges relate to determining what the mix of the major remuneration elements (cash, beneﬁts, long-term incentives should be, in order to arrive at an overall desired total remuneration competitive position, such as the 75th percentile of the local country market. Consider these questions: • Are all pieces of total remuneration — base pay, variable pay, long-term incentives (LTIs) and beneﬁts — at the same percentile of the selected market? If not, make decisions on how much ﬁxed versus performance-based remuneration elements need to be part of the package. • If an LTI plan is offered, is it the same design in every country? Does it make sense in every country? • Beneﬁts will vary because of each country’s statutory or mandated beneﬁts. How will the organization manage and quantify these differences? • Allowances — for automobile policies, housing and representation — vary from country to country. Should the organization eliminate any of these or include them in all countries? • How strong and stable is the organization’s market data snapshot, especially in emerging countries where remuneration policies may differ substantially between multinationals and local employees? August 2008 30 talent management magazine www.talentmgt.com http://www.talentmgt.com

Table of Contents Feed for the Digital Edition of TM - August 2008

TM - August 2008 Editor's Letter Contents Human Performance Leading Edge Foundations Global Background Screening Does Global Assessment Work? Global Total Renumeration: Creat One Organization Border Insecurity: Immigration Reform and Talent Management The Global Workforce: Communication Across Cultures Around the World in How Many Days? Insight: Exelon: Performance Under Pressure Special Report: Perspectives on Managing People Application: Reinventing Sales Rewards at Motorola Dashboard: Mideast Meets West Dashboard: Mergers and Acquisitions 2008 - Don’t Leave Employees Behind Editorial Resources Advertisers' Index Full Potential

TM - August 2008

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