Expatriate Remuneration Literature Review Management Essay

The selection of managers to serve overseas has been an area of intense interest for practitioners as well as academicians in their efforts to determine predictors of success during foreign assignments (Doyle, 1990). Some experts are predicting that one issue may affect the selection and ultimately the success of expatriate managers more than any of the variables examined in the past, namely, the remuneration of expatriate (Harvey, 1985).

As important as the topic of expatriate remuneration appears to be, very little research has been conducted on the remuneration of expatriate who have been relocated internationally relative to that on expatriate managers. A vast majority of the previous research on remuneration of expatriate has been concerned with domestic relocations and the resulting conflict, stress and adjustment for the remuneration of expatriate.

The first objective of this study is to examine theories that relate to the effectiveness of expatriate remuneration to glean insights into how to adapt these approaches in multinational like Royal Dutch Shell. A second goal is to examine previous researchers’ efforts relative to the remuneration package itself. The primary focus of this study is to gain insights into the unique problems associated with the expatriate remuneration.

In today’s global environment economy, providing equitable remuneration for expatriates is a challenge for many employers. Viewing the package as a whole rather than the sum of its parts, often facilitates a more effective design. Companies that have successfully designed packages for expatriates have developed plans that satisfy their own financial requirements while still remaining flexible enough to adopt to individual needs and changes in a global environment. In order to review the remuneration package of expatriates there must be certain element or components should be considered like the component of cash which includes basic salary, premium for the specific assignments, cost differential allowances, employee benefit, medical coverage etc. Most multinational company packages for expatriate include at least some of the a) an allowance or salary increase to maintain the expatriate’s standard of living at least at the level enjoyed at home b) foreign service allowance c) a hardship allowance (for certain places) d) contribution towards, or provision of, accommodation e) inducement or incentive factor f) education allowances g) paid local leave h) additional leave i) compensation from distance from home j) promotion k) terminal bonus l) insurance and medical care.

International benefits and compensation are calculated to reflect the special status of the international managers. In addition to salary, taxes and benefits, international managers also receive different allowances as part of their overall compensation to accept an overseas position. The Foreign Service premium is based on the expatriate’s level in the company, the family size, and the location. Expatriate compensation programs are an important issue in managing reward systems. Compensation plans for expatriate managers must be competitive, cost effective, motivating, fair and easy to understand, consistent with international financial management, easy to administer, and simple to communicate (Sherman, 1998).

Expatriate Remuneration Literature Review

There has been little theoretical research and few empirical studies related to remuneration package of expatriate. However, the expatriate literature on remuneration provides a starting point for examining the stress/ conflict associated with remuneration package in general and, from that, to anticipate the stress for expatriate pay. Initially, I carried out brief literature review to continue my research on expatriate remuneration in Royal Dutch Shell Group. It provided me a critical look at company’s HR strategies regarding expatriate remuneration and benefits in practice. I went through the existing theories about remuneration and benefits and deeply reviewed the current trends in the global Oil and Gas industry analysed various issues to find out why industry is facing lack of implementation of effective remuneration for the expatriate and to find out the possible strategic solutions for this issue. The importance of HR policies for recruitment and retention of expatriates is evident as the company is facing intense competition. According to Remuneration & Benefit Policy at Royal Dutch Shell (2009), “With thousands of Expatriates around the world, we ensure that they receive the kind of packages and ongoing support that makes their relocation a positive experience. Our team deals with all policies for international mobility, including short and long term international assignments as well as international rotators, commuters and frequent international business travel.”According to Armstrong (2002), there are two basic approaches to devising expatriate pay package: home based pay and host based pay. The home based pay approach aims to ensure that the value of the expatriate’s salary is the same as in the home country. On the other hand host based pay approach provides expatriate with salaries and benefits such as company cars and holidays which are in the line with those given to nationals of the host country in a similar jobs.

The focus of the research would be the expatriate remuneration and if there is some difference among the expatriates that will create the problem company itself as according to (EBSCO host, 2010), Pay differentials between local nationals and expatriates working alongside them remain substantial in Western firms operating in Central and Eastern Europe, according to a recently released survey jointly conducted by Coopers & Lybrand, the international professional services firm, and Monks Partnership, remuneration consultants in the U.K. and Europe. The survey, which examined management pay issues in the Czech Republic, Hungary, Poland and Russia, found that pay levels for expatriates in Russia are up to ten times those for local nationals employed in similar duties, while in the Czech Republic, an expatriate may be paid up to eight times more than the local national.

In today’s intensely competitive labor market attracting and retaining the best and brightest professionals is the lifeblood of any successful organization with global operations. Further, experienced expatriates are more valuable than ever as organizations continue to extend their global markets. This is crucial since organizations need expatriates who can lead the charge as they seek out new global clients and new revenue streams (emeraldinsight, 2010).

Methodology:

The research methodology used must be able to give reasonable answers to the research question and fulfil the objectives of research. There are two most commonly used research methodologies i.e. Deductive Approach and Inductive Approach. I will suggest Inductive approach for this research which is based on collecting data, analysing it and then developing a theory. There is not any established hypothesis as in Deductive approach. Inductive approach uses qualitative data rather than quantitative data and is not rigid approach like deductive methodology (Saunders et al., 2007).

In this research work, I am analysing the problem of expatriate remuneration in Oil and Gas Industry; I have to identify factors behind expatriate remuneration and then devise a theory for effective expatriate remuneration in the company selected. The choice of approach directly affects the research strategy, type of data collected and data analysis. As an alternative of Inductive approach, I can use combination of both deductive and inductive approaches to implant more confidence in my research work. The reason not to use only deductive approach is its rigidness and its flow from generalization to specific focus study. Easterby-Smith et al. (2002) argues in Saunders et al. (2007) that with Inductive Approach, suitable research strategy will be Empirical study focusing on observations of particular event or experience to collect data where study of small sample of subjects might be appropriate rather than large sample and philosophy behind this strategy is Phenomenology. Research methodology will focus to observe effectiveness of expatriate remuneration strategies to define the new policies or changes in current strategies.

My research design will be based on case study research strategy that is defined as strategy involving empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence (Robson, 2002 cited in Saunders et al., 2007, p:139). This approach is helpful to deal with complexity of research by allowing concentration on context of research details giving its rich understanding and generating more explanatory and exploratory research. With case study strategy, there may be various data collection techniques as both primary and secondary data will be required. As in this assignment I will not deal with the primary data and so focus will be the secondary data. The secondary data collection will be through observation and documentary analysis of different parts of the organization by reading documentation of HR policies in practice on expatriate package, analysing reports, memos, archives and industry statistics etc. Qualitative data analysis is based on conceptualization. The data recorded can be analysed to develop theory using various techniques like Grounded theory or Content analysis etc. Computer Aided Qualitative Data Analysis Software (CAQDAS) like N6, Hyper RESEARCH or NVivo can be used for this purpose. Proposed data analysis technique for this research is Grounded theory where data collection starts without formation of an initial theoretical framework and theory is developed form data generated by series of observations. Grounded theory works in three stages; at first stage data will be sorted using open coding technique that allows naming and categorizing phenomenon through close examination. At second stage, using axial coding data broken into discrete parts is closely examined and compared for similarities and differences and questions asked are reflected in data and relationship in data categories is recognised. At third stage called selective coding, we integrate these categories to develop the theory (Corbin & Strauss, 1990, 1998).

Ethical Issues:

There are always some ethical issues associated with the implementation and execution of a good research work. I will give due importance to this aspect of research and will comply with code of ethics to deliver a quality research work. Some possible ethical issues that may rise during this research project are as follows:

Integrity of data and intellectual property rights will be of high priority along with data protection and accuracy. I will comply in honest and ethical manner throughout research and avoid any misrepresentation or plagiarism. All publications or research material used will be quoted and referred systematically.

I will make sure that research work is neutral, free form any bias and undue influence. Research results will be used ethically for benefit of company with complete confidentiality and informed consent of respective authorities.

Research Limitations:

The proposed research has some limitation and threats that may affect its credibility and reliability as follows;

The research work will be focused on one i.e. Royal Dutch Shell and results obtained may not be true (applicable or generalisable) for other organisations in Oil & Gas industry.

As there is no existence of primary data so may be the research is not accurate and based on assumption.

There are resource and time limitations for this study as to generate more precise results it needs huge resources and time. Hence time and resource constraints may affect the quality of research.

There will be limited observation of the HR practices and actual procedures within the company. For sound results there will be need of observations because attitudes cannot be measured or seen but we can feel and infer them.

The business data will be collected from various resources including publications and online material. In this case the validity and reliability of some of information cannot be guaranteed.

These limitations can either be eliminated or I can reduce their impact by adopting more careful and in-depth approach to research.