HRM Practices in Banking Sector: HSBC Rewards and Compensation

This report delves into the HRM practices within the banking sector, with a specific focus on HSBC's approach to rewards and compensation. It begins by highlighting the increasing internationalization of businesses and the subsequent need for effective expatriate employee management. The report discusses the complexities of designing a reward system for expatriate employees, considering factors like economic variations, balancing global and local perspectives, and managing extended performance evaluation processes. The report then examines HSBC's reward system, which is designed to align with its business strategy. It explores the reward systems in Australia and the US, detailing the benefits, salaries, and incentive policies offered to employees. The report concludes by emphasizing the importance of tailored reward systems for expatriate employees to ensure job satisfaction and motivation within an international organization.

Running Head: HRM PRACTICES IN BANKING SECCTOR
HRM practices in banking sector
Rewards and compensation system

HRM PRACTICES IN BANKING SECCTOR 1
Table of Contents
Introduction......................................................................................................................................2
HSBC and its employees.................................................................................................................2
Pay for performance........................................................................................................................2
Rewards system designing and its complexities..............................................................................3
Complexity factors of designing a rewards and compensation system.......................................3
The Multi factor.......................................................................................................................3
Balancing global and local.......................................................................................................3
Driving extended process........................................................................................................4
Optimizing the budget.............................................................................................................4
Reward system of HSBC.................................................................................................................4
Rewards system in Australia.......................................................................................................4
Reward system in US...................................................................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

HRM PRACTICES IN BANKING SECCTOR 2
Introduction
Employees and organization, in the global world are facing the increasing speed of business
activities as well as career internationalization since mid of 90’s. Since then expatriation has
become a normal part of business career advancement either assigned or self-initiated (Beer,
Boselie, and Brewster, 2015). This normal part in business career advancement is also an
essential prerequisite step for some managerial positions in their home country, host country or
in third party country. Expatriation includes employees able to transfer technical, for instance,
administrative or management practices, improve communication between head office and its
subsidiaries, to ensure organization policies, coordinate activities between HQ and subsidiaries,
many more skills required to manage the organization’s business in foreign countries (Allen,
Lee, and Reiche, 2015). In such practices management has to design a separate reward and
compensation system for their expatriate employees working in any of the parent country, host
country, or third party nations.
This report discusses the complexity of designing a reward and compensation system for such
expatriate employees. Further part of the report discusses an existing reward system of HSBC in
its
HSBC and its employees
HSBC was started with a simple idea of becoming a local bank for international needs. Bank is
more than 150 years old and headquartered in London. Bank has expanded its international
banking network in 66countries comprising of around 3800 offices. Most of the business
operates in Europe, America, Middle East, North Africa, and Asia. This huge network of the
bank outsource for its human resource need.
Organization encourages both the horizontal as well as vertical move for employees hence,
HSBC encourage its employees to apply for their suitable positions across the organization
network. In the organization it is employees’ responsibility to apply for a suitable position.
However this opportunity is not for employees, in their probation period or for those who have
joined a new position, to apply for within six months of working at the new position. HSBC also
apply some strategic methods of human resource management to select most logical and efficient
candidates to operate its international business network. In order to take care of organization’s
expatriate employees bigger branches have minimum 20 HR personnel while smaller branches
have minimum 3-6 HR personnel. These HR personnel are employed to monitor and motivate
the performance of respective branch employees (HSBC, 2018a).

HRM PRACTICES IN BANKING SECCTOR 3
Pay for performance
HSBC believes that in order to get the long-term sustainability of their business, efficient
performance of people to achieve their goals is essential. To adhere the value of HSBC’s
business, organization conducts an annual performance review of its employees working in
parental nations or in host countries. To manage the international performance of the
organization, management has to evaluate and motivate the performance of its expatriate
employees. In this practice HRM of the organization needs to design a separate performance
evaluation system to give rewards and compensation to its expatriate employees (Ndofor,
Wesley, and Priem, 2015).
Rewards system designing and its complexities
In order to manage an international business, organizations need to build strong and healthy
relationship with its customers. This healthy relationship is possible only with the help of skilled
and job satisfied employees. Job satisfaction of employees enhances their performance as well as
their motivation to contribute for the success of organization. This satisfaction can be provided in
the form of rewards and recognition of employees as per their role expectations (Bullock, Stritch,
and Rainey, 2015). Reward and compensation system of an organization makes its employees
motivated and enthusiastic as well. Therefore, a well prepared and structures rewards and
compensation system is essential for sustainable growth of the organization. In this way
designing process of an effective and well structures rewards system has its own complexity or
challenges in context of expatriate employees. In the designing process employees of host nation,
parent nation, and third party nation create varying challenges for the HRM (Connelly, et al.,
2016).
Complexity factors of designing a rewards and compensation system
A rewards and compensations system of international organizations like HSBC has complexity
of different factors. Some of these challenges are discussed as below:
The Multi factor
Different economic factors varying from nation to nation increase the complexity of rewards and
compensation system. Other factors like different currencies, companies, different time zones,
rewards cultures, and time zones can add a great complexity to the rewards and compensation
system of the organization (Matousek, and Tzeremes, 2016).
Balancing global and local
For human resource management of international organizations, finding a balance between the
global and local point of view is very challenging especially in expatriate’s context. People
working in third party nation create more challenges to the human resource of an organization.
This includes that the bonus plan, rewards policies and benefits to the expatriate employees must
be consistent throughout the global network of the organization. At the same time on other hand,

HRM PRACTICES IN BANKING SECCTOR 4
local contacts and their compensation practices may need some adaptability as well as flexibility
in rewards policies and system.
Driving extended process
The process of performance evaluation of expatriate employees assigned for consistent targets is
extended for international organization. For human resource management team of an
organization operating internationally, the process of controlling and meeting the timelines to
distribute rewards on a fair evaluation is way more challenging.
Optimizing the budget
Managing a rewards and compensation system without budget constraints is quite an easy task
but organizations operating in international market have to maintain their budget allocated for
each operation to make it economic and profitable (Osibanjo, et al., 2014).
Reward system of HSBC
Across the world, HSBC is operating in around 66 countries and as it is known that each country
has its own currency, working environment, and payment system. To handle such obstacles,
company uses contractual approach at the time of recruitment and selection. In this process
employees have to sign a contract designed by experts in the company. Employees generally sign
a contract of 6 months to 4 years. Company employs Third country nationals for its operation in
host countries. For example, in case of organization’s expansion in Bangladesh, company
employs Third country nationals form India. Although, parent country nationals visit to the host
countries to monitor the operations over there, they visit for a relatively short time period
(HSBC, 2018b).
Organization believes that the approach of employees to achieve their individual’s goals is very
important for organization’s long-term sustainability. The approach of HSBC to remuneration,
including discretionary incentive or performance based rewards, is specially designed to reward
the success of employees. This approach ensures that what the organization is paying to its
employees is completely aligned with its business strategy for sustainable growth in the global
finance market.
Rewards system in Australia
HSBC offers a compensation plan that include different benefit packages including medical, and
vision coverage for its employees as well as their eligible family. Options like life and disability
insurance provide an income replacement benefit to use at the time of serious injury or death to
the organization employees. Bank also provide a bank paid life insurance that measures equal to
one times of employee’s annual basic salary, this amount is fixed up to maximum of $2,000,000
(HSBC, 2018c).
In Australia, company’s compensation plan also includes competitive salaries, salary packaging
options, and superannuation. Different share plans like employees share plan, salary sacrifice

HRM PRACTICES IN BANKING SECCTOR 5
super, salary sacrifice share, and salary sacrifice childcare plans are provided to the expatriate
employees working in Australia.
Reward system in US
For employees working in US, company uses similar system to reward employees. Rewards and
compensation system here are slightly different in terms of their risk management. Employees
here get 20 days of casual leave in a year. These leaves are designed to provide as per
employees’ requirements. Branch employees excepting branch managers can take these casual
leaves on application basis. Other than casual leaves are granted by the head office only.
Managers have to apply for their casual leaves to the head office. Employees here can purchase
Supplemental Life and Accidental Death and Dismemberment (AD&D) insurance for themselves
as well as for their eligible family members. This purchase can be made for up to eight times of
their annual pay and bonus up to $3,000,000. This insurance can be claimed if an employee
becomes paralyzed, dismembered, or died in an accident (HSBC, 2018c). In addition to the basic
salary pay employees are provided with impressive incentive policies designed by the company
experts.
Conclusion
This report concludes that employees need an extra motivation to exceed their efficiency limits.
Expatriate employees need this encouragement more to feel satisfied with their job in another
country. Organizations like HSBC, operating internationally have to design their reward and
compensation system separately for different national employees to meet their expectations as
well as host country’s reward system policies.

HRM PRACTICES IN BANKING SECCTOR 6
References
Allen, D., Lee, Y.T. and Reiche, S., 2015. Global work in the multinational enterprise: New
avenues and challenges for strategically managing human capital across borders. Journal of
Management, 41(7), pp.2032-2035.
Beer, M., Boselie, P. and Brewster, C., 2015. Back to the future: Implications for the field of
HRM of the multistakeholder perspective proposed 30 years ago. Human Resource
Management, 54(3), pp.427-438.
Bullock, J.B., Stritch, J.M. and Rainey, H.G., 2015. International comparison of public and
private employees’ work motives, attitudes, and perceived rewards. Public Administration
Review, 75(3), pp.479-489.
Connelly, B.L., Haynes, K.T., Tihanyi, L., Gamache, D.L. and Devers, C.E., 2016. Minding the
gap: Antecedents and consequences of top management-to-worker pay dispersion. Journal of
Management, 42(4), pp.862-885.
HSBC, (2018a) Explore our Business, [online]. Available from:
https://www.hsbc.com/careers/explore-our-business [Accessed on 21/10/2018].
HSBC, (2018b) Remuneration, [online]. Available from:
https://www.hsbc.com/our-approach/remuneration [Accessed on 21/10/2018].
HSBC, (2018c) Benefits, [online]. Available from:
https://www.hsbc.com/careers/why-hsbc/benefits [Accessed on 21/10/2018].
Matousek, R. and Tzeremes, N.G., 2016. CEO compensation and bank efficiency: An
application of conditional nonparametric frontiers. European Journal of Operational
Research, 251(1), pp.264-273.
Ndofor, H.A., Wesley, C. and Priem, R.L., 2015. Providing CEOs with opportunities to cheat:
The effects of complexity-based information asymmetries on financial reporting fraud. Journal
of Management, 41(6), pp.1774-1797.
Osibanjo, A.O., Adeniji, A.A., Falola, H.O. and Heirsmac, P.T., 2014. Compensation packages:
a strategic tool for employees' performance and retention. Leonardo Journal of Sciences, (25),
pp.65-84.