Lecture 8: Compensation and International HRM

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Questions and Answers

What is included in the definition of compensation in the context of HRM?

Monetary and non-monetary rewards (correct)

Paid time off only

Only bonuses and commissions

Only base salary

Which factor does not typically affect employee compensation?

Company size

Employee's personal preferences (correct)

Profit margin

Cost of living in work location

What is an example of guaranteed pay?

Bonuses based on performance

Base salary (correct)

Stock options

Commissions on sales

Which of the following is not typically considered a benefit?

Base salary Signup and view all the answers

Why might an organization with lower compensation struggle?

Difficulty attracting top candidates Signup and view all the answers

What does an extrinsic rewards system primarily focus on?

Direct financial payments Signup and view all the answers

What could result from an organization following a market follower strategy?

Lower overall compensation standards Signup and view all the answers

What type of compensation is project-based payment?

Variable pay Signup and view all the answers

What is the primary purpose of an incentives program?

To motivate high-performance among employees Signup and view all the answers

Which of the following is NOT a type of individual incentive program?

Gain Sharing Signup and view all the answers

What does the Cafeteria Benefit Plan allow employees to do?

Choose from a variety of benefits while adhering to a set limit Signup and view all the answers

What is meant by external equity in compensation?

Comparison of pay rates among different companies for the same job Signup and view all the answers

Which method is commonly used to maintain internal equity?

Job analysis and job evaluation Signup and view all the answers

What primarily distinguishes merit salary systems from bonuses?

Merit salary systems are for non-sales jobs and link pay to performance Signup and view all the answers

How can performance appraisal help with individual equity?

By providing insight into employee productivity relative to pay Signup and view all the answers

Which of the following represents a type of indirect financial payment?

Workers' Compensation Insurance Signup and view all the answers

What is the primary purpose of conducting a salary survey?

To ensure and maintain external equity Signup and view all the answers

Which method involves directly purchasing salary data from external sources?

Formal Salary Survey Signup and view all the answers

What does the Market Plus Philosophy aim to achieve?

To attract and retain top talent by offering premium compensation Signup and view all the answers

Which of the following is a characteristic of the Market Minus Philosophy?

Emphasizing cost-effectiveness through lower pay Signup and view all the answers

What is an essential feature of a Market Compensation Policy?

Benchmarking compensation levels against industry standards Signup and view all the answers

Which incentive is commonly associated with the Market Minus Philosophy?

Flexible work arrangements Signup and view all the answers

What is the intent behind Job Evaluation in an organization?

To systematically assess the value of different jobs Signup and view all the answers

What does Benchmarking involve in compensation practices?

Comparing employee salaries to those of competitors Signup and view all the answers

What is the primary goal of job evaluation?

To compare jobs and create a fair pay structure Signup and view all the answers

Which job evaluation method is most suitable for an organization with fewer than 100 jobs?

Ranking method/ Paired comparison Signup and view all the answers

In the job grading method, which of the following is NOT typically considered as a grade?

Managerial Signup and view all the answers

What does the factor-comparison method focus on when evaluating jobs?

Specific job factors like skills and responsibility Signup and view all the answers

Why is international human resources management (IHRM) becoming increasingly necessary?

To manage expatriates and global workforce complexities Signup and view all the answers

Which aspect is NOT typically a component of IHRM?

Domestic employee engagement Signup and view all the answers

What benefit does 'open pay' policies provide in the context of procedural equity?

Promotes transparency and fairness in salary distribution Signup and view all the answers

What is a key difference between domestic HRM and IHRM?

IHRM includes international taxation complexities Signup and view all the answers

What is repatriation primarily concerned with?

The process of bringing the expatriate back to their home country Signup and view all the answers

Which factor is NOT typically considered in the complex employee mix within international HR?

Work experience in the local market Signup and view all the answers

Which of the following dimensions does Hofstede’s cultural model NOT include?

Gender Orientation Index Signup and view all the answers

In cultures with a high Power Distance Index (PDI), how is power typically perceived?

As a privilege of social status Signup and view all the answers

What is a characteristic of low Individualism/Collectivism (IDV) cultures?

Integration into strong, cohesive groups Signup and view all the answers

What might cause re-entry shock for expatriates returning to their home country?

Extended time spent abroad leading to cultural fatigue Signup and view all the answers

Which of the following statements is true regarding Uncertainty Avoidance Index (UAI)?

High UAI cultures have a low tolerance for ambiguity Signup and view all the answers

What is a potential risk associated with increased involvement in employees' personal lives?

Legal issues due to privacy infringements Signup and view all the answers

Study Notes

Importance of Compensation

Compensation is essential; employees will not work without a proper compensation package.
Encompasses more than just salary; includes various financial and non-financial rewards.
Organizations offering less competitive compensation struggle to attract top talent, impacting performance.
Companies recognized as best employers, like SAS and Boston Consulting Group, feature satisfied employees regarding both pay and benefits.

Factors Affecting Employee Compensation

Egyptian labor laws govern annual increments, overtime, holidays, and penalties.
Social and tax laws set minimum salaries and employee contributions.
Competitive strategy influences compensation levels, alongside company size and profit margins.
Cost of living and geographical location affect salary differences across regions.

Definition of Compensation & Benefits

Compensation includes all monetary and non-monetary rewards offered to employees.
Guaranteed pay is the fixed cash reward, primarily base salary.
Benefits include programs like medical insurance, paid time off, retirement contributions, and more.

Extrinsic Rewards System: Direct Financial Payments

Wages are payments for hours worked, e.g., $7/hour.
Salaries are set payments for job responsibilities, e.g., monthly salary of 8000 EGP.
Project-based compensation remunerates employees based on completed projects.
Incentive programs motivate performance, could be individual or company-wide.
Bonuses provide special payments above the standard salary for exceptional work.
Merit salary systems link compensation to employee performance.

Indirect Financial Payments

Indirect compensation includes benefits like workers' compensation insurance and supplemental pay.
Cafeteria Benefit Plan allows employees to choose from various benefits within a set cost limit.

Elements of Equity

External equity compares pay rates between companies for similar roles.
Internal equity ensures fairness in pay among different jobs within the same company.
Individual equity assesses fairness of pay for individuals relative to co-workers.
Procedural equity focuses on fairness in the processes used to determine pay.

Methods to Address Equity Issues

Salary surveys track and maintain external equity.
Job analysis ensures internal equity.
Performance appraisals help maintain individual equity.
Effective communication promotes transparency in pay processes.

Market Compensation Policies

Market compensation policies analyze external data to ensure competitive employee pay.
Market-plus philosophy pays above average to attract top talent.
Market-minus philosophy offers below average compensation, focusing on non-monetary incentives.

Job Evaluation

Job evaluation systematically assesses jobs to create fair pay structures.
Techniques include ranking method, grading method, and factor-comparison method.

Procedural Equity

Open pay policies promote transparency by sharing compensation details within the organization.

International HRM

International HRM (IHRM) involves managing human resources across global operations.
Essential due to globalization, managing expatriates, and reducing cultural risks.

Differences between Domestic HRM and IHRM

IHRM deals with complexities of taxation, international relocation, and performance appraisals.
Increased need to address personal aspects of expatriates’ lives, such as housing and children’s education.

Repatriation

Refers to bringing expatriates back home, often leading to re-entry or reverse culture shock.

Hofstede’s Cultural Model

Developed by Geert Hofstede, identifying how cultural values impact business behavior.
Cultures are assessed along dimensions such as Individualism vs. Collectivism (IDV), Power Distance Index (PDI), and Uncertainty Avoidance Index (UAI).

Individualism vs. Collectivism (IDV)

High IDV cultures value self-interest and individual initiatives, while low IDV cultures emphasize group loyalty.

Power Distance Index (PDI)

High PDI cultures exhibit hierarchical structures valuing power, while low PDI cultures prioritize equality.

Uncertainty Avoidance Index (UAI)

High UAI cultures have low tolerance for ambiguity, preferring structured environments, while low UAI cultures are more comfortable with uncertainty.

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Description

This quiz explores the importance of compensation in the context of International Human Resource Management. Understanding the broader aspects of compensation beyond just paychecks is crucial for organizations to attract and retain top talent, impacting overall performance.