Symbiosis Institute of Business Management

Hyderabad

Name of the Prof. B Sumalatha Naidu

Faculty
Course Compensation & Reward
Management
Semester – 2 Batch of 2022-24
Submission 13th January 2023
Date

Submitted
by

Sr.No. Name PRN

1 Rochana Yenigalla 22021141090
 CASE ANALYSIS
Q1. Design a compensation model following an ethnocentric approach.
An ethnocentric compensation model would be a company based in the United States
that establishes a base salary and benefits package for its US employees and then uses
that package as the standard for all other employees in other countries where the
company operates.
For example, the company may offer a base salary of $70,000 per year, with benefits
such as health insurance, allowances, and paid vacation time for its US employees. This
same package would then be offered to employees in all other countries, regardless of
the local cost of living or market rates for similar positions.
In this model, employees in countries with a lower cost of living may be able to live
comfortably on the compensation package offered, while employees in countries with
a higher cost of living may struggle to make ends meet. Additionally, the company may
face difficulty in attracting and retaining talented employees in locations where the
compensation is significantly lower than local market rates.

Q2. Explain Cleancare compensation structure.

Dr. Ahalya Varma is a compensation specialist who is invited by Cleancare, a surgical
equipment manufacturing company with cross-border operations, to resolve the crisis
of differential pay policy. Cleancare has a competitive pay policy, but a large gap exists
in the differential pay policy. Ahalya is expected to use her expertise to provide a
compensation model following an ethnocentric approach that addresses the gap in the
differential pay policy and achieves the objectives of the company such as attracting
and retaining qualified and talented employees, improving employee morale, being
fiscally responsible, supporting a healthy work environment with promotional
opportunities, maintaining competitive and equitable salaries, motivating the
workforce to be more innovative, and ensuring fair and just compensation
administration.
Cleancare has a uniform compensation structure in which 75% of an employee's pay is
fixed and 25% is variable. The variable component is based on attendance and
compliance with production plans. All incentives are paid as additional wages. The
structure is designed to attract and retain qualified and talented employees, improve
employee morale, be fiscally responsible, support a healthy work environment with
promotional opportunities, maintain competitive and equitable salaries, motivate the
workforce to be more innovative, and ensure fair and just compensation
administration.
Q3. Discuss the impact of globalization on organization production activity and
compensation of expatriates, locals and third country nationals.
Organization Production Activity
Globalization has had a significant impact on organizational production activities. Some
of the key ways in which globalization has impacted organizational production include:

 Increased competition: Globalization has led to increased competition among

organizations as companies can now access global markets and compete with
companies from other countries. This has led to increased pressure on
organizations to improve their production processes and become more efficient
in order to remain competitive.
 Offshoring and outsourcing: Globalization has made it easier for organizations
to outsource or move their production activities to other countries where labor
and production costs are lower. This has led to cost savings for organizations,
but also may have negative impact on the local workforce and economy.
 Supply chain management: Globalization has led to increased complexity in
supply chain management as organizations now source materials and
components from all over the world. This has required organizations to become
more sophisticated in their logistics and inventory management practices.
 Technological advancements: Globalization has facilitated the transfer of
technology and knowledge across borders, leading to the adoption of new
technologies and production methods.
 Increased mobility of labor: Globalization has increased the mobility of labor,
allowing organizations to tap into a global pool of talent and skills.
 Environmental and social impact: Globalization has led to increased pressure on
organizations to consider the environmental and social impact of their
production activities. Companies are increasingly being held accountable for
the impact of their operations on the environment and local communities.

Compensation of Expatriates
Globalization has had a significant impact on the compensation of expatriates, which
are employees who are sent to work in a foreign country. Some of the key ways in
which globalization has impacted expatriate compensation include:

 Cost of living differentials: Globalization has led to increased movement of

expatriates across countries with different cost of living, which has led to cost
of living differentials in expatriate compensation packages. Some companies
will adjust the compensation package to reflect the cost of living in the host
country.
  Taxation issues: Globalization has led to increased complexity in expatriate
compensation packages due to different tax laws and regulations in different
countries. Companies must navigate these complexities in order to provide
competitive compensation packages while also complying with local tax laws.
 Cultural considerations: Globalization has led to increased diversity in the
expatriate population and companies must consider cultural differences in
designing compensation packages. For example, some cultures may place a
greater value on benefits such as housing or education for children.
 Home country protection: Companies might consider offering expatriates some
form of protection against currency fluctuations to protect against the
expatriates' home country's currency depreciation.
 Flexibility: Companies are moving towards more flexibility in their expatriate
compensation package in order to meet the needs of the individual employee,
rather than a one-size-fits-all approach.

Compensation of Locals
Globalization has had an impact on the compensation of locals, who are employees
who work in their own country. Some of the key ways in which globalization has
impacted local compensation include:

 Outsourcing and offshoring: Globalization has made it easier for organizations

to outsource or move their production activities to other countries where labor
and production costs are lower. This has led to cost savings for organizations,
but also may have negative impact on the local workforce and compensation.
 Impact on local labor market: Globalization has led to increased mobility of
labor and capital, which has led to changes in the local labor market and has
put pressure on the compensation of locals.
 Cultural considerations: Globalization has led to increased diversity in the local
population and companies must consider cultural differences in designing
compensation packages.
 Home country protection: Companies might consider offering locals some form
of protection against currency fluctuations to protect against depreciation of
the local currency.
 Impact on unionization: Globalization has led to changes in the labor market
and has had an impact on unionization and collective bargaining, which can
affect the compensation of locals.

Compensation of Third Country Nationals

Globalization has had an impact on the compensation of third-country nationals
(TCNs), who are employees who work in a country other than their own or the host
country of the company. Some of the key ways in which globalization has impacted
TCN compensation include:

 Cost of living differentials: Globalization has led to increased movement of

TCNs across countries with different cost of living, which has led to cost of living
differentials in TCN compensation packages. Some companies will adjust the
compensation package to reflect the cost of living in the host country.
 Taxation issues: Globalization has led to increased complexity in TCN
compensation packages due to different tax laws and regulations in different
countries. Companies must navigate these complexities in order to provide
competitive compensation packages while also complying with local tax laws.
 Cultural considerations: Globalization has led to increased diversity in the TCN
population and companies must consider cultural differences in designing
compensation packages.
 Home country protection: Companies might consider offering TCNs some form
of protection against currency fluctuations to protect against depreciation of
the TCNs' home country's currency.
 Flexibility: Companies are moving towards more flexibility in their TCN
compensation package in order to meet the needs of the individual employee,
rather than a one-size-fits-all approach.
 Legal requirements: Some countries might have specific laws and regulations
for employment and compensation of Third-Country National (TCN) employees.
Companies must comply with these laws and regulations to avoid any legal
issues.

Q4. Discuss various approaches of international compensation.

There are several approaches to international compensation, including:

 Ethnocentric approach: This approach involves setting the same compensation

levels for employees in different countries as those in the home country. This is
typically used by companies that are headquartered in one country and have
operations in other countries.
 Polycentric approach: This approach involves setting compensation levels based
on the local market conditions in each country. This is typically used by
companies that have a decentralized structure and view each country as a
separate market.
 Regiocentric approach: This approach involves setting compensation levels
based on the regional market conditions, rather than the local market
conditions in each country. This is typically used by companies that have
operations in multiple countries within a specific region.
 Geocentric approach: This approach involves setting compensation levels based
on global market conditions, rather than local or regional market conditions.
 This is typically used by companies that have a global presence and view the
world as one market.
 Hybrid approach: This approach combines elements of different approaches
and is tailored to the specific needs of the company.