5 must-haves for your global compensation strategy

Find out what to include in your global compensation plan.

Money in different currencies.

There’s a lot to think about when hiring an employee in another country, with compensation and benefits-related questions likely to be at the top of your priority list. Without a well-defined global compensation and benefits strategy, you could well end up wasting time, losing money, and even disincentivizing candidates and employees.

Learn about compensation and benefits for global teams in our free total rewards guide!

On the surface, managing benefits and compensation in a global organization sounds like a tall order. However, as you break it down piece by piece, you’ll realize that it’s not the insurmountable challenge it may seem.

What are the benefits of a global compensation strategy?

With a global compensation strategy guiding you, you’ll be able to balance offering a competitive package by role, seniority, and location against the financial realities of your business. It will enable you to answer questions like:

  • Can we afford to pay our engineers more this year so we can attract better talent to work on our product?
  • What benefits do we need to provide on top of our statutory minimums to remain competitive without overcompensating with salary?
  • In what global markets can we hire great talent within our budget?

Being able to answer these questions will provide multiple insights into the best way to acquire talent for your business, including which global locations are the most cost-effective to hire great talent.

Creating a global compensation and benefits strategy

1. Establish a base rate of pay

As an employer, it’s your responsibility to determine the base rate of pay for each employee. Keep in mind that salary ranges and taxes vary by country and that you may want to adjust base pay based on local variances. Check out our employee cost calculator to get a better idea of hiring costs in different countries. 

There are a number of different approaches you can use to establish a base rate of pay:

  • basing employee compensation on local and national rates.
  • equating each employee to the standard of living in their country of residence and compensating accordingly.
  • paying every employee at the same rate regardless of location, i.e., location-agnostic pay. Location-agnostic pay is typically benchmarked using a specific city where strong data is available. In order to avoid paying over-inflated salaries, employers often choose a mid-cost city, avoiding, for example, London, New York, or San Francisco, where salaries are generally a lot higher than the average.

When preparing your own compensation strategy, compare the pros and cons of each approach as they relate to your employees’ locations to determine which one is best for you. 

2. Choose whether to adopt a variable pay plan

As you hire employees globally, you’ll find that variable or incentive-based compensation plans are more common in some countries and less so in others.

With any pay-per-performance plan, you must focus on details, such as target setting, pay equity, and short-term versus long-term incentive plans. Everything from participation to eligibility to the level of incentives depends on the location of your employees. 

3. Consider premiums and allowances

Premiums and allowances are added to an employee’s base salary to ensure they can maintain a reasonable standard of living in their home country. This is important for global organizations as standards of living vary greatly across the world. 

Common types of premiums and allowances include:

  • cost of living adjustments
  • hardship, hazard, or danger pay
  • housing assistance
  • educational assistance

You don’t have to offer premiums and allowances, but these benefits can help attract and retain top talent. All else being equal, a prospective employee is more likely to be attracted to the employer offering the best premiums and allowances.

4. Learn more about global benefits

Global benefits are often the most complicated aspect of a compensation and benefits strategy. This is due to varying laws that govern workers in individual countries.

For instance, providing health insurance works differently for employees in the U.S. versus those in Spain. In addition to healthcare plans, it’s important to know when other benefits are mandatory, such as:

  • vision coverage
  • dental coverage
  • retirement plans
  • spousal or partner assistance
  • education reimbursement

You may also want to consider providing training benefits to employees, such as language and cross-cultural training.

5. Stay current on tax and compliance issues

As an employer, it’s important to understand all tax compliance issues that could come to light. The first step is to learn what’s required of you in every country.

Managing these requirements on your own is a huge challenge, but rather than manage all of these details in-house, Oyster’s global employment platform can do it for you.

Oyster provides compliance management for employees in 180+ countries so you can ensure that you meet local requirements and hire compliantly with help from our dedicated legal team.

Get Your Total Rewards Playbook! Learn how to reward and retain global talent

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables engagement anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.

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