International HRM

Major Functions and Activities of HR

• Human resource planning • Training and development

• Staffing • Compensation
– Recruitment (remuneration) and benefits
– Selection
– Placement

• Performance management • Industrial relations

 Dimensions of domestic HRM
• HR Activities

– Within national boundaries

– For domestic employees

What changes when HRM goes international?
 Approaches to IHRM

• Cross-cultural management
– Examine human behavior within organizations from an international
perspective

• Comparative HRM and Industrial Relations

– Seeks to describe, compare and analyze HRM systems and IR in
different countries

• HRM in multinational firms

– Explore how HRM is practiced in multinationals
 Defining International HRM

• HR Activities (already discussed earlier)

• Countries of operations

• Types of employees
 Country of operations

• Home Country

– Google in US

– Infosys in India

• Host Country

– Google in India

– Infosys in US
 Types of employees

• Host Country Nationals (HCN)

• Parent Country Nationals (PCN)

• Third Country Nationals (TCN)

 Types of employees

• Host Country Nationals (HCN)

– Google employs Indian citizen in India (Host country local employee)

– Infosys employs US citizen in US (Host country local employee)

 Types of employees

• Parent Country Nationals (PCN)

– Google sends US citizen to India (Expatriate)

– Infosys sends Indian citizen to US (Expatriate)

 Types of employees

• Third Country Nationals (TCN)

– Google sends UK employee to India (Expatriate)

– Infosys sends UK employee to US (Expatriate)

A Model of IHRM
International Assignments Create Expatriates:
• Who is an ‘expatriate’

– Employee working and temporarily residing in a foreign country

– Also called ‘international assignees’ (IAs)

– PCNs and TCNs are expats or international assignees

• Who is an ‘inpatriate’

– Definitions are not consistent

– Some times used for employees transferred to parent country

operations

• Example - Google moving an Indian employee to US is

‘inpatriate’; on the other hand Google employee moving to India
is ‘expatriate’
• Who is an ‘inpatriate’

– Another way the term ‘inpatriate’ is applied is

• When Google employs an Indian as a local employee in the US; but

sends her on a international assignment to India

• Or when Infosys India employs a US citizen as a local employee and

sends her to US on international assignment

• Another term in use is ‘Transpatriate’ – who moves between subsidiary

companies – for example Google (US company) moving its UK employee on
an assignment to India
• My Personal view (as an ex-practitioner) :

– The terminology confusion exists, because companies are trying to

find new ways to engage talent across borders in globalised world.

– Academicians and Practitioners are trying to coin appropriate

terminology to distinguish one type of international assignment from
another.

– In some respects the field is still evolving, as countries and

companies are struggling to protect their own domestic jobs, but
trying to benefits from cross border engagement of talent
What differentiates International HRM from domestic HRM?
• More HR Activities
• Need for broader perspective
• More involvement in
employees personal life
• Changes in workforce mix
(locals vs expats)
• Risk exposure
• Broader external
influences
 More HR Activities
• HR gets involved in areas that it is not usually involved in domestic HRM

– International taxation

– International relocation and orientation

– Administrative services for expatriates

– Host government relations

– Language translation services

HR gets involved with international taxation in IHRM context.

Why is it so?
• Expats are subject to international taxation

– Domestic (home country) tax liability

– Host country tax liability

• HR has to design compensation that ensures tax equalization (or tax protection, if
companies apply it)
• To ensure an international assignment does not offer any tax disincentives

• Time lag between assignment completion and settlement of tax liability (domestic and
international)

• Non compliance with home / host tax laws can expose both employee and employer to
severe risk (such as tax evasion, incorrect reporting of income)

How do companies deal with the tax complication arising out of

IAs
 Tax Equalization

Scenario 1

Scenario 2
 Tax Protection

Scenario 1

Scenario 2
 Activity 1
Activity 2:
• Google search for :
– Double Taxation Give names of two
companies that help
– How do countries avoid double taxation?
companies with
What is DTAA? international taxation
– How do countries avoid double taxation support for expats /
– Resident / Non-resident. How is international assignments
residential status ‘decided’
– Tax equalization / Tax protection
– PAYE / PAYG
 Relocation and Orientation
• Pre-departure arrangements:
– Training
– Immigration and travel support
– Housing
– Shopping
– Medical care
– Recreation
– Schooling
– Delivery of salary
– Taxation arrangements
 Administrative support at host location
• Time consuming and complex

– Policies and procedures for settling down

• FRRO registration
• Police registration

– Practices that are ethical at host may be unethical at home, or vice

versa
• AIDS test requirement at host country for a US citizen
• Employee might refuse to meet that requirement
• How should HR deal with the situation?
 Government Relations
• Support from government institutions for Visa / Work Permit / Certificates

Language services

• Some countries make excessive use of local language

• Need to translate into expat’s language or English

 II. Relocation and Orientation

• Pre-departure training
• Travel & Immigration
• Information on housing, shopping, medical care, recreation
and schooling
• Finalizing compensation details such as delivery of salary
overseas, determination of various
• Overseas allowances and taxation treatment
 III. Need for a broader perspective

• Need of HR managers to design and administer programs for more

than one national group of employees (e.g. PCN, HCN and TCN)
working in the country operations

– Eg. Should all expats get expatriate benefits such as expatriate

premium when working in a foreign location?

• Complex equity issues arise when employees of various nationalities

work together
 IV. More involvement in personal lives

• HR needs to ensure expatriate employee understands the full

compensation package (eg. housing, healthcare)
– MNE’s typically have an ‘International HR Services’ team that
coordinates administration of these programs H
– HR is expected to support in handling banking, investments, home
rental while on assignment, coordinating home visits and final
repatriation
• In the domestic setting, theses issues may be limited to only dealing
with benefits such as health insurance of employee and eligible family
members or some minimal relocation assistance (eg. Marital status as
selection criteria for assignments)
 V. Changes in workforce mix

• As foreign operations mature, need for PCNs and TCNs declines

– Focus would shift to moving talent from subsidiary to headquarters

– Emphasis of HR operations of subsidiary would change to broaden to

local activities such as human resource planning, staffing, training
and development and compensation
 VI. Risk Exposure
• Human and financial consequences of failure is more severe in IHRM
– Expatriate failure - premature return or underperformance is a high cost
problem
– Direct costs of failure - salary, training costs, travel costs and relocation
expenses can be very high
– Indirect costs such as loss of foreign market share and damage to key host-
country relationships may be considerable

• Terrorism is another aspect of risk exposure (WTC, Mumbai)

– Assignment expenses on protection against terrorism is increasing
– Example, devising emergency evacuation procedures for highly volatile
assignment locations
– Major epidemic or pandemic crises such as (SARS or Avian Flu)
 Convergence – Divergence
• Convergence :
– A thinking that dominated US and European management research in the 1950s and 1960s

– Key Assumptions of the hypothesis:

• There are principles of sound management that can be applied regardless of national
environments
• Existing local or national practices that deviated from these principles need to be corrected
• These sound management practices would lead to societies becoming more and more alike in
the future

– Note: Given that the USA was the leading industrial economy at that time, the point of convergence
was the US model.

• Divergence
– Although firms in different countries are becoming more alike, the behavior of individuals within
these firms is maintaining its cultural specificity
 Activity 1
Activity 2:
• Google search for :
– Double Taxation Give names of two
companies that help
– What is DTAA?
companies with
– How do countries avoid double taxation international taxation
– Resident / Non-resident. How is support for expats /
residential status ‘decided’ international assignments
– Tax equalization / Tax protection
– PAYE / PAYG

• Assignee
• COLA exchange rate
• Cost of living allowance
(COLA)
• Cost of living index
• Cost of living
• Dependent (child or parent)
• Destination services
• Employee social
contributions
• Employer social
contributions
• Expat index
• Family allowances
• Family size
• Fiscal year
Expatriate Glossary
• Hardship allowance
• Home country/location
• Host country/location
• Hypothetical/tax norm
• Localization/localizing
• Mobility premium
• Per diem
• Personal Income Tax
• Preassignment visit/trip
• Rotational assignment
• Settling-in allowance
• Short-term assignment
• Spendable income
• Spousal assistance
• Tax equalization/equalize
• Tax status
• Taxable income
• Temporary living
• Work permit/ Employment
Visa / Business visa
Visa Types
• Work /Employment Visa
• Business Visa