For a company looking to extend its operations outside its own country, global compensation is the answer to a growing international workforce.
Especially when the growth of remote work has almost doubled in the last 13 years, providing an attractive compensation package is paramount.
However, the glaring issues with paying international employees become apparent in each country’s specific compliances, tax and benefits, and social security contributions requirements. With international law, cost of living, and wage differences, it’s challenging for companies, new and old, to provide the best compensation strategy for their employees.
With global compensation, you’ll be able to understand how important it is to have a thorough familiarity with the economic climate and purchasing power parity variances in different countries. You’ll also get acquainted with the different compensation strategies to attract and retain talent worldwide.
In this article, we’ll focus on the importance of having a global compensation strategy and how you can manage it to provide a fair and equitable compensation policy for your employees.
But before we dive head first, we’ll first define global compensation.
What is Global Compensation?
Global compensation is the total amount of your direct and indirect compensation for international employees. This also includes international legal and tax compliances needed for recruitment abroad.
Direct Compensation
Direct compensation refers to the payable wage or salary and bonuses an employer offers. Everything directly paid for the employee’s services based on hours, output, and bonus requirements (13th and 14th-month pay) is under direct compensation.
Indirect Compensation
Indirect compensation, usually referred to as “fringe” benefits, is the disbursement of benefits shouldered by the company to attract and retain top talents. This includes health insurance, housing benefits, car loans, social security, paid leaves, etc.
What is the importance of Global Compensation?
With remote work opportunities booming, employees now have more freedom to choose their employers than ever before. So, offering the best compensation package ultimately affects your recruitment potential and employee retention.
The importance of global compensation starts with providing an attractive compensation package with strong employee benefits specific to the employee’s requirements. This ensures fair compensation based on the employee’s background and expectations.
Adjust compensation packages for international talent
You may argue that global compensation is similar to local compensation. However, the former is more nuanced and often better for international employees. Since hiring internationally, the economic standards, currency strength, and cost of living vary from country to country. It’s best to have specific packages for individual employees.
Especially for expatriates from countries with strong economic backgrounds, providing appropriate compensation packages reflecting their profession in their home country is better.
For expatriates living in host countries with unstable currencies, adjusting their compensation package solves the uncertainty of fluctuating inflation rates and avoids hefty exchange rate fees. You provide the needed financial security without compromising their desired lifestyle.
Offer better benefits to remote employees
With global compensation, you can align your benefits packages according to your remote employees’ needs. Identifying every employee’s financial expenditures in their host country ensures you can give them a secure financial solution for their day-to-day expenses.
You can provide adjusted amounts of country-specific currency benefits such as housing allowances, transportation costs, and vacation stipends. As with the previously mentioned exchange rates, your international employees who prefer a strong currency would be glad to avoid a lower conversion rate for their hard-earned money.
By calibrating employee benefits, you can provide a better compensation package for international workers looking for the best deal for their services.
Improve branding with international recruitment opportunities
Global compensation on a broader scale also indirectly affects your company positively. With attractive global compensation policies and employee benefits, a wider pool of talents is available to you. You can hire and attract the best talents in the world easily.
This provides an excellent competitive advantage in the globalized landscape while bettering your international branding, essentially becoming a positive feedback loop.
Attract the best talent – improve international branding – attract the best talent.
You gain an impressive edge in the global market by providing an exceptionally attractive compensation package while simultaneously strengthening your internal operations and international branding.
Overall, global compensation opens the doors to hiring and retaining the crème de la crème employees in the world. It makes your global expansion easier, boosts your workforce, and satisfies your remote employees.
How to manage Global Compensation
Managing an effective global compensation package requires you to have good strategies to attract and retain remote employees.
Some strategies may be more costly than others; however, the tradeoffs are beneficial in the long run.
Types of Global Compensation Strategies
Geographic Pay Policy
The geographic pay policy is the most cost-effective compensation strategy for global compensation. This strategy allows you to adjust employee salaries according to their country’s labor wage standard.
You can see the difference between the average developer/programmer salary for the US, India, and the Philippines below.
| Developer / Programmer Average Monthly Wage in USD | |
| US | 89,600.00 |
| Philippines | 779.31 |
| India | 378.30 |
*data according to salaryexplorer.com
There are significant variances in the standard pay for programmers across the countries. With this strategy, you’ll save up on hiring costs with similar skill sets.
However, you may want to provide higher compensations above the country standard to attract and retain more employees. You don’t want your employees jumping ship when they get an opportunity for better pay.
Temper your compensation packages to where they’re better than most while keeping costs down.
Local Standard Compensation
The local standard compensation is the opposite of the previous strategy. With this, you’re setting your country’s standard salary rate for your compensation package.
This strategy is extremely attractive for remote employees living in countries with lower salary standards. They’ll double or even triple their salary easily. Your compensation package will always be competitive, no matter what.
The local standard compensation strategy works well for companies located in strong economic countries. They can provide the best salaries and benefits for international employees. The only major drawback is that it’s financially costly but makes up for a competitive compensation package.
Although this can be difficult for countries with a lower wage standard, the next strategy is the best balance between competitive salaries while saving up on costs.
Hybrid Pay Policy
The hybrid pay policy strategy is the best for companies looking to strike a balance in providing a competitive compensation package while saving up on salary costs.
This strategy provides compensation packages based on the international mean rate. The wages and benefits are up to the global standard regardless of which country your company is located in.
For example, you can offer competitive salaries in other regions of the world without matching your country’s salary standard. So, if you’re located in a country with a strong economy, you can offer a lower salary but still attractive enough for similarly skilled international employees.
This is the best strategy when you’re expanding your company globally while keeping your costs relatively low.
Split Payroll
The split payroll compensation strategy works well when given to expatriates based in countries with a weaker currency than their home country. You can divide their payroll into two or three currencies so they can easier manage their finances.
You may ask yourself why they need to split their salary when you can provide their host country’s currency.
And why not just provide them with a stronger currency so it’ll be simpler for you?
Well, there are a few reasons why.
For one, if their host country has a relatively unstable currency, they’ll likely want to keep their money stable. By providing a strong and stable currency as part of their salary, it’s easier for expatriates to have a financial safety net.
What you’re doing here is solving their anxieties with the uncertain economic climate of their host country. If, by any chance, their host country’s currency tanks, they’ll still have valuable currency at their disposal.
Another reason is to avoid exchange rate fees. Additional expenses in converting currency diminish the expatriates’’ hard-earned money.
More often, split payroll is an attractive complementary package, so your recruitment opportunities have more options to choose their compensation.
With split payroll, you provide your expatriates with stable currency while avoiding expensive exchange rate fees. This type of strategy is used best in conjunction with the other three stated above.
Attract and retain the best talents in the world with Multiplier
Learning the best compensation strategies for remote employees is only the first step in attracting and retaining world-class talents. You also need to consider the other facets of international employment listed below:
A Complete Guide to Global Employment
Get to know the ins and outs of global employment in the changing workplace landscape. Understand the benefits and challenges of a remote workforce to assist your global employment needs. This piece builds on the fundamentals of communication, collaboration, and company culture you need to jumpstart your global employment journey.
International Compensation & Benefits
Forming a world-class workforce starts with having an extensive vision paired with a great plan. Learn how to create a compensation plan step-by-step while ensuring proper international compliance. With this guide, you’ll be able to create a great compensation and benefits package to attract the best talents worldwide.
Global compensation, at first glance, can be quite difficult to grasp. The extended separation through borders, time zones, and cultures bring complex problems. Add in the complexities of economies and the larger job market; creating an attractive compensation package can be quite overwhelming. However, with the right direction, it is achievable.
We at Multiplier offer top-notch global compliance services in up to 150+ countries. We have a robust, reliable, and secure all-in-one platform where you can manage everything payroll and compliance.
We also provide international insurance for your remote employees while having 120+ available currencies for compensation.
Attract the best employees in the world with us.
Take your business to the next level. Use the best. Use Multiplier.
Frequently Asked Questions
Q. How does global compensation differ from local compensation?
Local compensation focuses on the specific market conditions and practices of a particular location, while global compensation involves developing a cohesive compensation strategy that considers local laws across multiple jurisdictions.
Q. How can organizations ensure pay equity across different countries in their global compensation strategy?
Organizations can adopt certain practices to promote pay equity, such as conducting regular compensation benchmarking studies, establishing transparent pay structures, implementing consistent performance evaluation processes, and addressing any gender or diversity pay gaps through proactive measures.
