Expatriate Remuneration at Ford Motor Co
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Published: Wed, 14 Mar 2018
This research work evaluate and analyze the expatriate remuneration at Ford Motor. it reveals aim and objectives further more literature review explain about expatriate remuneration, on the other hand it depicts issues related to expatriate remuneration which highlights, different allowances such as separation allowances, clothing allowances, added responsibility allowances, relocation allowance, market rate approach, educational expenses, health insurance, holidays, home leaves etc. research methodology concentrate that data collection method which covers secondary data, primary data. whereas it explain qualitative and quantitative research as well. next section is about questioner which helped me to analyze data by graphical representation. graphical representation is very easy method to analyse data. where as ethical issues explain about administration services, tax equalisation etc. limitation tells about the importance of time and finding of this report is not applicable to the other multinational organisations.
finally, last but not least conclusion.
Sources for this research include article, journals, organisational websites, media and commentary of academic experts of expatriate and strategic management. The first section of my report tells about research question and literature review, which gives idea about expatriate remuneration, where as second section explain and justification of research methodology. Third section describe data analysis, ethical issues involved and limitation of my research, and finally it revels conclusion.
2. RESEARCH AIM AND OBJECTIVES
Today many companies growing their business globally, for variety of reasons. Naturally they want to send home country employee abroad or hire host country national or hire third party employee to look after companies foreign operations. All 3 cases are connect to good remuneration packages. So it’s become very important to multinational organisation, to concentrate on expatriate remuneration and related issues. By taking into account all this fact, my research aim and objectives are as follows.
Aim of this research is to investigate the effectiveness of expatriate remuneration in a ford motor
-To design of remuneration strategies, and systems to achieve organisational strategy
-To prepare a report and corresponding result circulated to the senior management staff based at Ford Motor.
3. FORD MOTOR
Ford motor is one of global leader in automotive industry. They have manufacturing and distribution centre across the six continent like North America, Europe, Asia pacific, Latin America, middle East, Africa, Caribbean. Approximately they are employing 201,000 employee in 90 countries. The companies have variety of automotive brands and that includes Ford, Lincoln, Mercury, Volvo. further more company have their own financial services like ford motor credit.(Ford, 2009).
4. LITERATURE REVIEW
Many authors have different thoughts about remuneration but the spirit an essence remain same. The literature review suggests that, (Krueger, 2007) “as pay levels increase, the attraction of potential employees increases along with the likelihood of job acceptance and the quality of job applicants”. (Kerr, 2002) “Remuneration systems represent a powerful and unique means for influencing an organisation’s culture”. According to Schloss (2009) “remuneration is systematic tool which include important variables within an organisation such as job design, management philosophy, performance appraisal, training and development and superior subordinate relationship.” on the other hand Porter defines, (Porter, 2003 ) “remuneration practices directly influence the decision an employee makes about whether to join an organisation, when to quit and whether to come to work”.
Attractive remuneration packages are play a vital role in attracting and retaining good employees in multinational organisation. Attractive remuneration package must have to consider different allowances like relocation allowance, clothing allowances, separation allowances, hardship allowances, added responsibility allowance, car allowances, apart from this it must consider home leave, physical condition insurance, holidays (public holidays, and annual leave), etc. on the other hand, lack of attractive remuneration packages link to employee dissatisfaction, increased absenteeism etc. because of this, Today multinational organisation gives more attention to expatriate remuneration packages. further more expatriate remuneration package are different in different multinational organisation, also different in different countries because of laws and regulation.
Expatriates defined as “employees of business and government organizations who are sent by their organization to a related unit in a country which is different from their own, to accomplish a job or organization-related goal for a pre-designated temporary time period of usually more than six months than five years in one term.” (Evers,2005). When a company expands internationally, managers are generally responsible for ensuring that operations are staffed. (Bohlander & Snell, 2007) There are many ways a company can staff a new global operation. Out of them one is the company can send people from its home country. These employees are often referred to as expatriates, or home country nationals. second, it can hire host-country nationals, natives of the host country, to do managing. Third it can hire third-country national, natives of a country other than the home country or the host country. Each of these three sources provides certain advantages and certain disadvantages. Most corporations use all three for staffing their multinational operations, although some companies exhibit a distinct bias for on or another. However, that host countries sometimes restrict their choices by passing laws and regulations designed to employ host-country individuals. Tax incentives, tariffs, and quotas are frequently implemented by the host country to encourage local hiring. In addition, the company must consider the air fares to and from the destination, which are not insignificant when individuals are accompanied by their families and may return once or twice a year for leave, or need to go to a holiday resort for test and recuperation. Employing local nationals is usually much cheaper and has distinct local political advantages by comparison with expatriation, but many organisation continue to mix the local workforce with at least some management from the headquarters. It is often only possible to maintain an expatriate’s home standard of living at noteworthy cost to the company, particularly if the spouse is working as well. A pre-assignment trip to the host location to allow the expatriate and accompanying family to decide whether they can live in the host location, as well as a cultural briefing before going, is recognized as a way of minimizing assignment failure, language tuition and independent financial counselling are often arranged for expatriates at this stage and are recognized as diminishing anxiety quite considerably. The cost of sending an employee abroad far exceeds the salary outlay. Accommodation cost, relocation charge. Language training and boarding school fees are further financial burdens to be carried by the employer,. Clearly, it is an expensive exercise. (Armstrong & Murlis, 2007) It is now generally accepted that the most common reason for assignment failure is the inability of the expatriate or partner, of both, to adapt to the local culture. Yet despite the importance of the spouse’s contribution to a successful assignment, few organizations include the spouse in the selection process.
5) ISSUES RELATED TO EXPATRIATE REMUNERATION
During my investigation at ford motor I found number of issues which are basically related remuneration package, which covers different allowances and other benefits like, physical condition insurance, educational expenses, home leave etc.
( A ) Relocation allowance:- As the name indicates that, move from one place to another. so this allowance cover the cost of supplementary expenses arising when moving from one country to another.
( B ) Added responsibility allowance (position allowance):- Sporadically applicable when the overseas job carries greater responsibility than the notional job in the home country. It is a difficult allowance to manage and in practice, many expatriations are seen as promotions so the national home salary is increased accordingly. The added responsibility allowance, therefore, is seldom found.
( C ) Hardship allowance :- Hardship allowances are usually expressed as a percentage of notional home salary. The maximum, for locations of extreme difficulty, rarely exceeds 30% unless especially war-torn or terrorist prone. The hardship allowance are different for different countries Hardship allowance is incentive premium.
( D ) Clothing allowance :- A one-off payment for clothing and accessories that expatriates need to buy on account of the particular territory to which they are assigned. Tropical countries requiring light clothing are the obvious examples where clothing allowances might be payable.
( E ) Separation allowance- Separation allowance covers that, if personal circumstances or unpleasant conditions in the host country avoid expatriates form taking their family abroad, a separation allowance may paid. Alternatively, additional trips home may be permitted.
( F ) Car allowances:- Cars are a of all grades. for security or status reasons guard is provided by the company in addition to the car. In certain. Therefore, local custom to provide any but the most senior employees with a car- or those whose job demands it.
5.2) Educational Expenses:- Companies will pay for the children of expatriates to be educated in the host country. The cost is rarely as high as subsidizing home country (boarding) school fees.
5.3) Home leave:- Location affects the frequency of home leave. Areas of extreme hardship often merit a second home trip, while areas of low hardship, separated from the home country by a prohibitive air fare. might not even qualify for an annual return trip. Indeed, it is quite common for one home trip per tour to be provided from the antipodes. If a standard had to be quoted, it would probably be a fair generalization to suggest that companies will pay for expatriates and their families to fly back to their home country once per year. on the other hand, the variations on this practice are too numerous to mention and are increasing all the time as the issue of home leave becomes more emotive and a matter of as much heated negotiation as the yearly pay review.
5.4) physical condition Insurance :- It is necessary that all in a foreign country personal are adequately covered for private treatment by health insurance, few countries have national health services as sophisticated. The cost of private medical care is different in different countries. for instance, is exorbitant and the national provisions are almost not-existent such as they have international plans for which the premium rates will vary, depending on the country assignment and the cost of remedial treatment there. It may also be necessary to consider the ability physically to access the appropriate health treatment in out-of-the way locations in the event of an accident.
5.5) Holidays:- It includes two type of holidays such as annual leave , and public holidays
(A) Public holidays:- public holidays are different in different countries. host country practice is usually followed with respect to public holidays although, in non-Christian countries public holidays such as Christmas day and Easter day may be allowed in addition to the local festivals.
(B) Annual leave:- usually annual leave sanction in line with or slightly above home country practice.
5.6) Market rate approach:- Main benefit of this method of payment is that it is administratively simpler than the balance sheet. The main disadvantage is that it can rarely be applied if the employee is moving from a high-to a lower-paying country. It also discourages repatriation, in that expatriates may find it more financially advantageous to remain in the host country rather than returning to employment at home. market rate approach can be desirable in high-paying countries where a market rate approach might yield an uncompetitive salary by local standards and the company therefore risks losing the employee to local competitors. it is also preferred when the assignment is likely to be long-term or permanent.
6) EXPATRIATE REMUNERATION STRATEGY:-
“strategic planning is a management tool to look at the future and see tomorrow’s opportunities or challenges to gain competitive position. managers who think in terms of today are behind the times tomorrow”. ( Bryson, 2004)
By considering above issues ford motor must have to design expatriate remuneration strategy, so company will not face problems in future. Ford motor need to have follow the home based approach or balance sheet approach. while designing balance sheet, ford motor also consider remuneration built up strategy, which includes packages that demonstrates that individuals will not lose by going abroad by considering incentives, the elements of base pay, differentials, and assistance programmes or allowances. The fundamental step occupies:
(A)To Calculate the net disposable income which represents the portion of income used for day to day living expenses at home
(B)Adding additional allowances and incentives to make the assignment attractive and compensate for disruption.
(C) Determining the after tax salary that would be paid for expatriate’s job in the home country.
(D To Apply the relevant differential to the net disposable.
Note:-Differential indicates the cost of living index.
Further more, ford must have to consider truly international perspective by means of processes indentifying regional or central management training, special assignment, attendance on management programmes run by international business schools and provision of career guidance and monitoring processes form the centre, distance learning programmes, job rotation, indentifying talent and potential etc.
“Competitive strategic planning not only predicts future events but also influences them and energizes resources and activities.” (Alkhafaji, 2003)
7) RESEARCH METHODOLOGY
In this region I will discuss about the general synopsis of research methodology in terms of qualitative and qualitative research technique, data collection method like primary and secondary data.
(7.1) Methods of data collection
Data collection method are categorised as secondary and primary data. No one of the methods of data collection provides 100% accurate and reliable information. The quality of the data gathered is dependent upon a number of other factors.
(A) Secondary data
It has Data collected by some else for some other purpose, called secondary data. Secondary data is easy to analysis, cheaper and quick to gather. particularly in the case of qualitative data, from the fig it is clear that, secondary data can be collected by documents and documents might be includes personal records, govt. publication, census, service record etc.
( B) Primary data
data, which has generated by researcher is called primary data. it is more reliable towards two types of data, such as place and purpose. from the following fig it is clear that Several methods can be used to collect primary data. several methods includes observation, interviewing, questioner. further more observation is divided into non participant and participant. where as interviewing is divided into structured and unstructured interview on the other hand questionnaire collect the data through two ways such as mailed questioner and collective questioner. The selection of a method depends upon the propose of the study, the resources available and the skills of the researcher.
Fig :- 1. Data collection method (Kumar, 2005)
7.2 ) Qualitative research vs. Qualitative research
Securing rich descriptions:-Quantitative research are less concerned with details.
Securing rich descriptions:-Qualitative research believe that rich descriptions of the social world are valuable. deliberately it unconcerned with rich descriptions because such detail interrupts the process of developing generalizations.
Capturing the individual point of view:-Qualitative researcher are seldom able to capture their subjects perspectives because they have to rely on more remote inferential empirical methods and materials.
Capturing the individual point of view:-Qualitative researcher think they can get closer to the actor’s perspective through detailed interviewing and observation.
Examining the constraints of everyday life:-quantitative researchers abstract from social world and seldom study it directly.They seek a science based on probabilities derived from the study of large numbers of randomly selected cases.
Examining the constraints of everyday life:-qualitative researchers are more likely to confront and come up against the constraints of the everyday social world. they see this world in action and embed their findings in it.
8) RESEARCH QUESTIONER LAYOUT
As mentioned in the beginning of this paper, the aim of this research is to investigate effectiveness of expatriate remuneration at ford motor. So by considering this aim I designed questioner which are most likely address the issue regarding expatriate remuneration. My research methodology includes questionnaire with simple question seeking response in the from ‘Yes’ or ‘No’, Multiple choice questions etc. and throughout my research work, I contacted ford motor employees only. After that corresponding result circulated to the senior management staff based at Ford Motor.
How would you describe your current martial status?
What is your average annual income?
What would your ratingbe for company expatriate remuneration?
Do you think languagewill be the barrier for expatriate remuneration?
Do you think cultural issuewill affect on expatriate remuneration?
When will be the remuneration benefits?
After VRS (Virginia retirements system)?
Do you satisfied with expatriate remuneration policy?
Do you satisfied with relocationallowance?
9 ) DATA ANALYSIS
For data analysis i will follow the graphical representation because It shrinks huge and compound data in a small graph. it is easier to understand and interpret the huge data though its graphical representation only through visual screening. Further more it enhances better communicability of data. It increases comparability of data to draw the quicker inferences. Graphical representation further enables the researcher to draw generalizations and make predictions. (Voit, 2000 ) Now a days graphical techniques have become an integral part of any data analysis, especially now due to a tremendous increase in the accessibility to computing facilities.
10) ETHICAL ISSUES
“In writing an introduction to a study, the researcher identifies a significant problem or issue to study and presents a rationale for its importance. During the identification of the research problem it is important to identify a problem that will benefit individuals being studied.”( Mamic, 2004) During my research I found few ethical issues related to expatriate remuneration and those are connected with language translation services, administrative services for expatriates, international taxation, host government relations, international orientation and relocation. Administrative services for expatriate remuneration are often complex and time-consuming activity because policies and procedures are not always clear and may conflict with local conditions. Tax equalisation policies involves tax disincentive or incentive associated with any particular international assignment. International relocation and orientation involves travel detail, arranging for pre-departure training, and providing immigration, schooling information ,medical care, amusement, and Providing housing shopping, and finalising remuneration details such as, determination of various international allowances and taxation treatment, designing of salary. Expatriates are subject to international taxation and are often subject to home country and host country tax liabilities. Further more ethical issues can arise where a practice that is legal and accepted in the host country may be unethical and illegal in the home country.
“Every research has several limitation. First, research cannot determine goals or standards, which are primarily a reflection of values” (Goddard, 2007). Time limitation is major constraints for my research, further more research has conducted with ford motor employees so its finding are not necessary applicable to the other of organisations.
In conclusion I would like to emphasized that, expatriate remuneration package should be carefully examined and that includes an elimination of the foreign services premium in its present from and a move towards reducing cost of living allowances. Further more expatriate remuneration for employees should be clear, planned and integrate into the career planning process as much as possible.
“Research can help to prevent mistakes. It can show that some goals, however lofty, are unattainable. And it can probe below the surface to indicate why certain results occur why certain programs don not work.” (Bailey, 2009)
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