INTERNATIONAL REWRD SYSTEM An accepted view of strategic human resource management (SHRM) is that there is a large positive relationship

between organization effectiveness (OE) and HRM practices. Compensation research has clearly demonstrated that whether or not compensation is performance-based is only one of several relevant dimensions of compensation and reward systems. Indeed, the preponderance of research evidence is that other aspects of the compensation system and the context in which they operate influence the effects of incentives. Factors found to influence the pay-organization performance relationship include organizations past profitability, ownership and governance, financial risk and international marginal tax rates. Factors found to influence the individual pay-performance relationship include trust in the relationship, size of the pay increase, line of sight. The Significance of National Cultures for Compensation and Reward Systems The assumption that HRM systems must fit national cultures is based on the belief that "most of a country's inhabitants share a national character..." that is "...the collective programming of the mind which distinguishes one category of people from another...the category of people is the nation. This belief leads to a search for distinct national cultures whose influence is critical, if not the most important, for understanding international compensation systems. Typical of the national culture model is Gomez- Mejia and Welbourne's (1996) work in which they caution scholars and managers about exporting theories and practices derived from U.S.-based research and experience. This IHRM contingency model using national cultural attributes as the dominant determinant. Accordingly, countries with high power distance scores should exhibit more hierarchical pay structures, while those manifesting low power distances would choose more egalitarian systems. In nations identified as individualistic, compensation and rewards would support employability and individual and performance-based pay. Those in more collectivist nations would choose more group-based approaches, and so on. This literature on national culture models is implicitly prescriptive; it dictates that compensation and reward policies must be developed to align with and reinforce national cultural attributes. The national cultural model predicts these national level attributes will be more significant than organizational level attributes. One reaction to such thinking is that it engenders blatant stereotyping. We fear it parallels biased notions that all women desire time off because of their caring and nurturing values, while all men desire more time at work to pursue their more aggressive values. While this context implies plenty of scope for policy and practice work, human resource specialists critical responsibility for the design and maintenance of employee reward systems becomes much more complex and difficult when set in the context of the conduct of international business. For one thing, practical considerations clearly articulated by a practicing HR specialist well over 30 years ago challenge the equal pay for work of equal value principle taken as self-evident in respect of employee reward content and administration in jurisdictions such as the UK. While it may represent a compensation managers nightmare . we can have equal compensation only when we live in an equal world. Rewarding expatriation rewarding multi-local talent. The HR specialist faces problems to be solved, first, in supporting a multinationals wish to employ parent country nationals not only in the organisations country of origin, drawing from domestic employment sources. PCNs may be expatriated to work in other countries to resource business development and operations there. And the transfers may be more than an isolated out-return cycle but require multiple assignments over time as the multinational and its strategy-structure arrangements evolve. The assignments may vary in terms of duration, as well as giving rise to different considerations around the effort reward bargain, bearing in mind that the employees circumstances, like those of the organisation, are unlikely to remain static. Secondly, there is the question of employing individuals sourced from the host country where the multinational sets up operations, to support the enterprise in that jurisdiction. If host country nationals are working alongside PCNs possibly occupying positions of superiority in leading regional operations according to the equal pay for work of equal value principle, it may be hypothesised that they should be subject to PCN reward management terms and conditions. Or do other considerations apply?

Thirdly, as multinationals increase their presence, and develop confidence in the potential of talented employees in countries around the world to transfer corporate practice embedded in their experience and knowledge beyond their country of origin, corporate management may choose to widen the source from which to assign managers and specialists transnational. These third country nationalsmay have been recruited and rewarded on terms embedded in their country of origin employment system. But if they are expected to contribute to corporate performance, working transnational, in the same way as PCNs, again, is there a case that their reward should be synchronized with that of the PCNs? Thirdly, as multinationals increase their presence, and develop confidence in the potential of talented employees in countries around the world to transfer corporate practice embedded in their experience and knowledge beyond their country of origin, corporate management may choose to widen the source from which to assign managers and specialists transnational. These third country nationals (TCNs) may have been recruited and rewarded on terms embedded in their country of origin employment system. But if they are expected to contribute to corporate performance, working transnational, in the same way as PCNs, again, is there a case that their reward should be synchronized with that of the PCNs? Thirdly, as multinationals increase their presence, and develop confidence in the potential of talented employees in countries around the world to transfer corporate practice embedded in their experience and knowledge beyond their country of origin, corporate management may choose to widen the source from which to assign managers and specialists transnational. These third country nationals (TCNs) may have been recruited and rewarded on terms embedded in their country of origin employment system. But if they are expected to contribute to corporate performance, working transnational in the same way as PCNs, again, is there a case that their reward should be synchronized with that of the PCNs? Accounting for expatriation reward management The keeping the expatriate whole principle has governed reported thinking and practice on expatriate reward design. It is not merely a case of semantics to argue that this line of reasoning has downplayed the reward aspect in favour of providing compensation for accepting changes in lifestyle, enduring hardship, etc. The sense of an exchange relationship is still in focus, but the underlying rationale appears to veer away from the tradition of an effort bargain. This change of orientation is expressed, first, in terms of pay package design intended to preserve existing relativities with PCN peers, or at least to preserve consistency with reward levels for the employees occupational group and level in their country of origin in the case of TCNS. Secondly, the express ambition is to maintain purchasing parity so that the expatriate may enjoy the same living standards as at home. The approach aligned to this policy orientation, known as the home-based/salary build-up, or balance sheet (ORC, 2004), augments basic pay with a foreign service premium as well as cash supplements to compensate for hardships. Housing and childrens education costs are reimbursed, extending the kept whole principle to the employees family members. In addition to salary adjustments to neutralise cost of living differences, other allowances may include home leave, relocation, spouse assistance/dual career allowances. Adding complexity to expatriate compensation administration, accompanying this traditional buildup plan, consistent with the kept-whole principle, tax equalisation generally accompanies balance sheet expatriate compensation. What this means is that the value of tax and social insurance contributions the employee would hypothetically have paid at home is deducted from the home base pay to arrive at a net salary. Allowances and premiums are then added to that amount, and the organisation pays any tax falling due within host jurisdiction on the compensation package total amount.