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International Pay System - Assignment / Report

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Assignment On
International Pay System
SubmittedTo
MD. ABU BAKAR SIDDIQUE
Lecturer
Southeast Business School
Southeast Uni...
Submission Date : 19 April 2019
Letter of Transmittal
19 April, 2019
Md. Abu Bakar Siddique
Lecturer
Southeast Business Sc...
FAKRUL HASSAN,
ABU BOKER,
A.M. AHSANUR RAHMAN TONMOY,
MD. ABDUL MUNIM
Executive Summary
Anyone interested in compensation ...
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International Pay System - Assignment / Report

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Technology has greatly assisted the globalization of pay systems although there are many differences that still require a broad approach, says David Shonfield. We live and work in a global economy but what globalization actually involves is far less obvious, especially for the management of pay and reward. Companies operating in different cultures and economic environments used to leave most things to be determined at local level. That has changed quite significantly over the past few years, especially in the last 18 months. There is now a strong tendency towards centralization and the harmonization of policies and practice in large firms.

Technology has greatly assisted the globalization of pay systems although there are many differences that still require a broad approach, says David Shonfield. We live and work in a global economy but what globalization actually involves is far less obvious, especially for the management of pay and reward. Companies operating in different cultures and economic environments used to leave most things to be determined at local level. That has changed quite significantly over the past few years, especially in the last 18 months. There is now a strong tendency towards centralization and the harmonization of policies and practice in large firms.

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International Pay System - Assignment / Report

  1. 1. Assignment On International Pay System SubmittedTo MD. ABU BAKAR SIDDIQUE Lecturer Southeast Business School Southeast University SubmittedBy MEHER AFROJ FAKRUL HASSAN ABU BOKER A.M. AHSANUR RAHMAN TONMOY MD. ABDUL MUNIM ID # 2018110005068 ID # 2018010005080 ID # 2018010005042 ID # 2018010005039 ID # 2018010005052
  2. 2. Submission Date : 19 April 2019 Letter of Transmittal 19 April, 2019 Md. Abu Bakar Siddique Lecturer Southeast Business School Southeast University A.R. Tower 24, Kamal Ataturk Avenue Banani, Dhaka-1213 Subject: Submission of Assignment Dear Sir, With due respect and humble submission, I would like to state that it is an immense joy for me to submit our assignment on “International Pay System”. We are glad to work under your active and cooperative support and I think it has been a great achievement for us that we could study under you throughout the last three months for which it has been possible to complete the assignment successfully. We will be really grateful to you if you are kind enough to receive our assignment report and give your valuable feedback so that we can utilize your judgment for further prospects. Sincerely Yours, MEHER AFROJ,
  3. 3. FAKRUL HASSAN, ABU BOKER, A.M. AHSANUR RAHMAN TONMOY, MD. ABDUL MUNIM Executive Summary Anyone interested in compensation needs to adopt a global perspective. The globalization of businesses, financial markets, trade agreements, and labor markets is affecting every workplace and every employment relationship. Employee compensation is embedded in the different political-socioeconomic arrangements found around the world. Compensation systems have a profound impact on individual behavior, organizational success, and social well-being. This holds true within and across all national boundaries. 0.1 Introduction Technology has greatly assisted the globalization of pay systems although there are many differences that still require a broad approach, says David Shonfield. We live and work in a global economy but what globalization actually involves is far less obvious, especially for the management of pay and reward. Companies operating in different cultures and economic environments used to leave most things to be determined at local level. That has changed quite significantly over the past few years, especially in the last 18 months. There is now a strong tendency towards centralization and the harmonization of policies and practice in large firms. 2.0 International Pay System We live and work in a global economy but what globalization actually involves is far less obvious, especially for the management of pay and reward. Companies operating in different cultures and economic environments used to leave most things to be determined at local level. 2.1 - LEARNINGOBJECTIVES 1. Realize that studying international compensation enhances their understanding of compensation within their own country. 2. Understand how changes in political and economic conditions affect pay in every country. 3. Recognize the danger of making generalizations about systems in a country. 4. Discuss how compensation in every country must deal with the objectives of efficiency, fairness, and compliance.
  4. 4. 2.2 - Managing Variations How people get paid around the world depends on differences (and similarities) in the following general factors:  Economic  Institutional  Organizational  Employee 2.3 - Guide to Global Compensation:
  5. 5. 2.4 - Social Contract: Government, Organizations, & Employees Employment Relationship IndividualsOrganizations
  6. 6. Fig - Social Contract 2.5 - Social Contracts and Pay Setting Austria Belgium Cuba Hungary Poland Sweden Individuals Unions Union Federations Organizations Individual Employers Employer Consortium Government Highly Centralized
  7. 7. Czech Republic Germany India Israel Japan Korea Slovakia Slovenia Argentina Brazil Canada France Hong Kong Mexico Singapore UK USA Local Systems Sector/Industrywide Systems Nationwide Systems Pay Setting Systems 2. 6 - Culture  Culture is often defined as shared mental programming.  Culture is acquired knowledge that people use to interpret experience and generate social behavior.  It is rooted in the values, beliefs, and assumptions shared in common by a group of people.  It influences how information is processed. 2.6.1 - Culture and Managing International Pay  The assumption that pay systems must be designed to fit different national cultures is based on the belief that most of a country’s inhabitants share a national character.  The job of a global manager is to search for national characteristics whose influence is assumed to be critical in managing international pay systems. 2.6.2 - Hofstede’s Cultural Dimensions  Power Distance  Uncertainty Avoidance SocialContract Localized
  8. 8.  Individualism – Collectivism  Masculinity – Femininity  Long-term - Short-term 2.6.3 - Trompenaar’s Cultural Dimensions and Human Resource Management What is are the Trompenaars Cultural Dimensions? Organizations all over the world work are dealing with a wide variety of cultures. According to Fons Trompenaars, cultural differences will create a better understanding of reality. For an insight into the biggest differences and how organizations are affected by these differences, Fons Trompenaars and Charles Hampden-Turner developed a cultural model, that distinguishes seven cultural dimensions. The name of this management and communication model is the Trompenaars Cultural Dimensions. These are the seven cultural dimensions: 1. Universalism versus Particularism 2. Individualism versus Communitarianism 3. Neutral versus Emotional 4. Specific versus Diffuse 5. Achievement versus Ascription 6. Sequential versus Synchronous time 7. Internal direction versus External direction 1. Universalism versus Particularism In universalist culture ideas can be applied anywhere and there is always a definition that can be used to determine the distinction between right and wrong. Standards and values are important and can only be departed from after consultation. It is generally accepted that in similar situations people from different origins receive the same salary. In a particularistic culture, members believe that it the circumstances that determine how ideas can be applied in practice. Personal relationships and obligations play an important role when making ethical decisions. Status is important in this as a result of which for example salary is linked to reputation and origin. 2. Individualism versus Communitarianism
  9. 9. Individualism sees human beings as individuals, whereas communitarianism characterizes humanity as being part of a group. Fons Trompenaars says that the individualist culture is linked to the ideas of the western world, whereas the communitarian culture is linked to non-western countries. Cultures change continuously and sometimes they change more quickly than people realize. As an example, Fons Trompenaars mentions Mexico, which was predominantly communitarian at first. Influenced by the global economy, Mexico is now moving towards a more individualistic culture. 3. Neutral versus emotional In a neutral emotions are controlled, whereas in an emotional culture emotions are expressed openly and spontaneously. Well-known examples of neutral cultures are Japan and Great Britain, where they frown upon being angry in public, laughing loudly or displaying any other emotional outbursts. In an emotional culture, however, this behaviour is allowed. Fons Trompenaars mentions countries such as the Spain and Mexico where people often laugh, talk loudly and greet each other enthusiastically. When people from a neutral culture do business with people from an emotional culture, they could be deterred by the other person’s behaviour. A good preparation and taking someone’s culture into consideration will prevent awkward situations. 4. Specific versus diffuse In a specific culture, individuals have a large public space, which they share easily with other people. They also have a small private space which they share with good friends and close associates. People often approach each other informally in both the public and private space. In a diffuse culture the public space and the private space tend to be interwoven. People in a diffuse culture will therefore protect their private space because this will provide easy access to the public space. People from a diffuse culture attach great value to formality. 5. Achievement versus ascription This concerns achieved status (achievement) versus ascribed (ascription) status. In an achievement-oriented culture, a person’s worth is determined on the basis of their performances and how well they perform their tasks. In a culture in which status is ascribed, status is based on who the person in question is. Their position is derived from for example origin, gender, age, career or a person’s career or position. When someone from an achievement-oriented culture does business with people from an ascription-oriented culture, it is advisable to deploy older, more experienced people who are familiar with formal customs and manners and who respect established titles.
  10. 10. In the contrary situation, it is important that people from an ascription-oriented culture make use of well-informed people who know exactly what the knowledge and skills are of people from an achievement-oriented culture. Fons Trompenaars says that there is often a mix, whereby culture determines on which elements from the Achievement or Ascription cultures the emphasis is put. 6. Sequential versus synchronous time Time can be measured and understood in different ways. We measure past, present and future using years, months, weeks, days and hours. This concrete measurement of time falls within sequential time. ” Time is money” is a typical expression that forms part of this culture, just like the eternal race against clock. Synchronous time is more abstract and focuses on being able to work on various projects at once. It does not concern itself with time zones, but is aware that the human body has its own rhythm. In a synchronous time it is about the rhythm of the group and that of nature. There is, however, a risk to doing several things at the same time. It could result in work not being actually completed. 7. Internal direction versus outer direction In internal-directed versus outer-directed cultures the focus is on how people experience their environment. Is the environment a threat (external) or is it sensible to move with the factors that are caused by society (internal)? The way in which people experience their environment differs from culture to culture. People in western cultures are mainly outer-directed and they want to control their environment as much as possible. In many non-western cultures it is more about living in harmony with the environment; there are forces that cannot be controlled or influenced and therefore you have to adapt yourself to these external circumstances. 2.7 - Trade Union And Employee Participation : AECI complies with the ILO’s conventions to drive and implement employee rights of freedom of association and collective bargaining. Concerted efforts are made to promote consultative forums at operating plant level so as to enhance mutually beneficial engagement between management and employees. Constructive relationships are maintained with all representative trade unions that enjoy consultative and/or negotiating powers on issues of mutual interest.
  11. 11. A level of uncertainty remains in South Africa’s labour relations landscape owing to the formation of a new trade union federation that will compete with existing federations for membership and scope of operation. The chemical industry is not immune to the effects of this change. Recognition agreements in South Africa are in place with all the main chemical industry trade unions. Similar agreements exist with recognised structures in other countries where the Group operates. About 47% of employees in South Africa are members of trade unions. Some 32% of employees are represented by the Bragaining Unit, with 27,5% being union members. Outside of South Africa approximately 59% of employees are represented by recognised trade unions. 2.8 - Ownership And Financial Markets A financial market is a market in which people trade financial securities and derivatives such as futures and options at low transaction costs. Securities include stocks and bonds, and precious metals. Financial markets are financial markets for the buying and selling of long term debt. Financial market is a market where buyer’s sellers engage in trade of financial security like bond etc. A market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the financial markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets. The financial market is market for securities, where companies and Governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The financial market includes the stock market and the bond market. financial market is the group of interrelated markets, in which financial in financial form is, lend or borrowed for medium and long term and, in cases such as equities, for unspecified periods. financial market of Bangladesh: The financial market of Bangladesh is considered to be one of the emerging markets in the context of the global financial system. Objectives: To develop a balanced, stable and resilient financial in Bangladesh The financial market of Bangladesh is the third largest in the South Asia and one of the smallest in Asia. There are two full-fledged automated stock exchanges: Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). After many years of operations of the exchanges, the Bangladesh Securities and Exchange Commission (BSEC) was established in 1993 to regulate the businesses of the exchanges, ensure proper issuance of securities and compliance with laws and protect the interests of securities Investors. Types of financial Market: i. The Primary Market The primary market deals with newly issued securities and is responsible for generating new long-term capital. ii. The secondary Market The secondary market handles the trading of previously-issued securities, and must remain highly liquid in nature because most of the securities are sold by investors.
  12. 12. 2.9 - Managerial Autonomy : Autonomy in management basically means allowing a great deal of freedom to make choices in the workplace. A manager who grants an employee autonomy generally outlines the goal of a project but allows the employee to decide the best way to achieve that goal. Managers tend to have increased autonomy in organizations that are more decentralized. In such organizations, managers have more latitude to make decisions regarding the work of employees and even personnel decisions. For example, managers with increased autonomy may be able to assign merit raises to the employees in their unit at their discretion. As with employee autonomy, this freedom can result in feelings of motivation and satisfaction for the manager, who may be in a better position to reward and motivate employees. 2.10 Comparing Costs : In Chapter 8 we discussed the importance of obtaining accurate information on what competitors pay in domestic markets. Similar comparisons of total compensation among nations can be very misleading. Even if wage rates appear the came, expenses for health care, living costs, and other employer-provided allowances complicate the picture. Outside the United States, many nations offer some of from national health care. An organization may pay for it indirectly through payroll taxes, but since all people in a nation share similar coverage, its value as part of total compensation is diminished. Comparisons between the specific US. firm and a specific foreign competitor may be even more misleading. Accurate data are usually difficult to obtain. While consulting firms are improving their global data collection, much of their data is still from U.S. companies' operations in global locations. Other foreign and local-national companies' data are often not available. Thus, international data may be biased toward U.S. companies’ practices 2.11 - Comparing Systems : We have made the points that pay systems to differ around the globe and that the differences relate to variations in economic pressures, sociopolitical institutions, and the diversity of organizations and employees. In this section mere compare several compensation systems. The caution about stereotyping raised earlier applies here as well. Even in nations described by some as homogeneous, pay systems differ from business to business For example. two well-known Japanese companies, Toyota and Toshiba, have designed different pay systems Toyota places greater emphasis on external market rates, uses far fewer levels in its structure, and places. greater emphasis on individual-based merit and performance pay than does
  13. 13. Toshiba. So as we discuss "typical,' national systems. remember that differences exist and that change in these systems is occurring everywhere. 2.12 - Strategic Market Mindset : The word “strategy” can conjure images of corporate boardrooms and battlefield commanders. But, a strategic mindset doesn’t require endless committee meetings or vast resources. The effort can be launched in one hour and adopted over time. Ultimately, a strategic mindset means you have a vision for your business beyond year-end: you can visualize 2, 5 or even 10 years out. That means setting broader goals—but still with time frames and relevant metrics. And, you can relate day-to-day decisions both to immediate business impact and progress toward those long-term goals. That idea bears repeating: a strategic mindset gets you thinking about the impact of your decisions on your business today and in its future. 2.12.1 - Steps Of Strategic Mindset: Use these 6 steps to establish a strategic mindset for your business planning and tasks. Spend only 10 minutes on each step the first time you tackle it—in one hour or 10 minutes a day (take the first two steps together to finish in a business week). Repeat the process within a month. You will rapidly get beyond urgency and into strategy in your thinking.
  14. 14. Step 1: What Do I Want My Business to Become? In 10 minutes or less, write down a 1- to 2-sentence answer to this question. Be specific, but not detailed; for example, you might want to become the “pipeline compressor vendor of choice in the Rocky Mountain Region,” but you probably don’t “envision” a future with detailed customer lists, revenue targets and product lines. Describe your target industry, scope, and a sense of your firm’s values. If you like, share this answer with peers or key personnel. Listen openly to their reactions, and adjust the statement to reflect their best ideas. Don’t, however, feel obligated to meet everyone’s “demands.” Some will conflict, and you will need to sort out the best wisdom. Now, you have a vision statement, your “North Star”—something to move toward. You can work with this statement, even before you have “shopped it.” Check in with it regularly. Step 2: What is My Business? Next, spend 10 minutes writing down what your business is and does. This statement will be longer than your vision. Consider briefly addressing these topic areas:  Who you will serve.  What products or services you will provide.
  15. 15.  Where you will operate (geographic markets).  How you are distinct from competitors.  Your commitment to profitability and fiscal responsibility as the firm evolves.  What your operating philosophy and values are, including corporate responsibility.  Your commitment to leveraging technology to meet your vision. People on treadmills don’t need maps, because their course is set. This concise paragraph is your map to reaching your North Star: the mission statement to your vision. It will help you focus on how—in broad terms—you plan to achieve that vision. Again, shop this statement around if you like, and incorporate valuable suggestions. And, begin considering this statement on a day-to-day basis. Does a proposed project fit with your target customer? Or, does it range too far out of your distinctive competence? Your mission statement helps you know when to say “yes”—and when to say “no.” Step 3: Set A Goal Close your eyes for a moment and visualize your business as it will become. What have you done to get there? This question helps you define a stepping-stone goal toward that vision. Write down an example goal. Give it a time frame: will it take you 1 year? 3 years? 5? Add ideas about how to accomplish it. Do you need to conduct market research? Research and development? Consider what personnel changes will be required to meet the goal. In 10 minutes, you will have a good picture of this goal and preliminary ideas about making it happen. If you like, ask for input. And, keep that strategic goal close… you’re going to need it. Step 4: Implement Your Goal It may sound brash to go from vision statement to strategy implementation in 40 minutes, but that’s what you are doing! Select one task needed to implement your goal: call up a trusted vendor to discuss the possibilities. Or, gather key engineers for lunch and get their first impressions on feasibility—for 10 minutes! (Remember, many engineers will say “no” first and ask questions later; don’t let an initial “no” discourage you.) Whatever question about the goal you begin to answer, you are taking the first step to implementing it. You will be fleshing out the concept, planting the seed in others’ minds, setting next steps and making progress toward a goal that wasn’t started yesterday. Step 5: Measure and Evaluate Your Progress
  16. 16. At this stage, you will be challenged to identify ways to measure progress toward your goal. However, even activities such as market surveys and informational interviews can be counted. And, measuring these activities will show you whether or not you are moving forward, halted in your progress or in reverse. Identify a metric for your first implementation step, collect the data on that metric, and evaluate how well you are meeting your target. If needed, adjust your implementation or your metric. All in 10 minutes you say? Yes! You are taking a first, small step toward something larger. Measurement at this stage simply allows you to test your footing. Step 6: Revisit In 50 minutes, you’ve established a vision and mission, set a strategic goal in support of that statement, acted on it and measured your action. Are you done? Of course not! A strategic mindset is just that: a way of seeing and doing that you carry into your daily work. Now, spend 10 minutes reviewing what you’ve done. Do your vision and mission still ring true? In developing a strategic goal to support those statements, have you identified potential improvements to your vision and mission? Can you realistically act on your goal in incremental steps? Can you measure that action and its progress? Make any adjustments that you have identified in reviewing your strategic activity so far. Doing so will lead to on-going repetition of these steps, helping you to form a habit of tackling your business’s future with each activity you engage in. Localizer: “Think Global, Act Local”  Designs pay systems to be consistent with local conditions.  Business strategy is to seek competitive advantage by providing products and services tailored to local customers.  Operate independently of the corporate headquarters. Exporter: “One Size Fits All”  Basic total pay system designed at headquarters and is “exported” world-wide for implementation at all locations.  Exporting a basic system makes it easier to move managers and professionals among locations.
  17. 17.  One plan from headquarters gives all managers around the world a common vocabulary and a clear message what the leadership values. Globalizer: “Think and Act Globally and Locally”  Seek a common system that can be used as part of the “glue” to support consistency across all global locations.  Headquarters and the operating units are heavily networked to shared ideas and knowledge.  Performance is measured where it makes sense for the business.  Pay structures are designed to support the business. 2.13 - Expatriate Systems : Talk to experts in international compensation, and you soon get into complexities of taxes, exchange rai housing differences, and the like. What you do not hear is how the expatriate pay system affects corn advantage, customer satisfaction, quality, or other performance concerns. It does emphasize maintaining employee purchasing power and minimizing disruptions and inequities. But the lack of attention to aligning expatriate pay with organization objectives is glaring. Sadly, the major innovation in expat pay over the past decade seems to have been to relabel expats and TCNs as "international assignees? Expatriate compensation systems are forever trying to be like Goldilocks's porridge: not too high, not too low, but just right. The expatriate pay must be sufficient to encourage the employee to take the assignment yet not be so attractive that local nationals will feel unfairly treated or that the expatriate will refuse any future reassignments. These systems also presume that expats will be repatriated to their home country. However, the relevant standard for judging fairness may not be home-country treatment. It may be the pay of other expats, that is, the expat community, or it may be local nationals. And how do local nationals feel about the allowances and pay levels of their expat co-workers? Very little research tells us how expats and those around t them judge the fairness of expat pay. 2.14 - Borderless World: Some corporations, particularly those attempting to become "globally integrated enterprises" are creating centers of globalists: managers who operate anywhere in the world in a borderless manner. They expect that during their career, they will be. located in and travel from the country' to the country. According to a former CEO o General Electric. The aim of
  18. 18. global business is to get the best ideas from everyone, everywhere? To support this global flow of ideas and people, some companies are also designing borderless, or at least regionalize pay systems. One testing ground for this approach is the European Union. As our global guide points out one difficulty with borderless pay is that base pay levels and the other components depend too much on differences in each nation's laws and customs. Focusing on expatriate compensation may blind companies to the issue of appropriate pay for employees who seek global career opportunities. Ignoring those employees causes them to focus only on the local operations, their home country pays, and devote less attention to integrating operations in global firms. It is naive to expect a commitment to a long-term global strategy in which local managers have little input and receive limited benefits. Paradoxically, attempts to localize top management in subsidiaries may reinforce the differences in focus between local and global management. 3.0 Recommendation And Conclusion Studying employee compensation only in your neighborhood, city, or country is like being a horse with blinders. Removing the blinders by adopting an international perspective deepens your understanding of local issues. Anyone interested in compensation must adopt a worldwide perspective. The globalization of businesses, financial markets, trade agreements, and even labor markets is affecting every workplace and every employment relationship. And employee compensation, so central to the workplace, is embedded in the different political- socio-economic arrangements found around the world.

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