Unit 3: Performance and compensation
International Human Resource Management notes · PTU syllabus (MBA 933-18)
On this page
Unit summary
Measuring and rewarding performance across countries is one of IHRM's hardest tasks. This unit covers multinational performance management, performance appraisal of international employees, the concept and objectives of international compensation, and its key components and approaches.
After this unit you can
- Explain multinational performance management
- Explain appraisal of international employees
- Explain the objectives of international compensation
- Explain components and approaches to international compensation
PTU syllabus topics
- Multinational performance management
- performance appraisal of international employees
- concept and objectives of international compensation
- key components and approaches to international compensation programs
Going rate (host-based)
Local market rates plus allowances
Simple; unequal pay across postings
Balance sheet (home-based)
Keep home purchasing power
Fair; costly to administer
Global pay
Common global grades
Consistent; may not fit local markets
Topic 1
Multinational performance management
- Purpose: link subsidiary and individual performance to global strategy.
Whole vs part
Global strategy may set subsidiary goals that hurt local results (transfer pricing)
Non-comparable data
Different accounting, currency, markets
Volatility of the global environment
Political, economic shocks
Separation by time and distance
Monitoring difficulties
Variable levels of maturity
New subsidiaries vs established ones
Topic 2
Performance appraisal of international employees
- Variables affecting expatriate performance: compensation package, task (role clarity, autonomy), headquarters support, host environment, cultural adjustment.
- Who appraises: host-country manager (sees daily performance but may misread cultural behaviour), home-country manager (knows standards but is distant), peers, subordinates, self — multiple raters are best.
- Criteria: hard goals (sales, profit), soft goals (relationship building, leadership), contextual goals (local conditions).
- Issues: cultural bias, different meanings of feedback, frequency, rater training, appraisal of HCNs and TCNs under local norms.
Topic 3
International compensation: concept and objectives
- Objectives: attract and retain international talent, facilitate transfers, maintain equity among employees, be cost-effective, comply with laws, align with strategy.
- Expatriate objectives: financial protection, career advancement, family needs, reward for hardship.
Topic 4
Components of international compensation
Base salary
Home or host-country based
Foreign service inducement and hardship premium
Reward for difficult locations
Allowances
Cost-of-living, housing, education, home leave, relocation, spouse assistance
Benefits
Pension, medical, social security continuity
Tax equalisation
Expatriate pays no more tax than at home
Topic 5
Approaches to international compensation
Basis
Pay linked to host-country market rates
Home-country pay plus allowances to maintain home living standard
Advantages
Equality with local and other nationals; simple
Equity among expatriates; eases repatriation
Disadvantages
Variation between assignments; re-entry problems
Complex; pay differences with locals; costly
Suits
Senior roles, low-cost to high-cost moves
Mobile managers, many countries
- Other approaches: local plus (local pay with some expatriate benefits), cafeteria plans, regional systems, global pay frameworks.
Key terms
- Hard goals
- Objective, quantifiable performance targets
- Contextual goals
- Goals adjusted for local conditions
- Hardship premium
- Extra pay for difficult locations
- Tax equalisation
- Ensuring expatriates pay home-level tax
- Balance sheet approach
- Home pay plus allowances to keep purchasing power
Quick revision
- Factors affecting subsidiary performance.
- Variables in expatriate performance; raters; hard, soft, contextual goals.
- Objectives of international compensation.
- Components: base, premiums, allowances, benefits, tax equalisation.
- Going rate vs balance sheet; local plus.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.State two factors affecting subsidiary performance.
- Q2.Who should appraise expatriates?
- Q3.Distinguish hard and soft goals.
- Q4.Name four allowances in an expatriate package.
- Q5.What is tax equalisation?
- Q6.Distinguish going rate and balance sheet approaches.
Long-answer questions
- Q1.Discuss multinational performance management.
- Q2.Explain the issues in performance appraisal of international employees.
- Q3.Explain the objectives and components of international compensation.
- Q4.Compare the approaches to international compensation.
Stuck on this unit?
Message SBS on WhatsApp for help with International Human Resource Management, or to ask about studying MBA at Synetic.