How To Develop A Global Compensation Strategy for Remote Workers

In the age of remote work, having a well-considered approach to global compensation can make all the difference in your ability to attract and retain top global talent.

However, there are some extra considerations and challenges at hand when it comes to paying a global workforce, and ensuring fairness for all your workers. Additionally, companies must adhere to different and complex country-specific regulations.  Additionally, you need to stay compliant with local anti-discrimination laws, particularly those addressing gender pay gaps. 

Utilizing tools, resources and Employer Of Record services like Playroll can optimize the process. We help ensure that all aspects of compensation for your international hires are handled accurately and lawfully.

This article unpacks the essentials of global compensation and why a robust strategy is crucial. We’ll dive into the pros and cons of different strategies to help you build an effective global compensation plan.

‍

What Is Global Compensation?

Global compensation is how you approach distributing salaries and benefits to employees located in various countries. It’s essential to incorporate a total rewards strategy. This approach involves not just salary and bonuses but also includes benefits, well-being, career development opportunities, and recognition programs.

The goal is to provide a package that addresses employee satisfaction and engagement, while taking the company's overall business strategy and the local market conditions where employees reside into account.  

‍

Why It’s Important to Have a Global Compensation Strategy

A well-consider compensation strategy is vital for several reasons:

• Attracting Top Talent: Competitive compensation packages help attract skilled professionals from around the globe.
• Retaining Employees: Fair and competitive compensation reduces turnover rates by ensuring employees feel valued and adequately rewarded for their efforts.
• Compliance: Different countries have unique labor laws and tax regulations. A global strategy will help you stay compliant, mitigating the risk of legal issues and penalties.
• Equity and Fairness: A structured approach provides employees with equitable compensation. This establishes an inclusive culture where all employees are treated fairly, irrespective of their location.

Key Considerations When Calculating Global Employee Compensation

When calculating compensation for your international employees, take into account the following factors:

• Cost of Living: Adjusting salaries according to the cost of living in different regions ensures employees maintain a similar standard of living.
• Local Market Rates: Researching local salary benchmarks helps in setting competitive and fair wages.
• Legal Requirements: Understanding and adhering to local labor laws, including minimum wage regulations, employer and employee tax implications, and mandatory benefits.
• Currency Exchange Rates: Regularly reviewing and adjusting for currency fluctuations to maintain compensation parity.
• Cultural Expectations: Tailoring benefits and perks to align with cultural preferences and expectations in different regions.

‍

Comparing Different Global Compensation Strategies

Different strategies can be employed to manage an international salary scheme effectively:

Location-agnostic pay:

Employees are paid a standard amount based on role and the work involved, regardless of where they work. 

Pros: 

• This approach allows access to a global talent pool and leads to a more diverse workforce. 
• It can be especially attractive to employees situated in countries with a lower cost of living than the region where your company is based. You will find it easy to attract world-class talent in these regions if they know that they will be fairly compensated.

Cons: 

• Employees in areas with a high cost of living might feel they are being under-compensated compared to colleagues elsewhere.  
• It can get very expensive for businesses as they scale across the globe.

A cost of living approach or localized pay:

‍Compensation is based on the local standards where the employee resides. This ensures competitiveness in local markets but can lead to disparities within the organization. 

Pros: 

• It is particularly favorable to workers based in countries with a high cost of living, since they will be well-compensated for their living expenses. 
• It is also a more cost-effective approach for businesses, compared to location-agnostic pay.

Cons: 

• Keeping track of different cost-of-living adjustments and ensuring compliance in different parts of the world can be extremely complex for companies.
• In addition, employees based in low-wage countries can easily feel disadvantaged and that they are being treated unfairly if they are paid differently for the same work.

Considering this, two approaches are emerging:

Hybrid Approach: Adjust salaries based on a mix of company’s headquarters and host country benchmarks (employee residence), cost of living adjustments, and company policies. This could involve pegging salaries to the currency your business uses as a standard (for example, dollars). In this example, you would use the dollar amount as the base for an employee's salary, then pay employees in their local currency based on the current exchange rate.

Global Benchmarking: Using global salary surveys and data to set compensation based on international standards. This method is complex but aims to standardize compensation across the organization.

‍

Best Practices for Global Compensation

To develop an effective global compensation strategy, implement these steps as part of the process:

Regular Market Research: Continuously monitor global market trends and adjust compensation packages accordingly to stay competitive.

Transparent Communication: Clearly communicate compensation policies and how decisions are made to build trust and transparency. This should form part of your hiring process with candidates, as well as communication to your existing team.

Flexibility: Be prepared to adapt your compensation strategy as markets evolve and new remote work trends emerge.

Technology Utilization: Implement HR and payroll software to simplify the management of global compensation.

Employee Input: Regularly gather feedback from employees on their compensation satisfaction to make adjustments accordingly.

Useful Tools When Building an International Strategy

Building and managing a global pay structure can get complicated – use the following tools and resources to simplify the process:

HR Management Software: Utilizing services like Playroll can streamline processes by managing international payroll and compliance through Employer of Record (EOR) services. 

Employee Cost Calculator: Use Playroll’s free Employee Cost Calculator to get a breakdown on annual salary, statutory benefits and employer taxes in 180+ regions – and get a side-by-side comparison of employer costs in different markets.

Economic Research Institute (ERI): ERI provides detailed salary surveys and compensation data for a wide range of industries and job roles globally.

Numbeo: It provides data on living expenses, including rent, groceries, and transportation, across different cities and countries.

Glassdoor: It offers salary information based on employee-reported data. It helps organizations understand compensation trends in different regions and industries.

Currency Exchange Platforms: Services like XE or OANDA for real-time currency conversion and financial planning.

‍

The popularity of remote work is here to stay. As more companies embrace hiring internationally, having an effective global compensation strategy can help you get an edge when it comes to attracting and retaining talent. Embracing these principles will not only enhance employee satisfaction but also drive business success.

Simplify How You Compensate Remote Workers

At Playroll, we take the complexity out of hiring a distributed workforce. As an Employer Of Record, we handle paying, onboarding and managing your international employees in 180+ regions, so you can focus on your business.

Additionally, you can administer localized, attractive benefits for your employees with advice from our team of experts on what competitive compensation looks like.

‍