3033IBA-Eorkshop 4 Case Analysis
Added on 2021-06-17
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3033IBA-WORKSHOP 4 CASE ANALYSIS PREPARATION FORMName:.............................................Student No:...............................Campus (or Online):..........................................1. Briefly discuss and explain the issue of comparability? [Please include an example(s) in your explanation].The two approaches which multinational companies follow while compensating employeesare going rate approach and balance sheet approach. The companies condier two significantfactors in case of comparability of the two compenation structures. The first one is that thesalaries and benefits an employee is receiving should be comparable both to other firms andhis peers in other countries. The salary should be comparable to the other departments withinthe organisation. The companies in comparison to going rate, are concerned about the salarystructures prevailing in the domicile country. In comparsion to the going appraoch, thebalance sheet rate is based on the philosophy of the MNCs to provide salary accoridng to auniform rewrad system. For example, companies based in countries like the US havinghigher currency value than most of the countries offer their employees additional benefits tocompensate the loss they suffer in their salary drawings due to difference in exchange ratesbetween their home and host countries.2. What are the main advantages and disadvantages of the Balance Sheetapproach to international compensation?The fowling are the main advantages of balance sheet approach are:1.There remains an equity between the payments of employees in same company basedin same country, hence motivates the employees.2.Special non-financial compensation measures make up the loss employee suffer due
3033IBA-WORKSHOP 4 CASE ANALYSIS PREPARATION FORMto difference in exchange rates between their home countries and countries ofdeployment.The following are the disadvantage of balance sheet approach:1.Great disparities between expatriates of different countries effect the motivation ofemployees. 2.The different compensation packages consisting of financial and non-financialcompensation components are extremely complex. 3. Briefly describe the Local Plus approachto compensation (including why a MNC may use this approach and the main inherent risk of this approach?)Local plus approach have international companies playing their staff according to the salaryrates prevailing in the host countries where they are deployed. The business organizationsuse the local plus approach to enable their employees take advantage of the growing salaryrate in emerging countries where are placed. However, employees placed in countries havingpoor economic growth may suffer a great decrease in their salary. This loss of salary posesresults in the decrease of motivation of employees which in turn leads to fall in theirproductivity, thus posing risks to the revenue generation of the company.
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