Analysis of International Pay Systems

An expatriate can be defined as an employee of an organization who is a citizen of the company s base country but does not work in his or her native country. In this case Riordan is an American company that is expanding to Japan. It will need to hire employees to work in its firm in Japan. If Robert lord was to move to work in Japan he would be an expatriate. Taking into consideration that his expatriate’s pay would include housing, healthcare, transportation, allowances and premiums, his pay would differ from the pay of a Japanese national of the same age. This is because there are elements that are tied to an expatriates pay. This has been discussed below.

After moving from the US to Japan Robert lord would need most of new things. These include furniture, the company must cater for him to learn the new language in Japan and also he must learn the Japanese culture. The company has to cater for all this and it can be done through his salary. Robert will also need to find a school for his children if he is taking them with him plus the company must cater for spousal employee assistance. All these can be subdivided into four parts salary, taxes, housing and allowances.


His base salary will be inclusive of incentives. An incentive is important since Robert is required to move from his country to a foreign country. Incentives can be an additional payment (or other remuneration) to Robert as a means to get him to move to Japan. It also acts as a positive motivational influence. His base salary is determined by evaluating of the same job in his home country. Thus his salary will not be determined by the Japanese system, it will be determined by the salary of his home country. In a bid not to disrupt the output of Robert the company will have to maintain his living standards. The company has to maintain his living standards close or above that of Robert s peers at home. Since the economy of Japan is not the same as the American economy it would result in hefty packages paid out to Robert by the company.


Income earned by Robert will have two sources of tax. He will be taxed by the American government and also by the Japanese government. His pay will be subject to taxation in Japan and back home unlike a Japanese of the same age who is being taxed only by the Japanese government. Riordan will have to take responsibility to pay either or both the taxes being levied upon Robert. The company will be forced to pay whatever taxes that are above what Robert was paying in his home country.

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House allowance

Riordan has to cater for housing Robert in Japan. The company will be forced to pay house allowances or provide company owned housing for Robert. The company will be forced to maintain Roberts s standard of living. Therefore this mean his allowance may increase since the cost of housing in Japan is higher than that of Japan

Allowances and premiums

The company will have to cater for further expenses by offering more allowance. These allowances may include transport allowance since Robert needs to get to work and back home, club memberships, child care and education, spousal employment, local culture training, and personal security. These allowances are important since Robert will be working under less direct supervision as compared to a domestic counterpart. Since Robert will be new to Japan he will often live and work in strange and sometimes unsecure surroundings thus he needs more security. It is important for him to study Japan s language and culture since he will be representing the employer in the host country. The amount of the allowances and premiums may vary due to hazards and hardships of the host country.

Roberts pay is different since the Base pay of a Japanese worker the same age as Robert accounts for 60 to 80 percent of an employee s monthly pay. The base pay of a Japanese worker depends on the worker s rank in the organization. Unlike America base pay in Japan is not based on job evaluation or market pricing nor is it attached to specific job titles. Rather, it is based on a combination of employee characteristics: career category, years of service, and skill and performance level of the employee. This means that he will be paid more that his Japanese counterpart.

This pay is equitable: This is because:

Robert is far away from home and is new to Japan

Robert will be working under less direct supervision as compared to a domestic counterpart therefore he is entitled to a better pay.

Since Robert will be new to Japan he will most likely live and work in strange and sometimes unsecure surroundings thus he needs more security thus more pay.

It is important for him to study Japan s language and culture since he will be representing the employer in the host country. Thus the employer must cater for him to sturdy.

Robert might encounter hardships while in Japan thus the pay is justified.

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If he was relocated back to the US his pay would differ from the pay he gets in Japan since the pay system in Japan and that in America are different. These differences are discussed below.

The Japanese national pay system is different from the American system of payment the Japanese system of pay looks mostly at the talent of the employee, his seniority at the organization. It is not pegged on employee performance alone. Its job promotions are majorly decided upon the trainability of an employee. The system focuses on long term commitment to the company. The companies in Japan have long term focus.

The US system has short term focus and goals and a performance that is geared towards market dynamics. Performance dynamics in Japan are not market controlled but are based on the internal organization of the company. In Japan cash flow is controlled with financial bonuses while in the US cost control of the company varies with performance of employees. There are no bonuses in the US system. In Japan as discussed earlier the pay of an employee is based on ones position in the company, ability, talent and their age.

In the US pay is based on the type of work that the employee does. The Japanese system has very many levels in their organizations. It has a number of ranks at the work place while the us based system has a few ranks and larger pay differences from the least paid to the most paid. In Japan the difference between the highest and lowest paid is minimal. In Japan the system is such that companies compare pay of similar employees from their competitors and base the pay of their employees on the pay of their competitors. This could be geared towards the retention of talent in the company. In the US the competitor s pay does not determine an employees pay.

An employee s pay is determined by market dynamics and the employee s performance at the company. In Japan the when it comes to bonuses they are constant at lower levels and vary only at the higher levels. Promotion is based on the performance of an employee. The main disadvantage of promotions in Japan is the number of levels. Promotion involves a small pay increase. In the US system employee bonuses are not constant. Bonuses are varying and depend on the employee s performance and pay. Bonuses and performance appraisals decrease and increase depending on the employees and companies performance. The advantage of the Japanese system is that it supports commitment and job security. One is secure and happy at their work place. It is also advantageous since it has long term objectives and goals.

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The advantage of the US system is that it supports performance of employees. It is market driven therefore organizations can be flexible and are consumer driven. Focus on the market has great profits. The disadvantage of the Japanese system is that it discourages employee contribution and it discourages the lower level employees of the organization. The US system lacks job security due to its short term goals. There is no reward in investing in long term goals.

Trade unions and employee involvement

In Japan the unionization rate is about 24 percent. Any employee below the section head job rank can become a union officer in Japan. The trade unions in Japan enjoy a close and unstrained relationship with the employers. Employees from companies are automatic members of trade unions. Members of the management of a company cannot join trade unions.

The work and effect of trade unions is to champion for better pay and work conditions for employees. The trade unions discuss with employers so as to better the pay and benefits for employees. Trade unions also actively engage the government in a bid to fight for the increase of wages and salaries of citizens employed by the government. Trade unions often organize strikes and demonstrations when there is a problem in the rights of employees. If companies try to downsize the number of employee s trade unions often protect the rights of these employees. They also fight for better working conditions for employees. Trade unions also comprise of the social contract in Japan

The social contract

A social contract can be defined as an agreement between people of a certain society to give up their liberty to a government or an organization in return for security and protection of their liberty. The social contract in Japan is responsible for creating a good relationship between an employee and an employer. The social contract brings harmony to all major players in the employment sector. It brings together the employer, employee, the government of Japan and trade unions. The social contract is composed of the expectations and interaction of all this elements in Japan. The social contract creates an understanding about how employees are paid in Japan. It helps employers in managing and understanding employee compensation in Japan. The social contract in Japan spells out the guidelines to consumer and market response, production of quality goods and services

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