Investigating expatriate remuneration effectiveness in multinational organisations

¶ … Expatriate Remuneration in a Multinational Organization

The purpose of this study is to determine the extent to which the regime that is adopted for the process of remunerating expatriates in Coca Cola Company is effective. Coca Cola is a very large multinational company and therefore the study is going to focus on how its expatriate enumeration policy is effective in the process of remunerating its expatriates who span all parts of the globe while having different positions. The study is going to concentrate on the general effectiveness of the different foreign remuneration regimes on the company's turnover and the corresponding effect of the remuneration policing in maintaining a perfect professional image of the company. The effectiveness of the expatriate remuneration is gauged using a variety of methods that are all geared towards the succinct and exact determination of the extent to which the policies of remunerating the expatriates is the various countries of operation.

Purposes: The purpose of this research is to determine the effectiveness of expatriate remuneration in a multinational organization such as Coca Cola.

1.0 Introduction

An expatriate is an individual who works in a foreign country. These persons may not be permanent residents of these countries as they are mainly involved in assignments that could be long or even some which take a more protracted amount of time such as between three to six years while still not citizens of their host countries. Different pay approaches are employed by various organizations.

As corporations expand their global presence, they are forced to involve the services of several of their staff in their global operations. The assignments that these professionals may be assigned range from simple assignment s which take very short time to very complex ones that take longer periods. All these assignments usually require their guidance and due expertise. The remuneration of expatriates usually presents a lot of challenges. The process of managing expatriates too is very challenging. The process of convincing individuals to go work in very unpleasant and potentially dangerous nations is not easy. It involves acts and steps that are tailored to assure them working in such countries would be a perfect career move.

The process of remunerating expatriates is very complex operation which is most often rushed by several corporations due to the urgency in their operational demands. The implications of an adopted expatriate remuneration policy are often felts long after the expatriate arrives in the host country and when the assignment period is expired.

It is worth noting that differential treatment of the adopted expatriate remuneration policy results in very sad and depressed expatriates.

It is worth noting that the inconsistency in the treatment of expatriates themselves can also present a lot of problems.It is therefore important to take good care of their remuneration perks. It is therefore important for multinational corporations to formulate very defendable pay perks for their expatriate population. The adopted expatriate remuneration policy should reflect clearly the complexity and conditions involved in their different assignments that are to be undertaken by the various professional expatriates. Equitable treatment of the expatriates is also important and should also be clearly expressed in the expatriate remuneration policy.

Most corporations have over time adopted clearly refined remuneration policies to cater for their expatriates. Several issues however exist that makes the expatriate remuneration a very complex area. The factors that complicate the process of deriving the expatriate remuneration policy include and are not limited to the following: Weak and strong currencies of the origin and the host countries, the volatility of the exchange rates, the disparity of the cost and standards of living between the countries, the disparity in the tax regimes and the bare fact that some countries are more attractive to work in than others. It is therefore important to formulate. The formulated remunerating policy should therefore be one that is attractive, fair, has high retentions capability, should be fair and encourage equity.

The remuneration policy that is adopted by any given firm should be based on the following doctrines. The first point to consider while formulating the expatriate policy is the fact that the expatriates' life while working abroad should never be better or worse when on assignment. The second point to be considered or factored in is the fact that the living standards of the expatriate's origin country should be maintained as much as possible. The other point to consider is that a higher level of responsibility should be portrayed in the amount of remuneration offered to the expatriate. The package should also be highly competitive. While formulating the remuneration package, utmost attention should be paid to the particular conditions under which the expatriates will be working or exposed to while undergoing their assignments abroad. It is also of utmost important to ensure that there is equity in the remuneration level of the expatriates who may be ailing from different countries. Overall the adopted expatriate remuneration policy should be cost-effective. This is to say that the adopted policy should be able to justify the summed up amount that is costs to maintain them abroad.

This proposal is focused on the Coca Cola Company which is one of the major multinational companies in the world. It produces a drink, Coca-Cola which is a carbonated soft drink that is sold in stores, various restaurants, and several vending machines internationally. The Company claims that its Coca Cola beverage is sold over 200 countries. The beverage is produced by The Coca-Cola Company which is based in Atlanta, Georgia, and is usually referred to as Coke (which is a registered trademark of The Coca-Cola Company in the United States from 27th March,1944.However, in Europe and other American countries, the drink is referred to as pop or cola. The beverage was initially intended as a patented medicine during its invention in the late 19th century by one John Pemberton, then Coca-Cola company was acquired by a businessman Asa Griggs Candler, whose guidance led Coke to its attain dominance and huge market share of the world soft-drink market in the 20th Century.

The company produces the concentrate, which is then purchased to various licensed Coca-Cola bottlers throughout the globe. These bottlers hold territorially exclusivity of contracts with the company then are responsible for the production of the finished product. The products are packed in cans and bottles containing the concentrate in combination with highly filtered water and specially produced sweeteners. These bottlers are then responsible for the sale, distribution and merchandising of Coca-Cola to the various retail stores in their respective territories of the world and numerous automated vending machines. Examples of these bottlers include the Coca-Cola Enterprises the largest and single Coca-Cola bottler in Western Europe North America .The Company also involves itself in the selling of the concentrate for soda fountains to various major restaurants and food stores.

The Coca-Cola Company has in the past also introduced several other cola drinks under brand name Coke. The most popular of these is Diet Coke; others include Caffeine-Free Coca-Cola, Coca-Cola Cherry, Diet Coke Caffeine-Free, Coca-Cola Vanilla, Coca-Cola Zero, and several special editions which contain coffee, lime or lemon.

The company has also had its share of controversies and complaints from customers all over the world. The major complain regards the fact that its ingredients are not natural and hence harmful to the human body. In reaction to the consumer preference of a more natural product, the corporation is in the process discontinuing the use of E211, or sodium benzoate, which is a very controversial additive, utilized in the Diet Coke and has been linked to DNA damage in the yeast cells and hyperactivity incidences in children. The company therefore has formally announced that it plans to discontinue the use E211 from its other products ranges, including the Sprite and the Oasis brands. This is however, subject to the discovery of an appropriate alternative.

1.1 Limitations of your Research

The limitation of the research is numerous. However the most common ones include the huge geographical disparity that exists between the various branches of the Coca Cola multinational company. This mean that is impossible to include data from all the branches of the company since this would result in the need to carry out a very lengthy research which involves very costly initiatives.

The other constraint to the research is the short limit of time that is needed in carrying out the research which involves several element and factors. The time constraint that exists therefore is a barrier to the determination of the exact levels of effectiveness of expatriate remuneration by the Coca Cola Company.

2.0 Literature review

The study of International human resource management has always been focused on the element of expatriation (Aycan, 1997).The past has shown a lot of solutions to the field of International human resource management. All the solutions have a basic objective of maximizing the success of expatriate human resource while at the same time minimizing or completely eliminating failure in the expatriate manpower (Gregersen, 1987).In order to combat the negative effects of expatriation such as expatriate failure, corporations are forced to adopt a system that ensures that the expatriates a given very attractive payment packages. This is to encourage them to take up the given assignments while at the same time ensuring that they carry out their assignments with a lot of comfort. This research proposal is going to be focused mainly on the oversees operations of Coca Cola company, a multinational corporation with several oversees operations. It is worth noting that the work of other scholars has not clearly outlined the main effects that the expatriate remuneration policy might have on the other professional from the host countries in which the expatriates are posted. It is very sad that host country nationals (HCN) are a neglected lot. They form an integral part of life to the expatriates (Oddou, 1991).It is therefore important to note that while evaluating the effects of expatriate remuneration, several factors are taken into consideration. It is important for a corporation to evaluate the extent to which their expatriate remuneration would affect both their global professional image as well as increasing their profitability margins.

3.0 Methodology

The methodology that is to be adopted in the process of evaluating the effectiveness of expatriate remuneration by the Coca Cola Corporation is based on the major expatriate remuneration policies in practice.

The process of this evaluation will take into account data that is gathered from the four main expatriate pay regimes. These regimes include the home country-based policy. The host country-based remuneration policy, the selected country policy and finally the hybrid policy.

The Home country-based policy can also be referred to as the balance sheet approach. The following are the steps followed while carrying out this approach.First, the determination of the salary that the expatriate is supposed to earn in his/her home country is carried out. Factors such as the net income, national tax insurance deductions or rather contribution are considered. Then the home country spendable income is evaluated. This income is evaluated based on the daily expenditure of the expatriate while back at his/her home country. Then the cost-of-living index is evaluated in order to come up with the equivalent buying capacity in the host country. This evaluation is then utilized in the process of evaluating the expenditure levels of the host nation and is therefore a very important factor that is employed in order to ensure that the expatriate will not be exposed to worse off conditions while in the host country. The next step involved is the addition of the allowances that are incurred while working abroad. This is the approach that is mainly approached by most corporations.

The second approach that is involved in the process of evaluating the effectiveness of the expatriate remuneration policy is the consideration is the home country basis. In this approach, the expatriates are paid according to the market rates for their particular jobs in the host nations. However, allowances may be paid for the various expenses that are incurred by the expatriate while on overseas assignments. Such expenses may include but not limited to children's education expenses and second-home expenses.

The third approach involves the selected country approach. This is usually used or applied in the country where the corporation's headquarter is based. In this case, this approach is applicable in Atlanta, Georgia where Coca Cola is headquartered. This approach is based on the home country basis/approach.

The final approach to be used is based on the hybrid approach. This system involves the process whereby the expatriate's pay is divided into two main components. The first component is common to all the expatriates working in jobs with similar levels of competence without regard to their countries of origin.This component are referred to as the local component. The second local component is evaluated on the basis of the spendable income that the expatriates incur in their host countries.

The other factor that must considered while undertaking this research is the allowances that the expatriates receive. The process of evaluating a given expatriate remuneration package involves the consideration of all the allowances received by the expatriate. The expatriates are meant to be compensated for a variety of reasons such as disruptions. The overall aim is to make the assignments very attractive to the expatriates. The other allowance that they receive is the cost-of-living allowance which is given on the basis of spendable income. The cost-of-living-allowance is evaluated by the application of a particular index to the expatriate's home country spendable income. This index is employed is applied to the expatriates home country income.

The other important approaches that may be adopted in the methodology include the Salary Build Up approach. This approach utilizes the market income rate of income of the home expatriates home country in the process of coming up with the expatriate package. The aim of the buildup approach is to come up with a properly maintained internal equity of the pay perks between the countries and also to come up with a package that would effectively equalize the effects of the differences between the tax regimes that exists between the countries. This is carried out in order to ensure that the expatriates are not exploited by the difference in taxation that exists between the countries. The steps in involved in the process of coming up with the salary build-up approach is the deduction of the hypothetical tax that should be incurred by the expatriates in their respective expatriate countries. This income is then added up on the home salary using international premium rates. This is so as to compensate for the effects of hardships that the expatriates undergo. The other factors that are injected in the evaluation are the cost of living index and the current exchange rate in order to evaluate the total net remuneration package. The next step is the grossing up of the net remuneration in the expatriates host country in relation to the host county's local tax and other deductions which are either statutory or non-statutory.