Expatriation

Introduction:

Expatriation is a very significant characteristic of International Human Resource Management (IHRM), which is a result of the developments made in global business environment. For instance, such as Asia Pacific Region came up as world economic centre becoming the rivals of existing centres of Europe and North America. Moreover, the extended role World Trade Organization in dispute settlement and facilitating international trade flows and emergence of international economic forums such as North American Free Trade Association, European Union, Asia Pacific Economic Conference, European Union and expansion of the membership and status of A.S.E.A.N., have significantly changed the platform on which the international business used to operate. It was concurred through the basis earlier studies, that expatriates were home country employees. And these expatriates were assigned to the foreign or overseas location of the organization for relatively long periods of time. If we try to understand the trends in context to industrialization, it can be figured out that during initial stages of internationalisation, major industry restructuring was driven by advancements in communication and information technologies, whereas, the new global context is witnessing alteration in the structure of international operations with the availability of labour markets and staff requirements.

Remuneration policies form a very integral part in the implementation of business strategies and change initiatives for an organization. For the employees it’s a substance of motivation and mobilization to achieve the valued corporate goals. Most of the companies today are committed in providing competitive salaries and benefits. Culpepper and Associates carried out the compensation and benefits survey in 2008, which showed that base salaries are growing in Asia Pacific at much faster rate as compared to other regions of the world, followed by Latin America and Europe. Changes in remuneration practices are inevitable worldwide with surge of globalisation and the increasing demand of skilled labour. More companies nowadays are following a trend of reinforcing pay and performance relationship through variable pay plans (Hewitt Associates, 2007). Especially, expatriate workers are appreciated and rewarded for their performance through variable pay plan, a share program and other benefits, not just through base pay. Multi-national companies that maintain effective remuneration policies tend to have sustainable competitive advantage as they effectively lock their key employees into their careers and keep minimal employment cost. Thus, these remuneration practices for expatriates and every other employee will continue evolve and expand as it plays a very important role in these multi-national organizations.

As per the International Human Resource Management theory underpinning, the relationship between expatriation and seemingly inequitable salaries on the basis of hardship experienced give rise to many arguments. Remuneration systems for expatriates range from simple systems based on base country net salaries plus various allowances to ones of eye-watering complexity operated by large multinationals for hundreds of nationalities with thousands of permutations. (http://www.exfin.com/)

To understand the remuneration policies for expatriates and its effectiveness in the multi-national organization, the researcher has developed a case-study on Satyam InfoTech, an Indian based I.T. company. Satyam has a big infrastructure which has around 100,000 people working under it in India and abroad, with expatriation as a common practice in the organization.

Aims & Objectives:

Research Question: What is expatriate remuneration in a multi-national organization and how effective is this practice to Satyam InfoTech?

The key aim of the study was to establish if the expatriate remuneration policies in this sample multi-national company are effective and are aligned with global practices.

The main objective of this research is to understand the current trend in remuneration practices for the expatriates in multi-national organization. Also, the objective is to understand its effectiveness in the context to the Human Resource perspective and the Organization’s perspective.

Hypothesis:

H1: Expatriate Remuneration has positive effectiveness in Satyam InfoTech.

H2: Expatriate Remuneration has negative effectiveness in Satyam InfoTech.

H0: Null hypothesis.

Literature Review:

International assignments are important investments for MNCs. Besides the direct costs of employee salaries, taxes, housing, shipment of household goods, education assistance for dependants, spouse support, cross-cultural training, goods and services allowances, repatriation logistics and reassignment costs, the administrative costs of running an international assignment program should not be neglected. These include home based HR support (assignment planning, selection and compensation management), assignment location or host based HR support, post assignment placement costs as well as post assignment career tracking costs. Furthermore, adjustments costs of expatriates have to be taken into account. While many of these figures are highly quantifiable, it is even more difficult to assess the return on investment of international assignments. In a study conducted by Cranfield School of Management and PrincewaterhouseCoopers (Dickmann et al. 2006: 18-19) it was reported that the average costs per annum for expatriate are amounted to US$311,000. This includes the direct compensation costs and the costs to the organizations of managing their international assignments program. At US$22,378 the latter accounted for 7% of the total assignment costs. While more and more firms are interested in measuring a return on investment in international assignment, to date only 14% are addressing this complex task mainly looking at the definition and respective fulfilment of assignment objectives. Having summarised the expatriate remuneration practice, now some theoretical perspectives related to the various levels have to be looked upon. In this a scene can be set for addressing a question of how expatriate remuneration outcomes may be influenced by a series of independent variables, in dynamic interaction with the environmental context in which international employee mobilization occur.

Human Resource Perspective:

Two aspects in particular may influence the H.R. perspective on expatriate reward determination. First, the ideas of ‘best practice’ and related commentary on policies and practices that MNCs should adopt a ‘functional’ lens focusing the H.R. view point. Secondly, the role and interests of the H.R. function likely to affect H.R. specialists’ interpretations of alternative approaches to expatriate remuneration determination, a ‘political’ orientation. Administering the remuneration of expatriates employees has been an important concern for H.R. specialists, accounting for over 50% of their time (Perkins and Hendry 2001). Changes in the nature and duration of international employee mobility, not necessarily of HR’s making but which need an H.R. response, condition the context for H.R. strategies to address the attendant compensation policy and practice implications.