Pay Benefits Essay, Research Paper

HRM 04/11/99

Coursework

1) Trends in pay and benefits in Europe, contrasting where possible with the USA.

Comparing pay and benefits between Europe and the USA is extremely complicated because you are referring to a number of different countries which constitute one area. Therefore Europe has too many different cultures, traditions, and systems that diversify. However the USA works in one particular way and can dominate the entire world if it wants too.

To make the Coursework simpler I categorised the answer in sections relating to the question.

Pay and Benefits between Europe

 Companies in Europe tend to base there rewards in levels of executive pay.

 There is a greater emphasis in merit pay and can be rewarded even more with performance measures.

 Companies tend to use Pay and Benefits as a policy in the organisation rather than a regional must.

 Merit Pay: Performance related pay, used widely in Europe, it?s the base salary related to the performance of the employee.

 Pay for Performance: This system is being used more and more, basically the organisation pays your contribution and not your level in the company.

 Fringe Benefits: In European countries things like insurance and company cars are very important therefore these reward packages can be the reason why you may want to work for them.

 Individual Bonuses: Comes depending on the individuals performance. This reward package is paid depending on what you achieved and it comes in two forms.

Incentive Schemes

Longer term Bonuses.

 Team Bonuses: Like the individual bonus but relating to teams and it?s being used more and more throughout the whole company rather than executives only.

 Organisation-wide schemes: These reward employees once certain organisations have known to pay out more often. E.g. Profit increases and Sales turnover. Usually these payments come annually or more often.

 Share Option Schemes: Employees will profit from the organisation?s performance. Not extremely effective as an incentive, but still popular with the company employees.

Pay and Benefits in Europe compared to Americans rivals

 Many European organisations are adapting the American view about the efficiency of variable pay.

 Managers in America assume that their is a connection between variable pay and corporate performance. European managers first need to be convinced that a link exists before they make implementations.

 As there is a move towards Trans-national organisations, there is a tendency of remuneration more and more expatriate, which will yield more flexible.

 In some European companies monetary rewards are not seen as motivational, pride comes first.

 Flexible remuneration which gives the employee freedom in the compensation package, popular in the USA not really on Europe.

 American managers seem to place more emphasis on long-term executive plans than those in Europe.

 Bonuses in the USA are much higher as much as 300% the Salary whereas in Europe only up to 10%.

 American Executives strongly believe in the motivational efficiency of executive compensation systems rather than European ones that are too cautious.

2) The relevance of culture pay and benefits.

The culture of the country is very important but when it comes to pay and benefits systems, however each country is different and even companies know what they need to satisfy them and employees, now I?m going to describe different kinds of pay and Benefits.

 Low power distance: (Holland, Sweden) Small differences in pay between workers in the organisation. More gainsharing

 High power distance: (Arab countries, Latin America) Much more hierarchical, pay differences reflect your standing in the organisation. Huge differences between top management and those below them. Rewards show off power.

 High individualism: (USA, Britain) Pay for performance with rewards for individual achievement. Emphasis on short-term achievements and external equity.

 Low individualism: (Japan, Singapore) Rewards the team rather than the individual. Pay affected by employees? personal needs. Pay based on seniority, with intrinsic rewards vital.

 Low masculinity: (Holland, Scandinavian countries) Gender not an issue in job evaluation. Concentrate more on work content instead of job evaluation. Few perquisites based on gender. Determine pay using equity goals.

 High Masculinity: (Germany and Austria) Base pay decisions on tradition. Rewards male traits with promotions. Gender biased pay policies.

 Low uncertainty avoidance: (Hong Kong, Sweden) Uses decentralised pay programs and are concerned with external equity, variable pay.

 High uncertainty avoidance: (Italy, Greece) Think that fixed pay is more important than variable pay. Very little discretion on the part of the supervisors. Centralised pay programs.

These examples show us how cultures vary between countries and what effect they have on pay and reward schemes depending on certain values. They are adapted to fit in the company?s needs. Why? For example pay surveys don?t help much anymore therefore looking abroad should help.

Europe is a hard example because problems vary country to country aspects like cost of living, pay and benefits, cultures, get in and ruin the perfect system. The improvements cannot come overnight especially when you get organisation or even cultures that don?t want to bring in foreign ideas that will change traditional ways of treating each other. We must also think that reward systems can be expensive to some and not motivating enough especially to specific teams rather than individuals.

All of these facts should be carefully thought about when focusing on Pay and Benefits systems.