Compensation Management and Globalization

This module has covered topics related to compensation management and discussed the topic from a variety of perspectives. To close the compensation management module, here are some thoughts on where the corporate world is headed worldwide in the context of the ongoing global economic crisis and how the corporates are addressing the needs of their employees.

Further, globalization has created a “global village” where people in different parts of the world are able to not only participate in global supply chains but also partake of the wonders of cultural exchange and assimilation. This has created aspirational values among large sections of people in the developing countries who now demand better compensation at par with their counterparts in the advanced economies of the West.

Hence, corporates need to be aware of the complexities of the issue of how much compensation and in what form that is to be paid to the employees taking into account all the factors.

Given the fact that most companies in the West outsource to countries like China and India because of the cost advantage where lower wages in these countries provide cost savings, the reckoning of higher wage demands and wage parity that occurs because of economic factors might obviate the advantage enjoyed by these countries as far as the outsourcing phenomenon is concerned.

In this context, it is worth noting that corporates world over are feeling the pinch of the ongoing global economic crisis and this has led to depressed wages as well as lower hikes for the employees in the last two years. Hence, the added challenge of keeping the workforce happy in these gloomy times is something that HR managers must take into account as well.

The globalized workforce that participates in the global supply chain creates its own set of challenges with many expatriates being paid “hardship allowances” to entice them to work abroad in developing countries.

Further, the native workforce in these transnational corporations earn higher wages than those of the average workers in their countries leading to ethnic tensions and demand for inclusion of the less qualified workers. All these factors need to be addressed by the managers of corporations when they decide on the compensation.

Finally, the very real phenomenon of attrition because of poor compensation continues to haunt the corporates and the challenge of retaining quality workers while retrenching poor performers remains a key imperative for companies. Hence, compensation management has aspects other than those that were discussed so far in this module and this article is meant to highlight some of them. It is hoped that the world economy recovers quickly and the boom years where workers and corporates were happy working together come back to the advantage of everybody.