As multinational organisations continue to grapple with global competition, employee expectations and cost containment in today's economy, they are focusing on overseas employment costs necessary to attract and retain their top talent. Since compensation practices vary among countries, this undertaking is particularly challenging.  
 
Mandated salary increases, profit sharing, additional payments for holidays or bonuses ranging from 12 to 16 months, and allowances for meals and transportation are just some of the pay schemes that vary from country to country.
 
“It is necessary to understand the different mandatory and customary pay practices among countries to cost-effectively manage a global workforce,” said David Wreford, a Principal with Mercer, global provider of consulting, outsourcing and investment services. ”Multinational employers should first develop a global perspective and then interpret it in light of the pay practices and requirements in each country. This ensures a consistent and rational global reward strategy that is relevant and workable in the local markets where they operate.”
 
Mercer’s Compensation Plans around the World guide for multinational organisations summarises compensation practices and regulatory variations in more than 45 countries. The report includes remuneration practices such as typical pay components, including mandatory salary increases, cash payments for transportation, meals or holidays, number of months of pay and frequency of salary increases. While the report constitutes a general guide that helps HR professionals identify compensation practices and regulatory issues, it is not a substitute for local legal advice and detailed research into local practices and requirements.  
 
Mandatory salary increases

As multinational organisations strive to manage global employment costs, one factor that continues to pose a challenge is that of mandated salary increases. In Europe, for example, salary increases are often dictated by collective labour agreements. While salary increases are not mandated in Finland, Germany and Sweden, for instance, they often are included in collective agreements. Additionally, in Turkey and Denmark, salary increases are required for companies that have unionised workforces. In Greece, they are mandated only for employees paid minimum wage. Other European countries, including the United Kingdom and Poland, do not have mandated salary increases.
 
In the Americas, most countries, including Canada, do not mandate salary increases. In Brazil, however, union agreements commonly dictate mandatory salary increases while in Colombia salary increases are required only for employees making minimum wage. The United States does not mandate salary increases for non-union workers although unionised workers may have a salary increase provision in their labour contract, but not required by the government.
 
Most of the countries in Asia Pacific, like in the Americas, do not mandate salary increases. Thailand, Japan, Indonesia and India are among these countries. In Malaysia, however, pay increases are required for unionised and blue collar workers.
 
“Part of the challenge of cost-effectively managing a global workforce is reconciling the company reward strategy with the many local practices,” said Wreford. “When pay practices are mandatory there is no choice but to comply, but when a company’s reward strategy is at odds with the typical local practice the company must think through how each approach will position them in the local market. While it is often best to adapt to the local approach, there are times when following the global strategy can differentiate an employer and make them especially attractive to the most desirable employees.”
 
Differences in compensation practices around the world

Besides mandated salary increases, other compensation practices that differ by country include additional guaranteed cash payments (payments provided to employees beyond salary but independent of performance) such as cash allowances for transportation, meals or holidays.
 
Within Europe, for example, some countries including Italy, Portugal and Spain mandate additional salary payments. In Italy, nearly all companies provide a 13-month salary to all employees while other companies provide a 14-month salary. Portugal and Spain mandate 13-month and 14-month salaries, respectively. Belgium, France and Norway mandate an allowance for transportation. While the practice of providing company cars is common in some European countries, including Belgium and Ireland, the practice is not as prevalent throughout the region as it is in the Americas.
 
In the Americas, there are countries that mandate additional salary payments comprising of a 13-month salary payment, holiday bonus or profit sharing payout. In Argentina a 13-month salary payment is required by law while in Brazil companies are required to pay a vacation bonus and provide a 13-month salary. In Mexico and Puerto Rico, holiday bonuses are mandated. Additionally, in Mexico profit sharing is mandatory. Transportation allowances (reimbursement for public transportation or a car stipend) are common in Brazil, Chile and Colombia, but not in the United States or Canada. Meal allowances (lunch vouchers and cafeteria meals) are mandated in Venezuela.
 
In Asia Pacific, some countries, including India, Indonesia and the Philippines, mandate additional salary payments. In other countries, such as Hong Kong, Singapore and Taiwan, 13 or 14 months of salary is common, while still in other countries, such as China and Malaysia, additional salary payments exist but are less common. Although a car benefit and an allowance for meals is common practice throughout many Asian countries, these pay practices are not as prevalent as a transportation allowance.
 
 
Mercer notes that mandated salary increases around the world are prevalent in the following countries:
Colombia: For minimum wage and integral minimum wage only.
Belgium: National collective labour agreements require an indexing of employees’ salaries that is linked to the health index; index adjustment timing varies by industry.
France: The employer must have an annual salary negotiation even if it does not result in an agreement with the union.
Ireland: Historically, public sector and many private sector companies with unions signed up for national wage agreements and pay increases were negotiated on a national basis for multi-year periods. Given the current economic situation, there is uncertainty about future payments under these negotiated agreements.
Norway: In industries with large unions, companies need to follow the collective agreement between the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Business and Industry (NHO) unions.
Greece: Only for employees paid the minimum wage.
South Africa: Mandated increases apply only to nonunionized sectors.
 
Note: The information contained in Mercer’s Compensation Plans Around the World Guide constitutes a general survey to help HR professionals identify compensation practices and regulatory issues in a number of countries. It is not a substitute for local legal advice and detailed research into local practices and requirements, which can change without notice. Mercer recommends that employers seek legal advice and confirm the details of the topics covered as it pertains to their specific situation before evaluating their own employment practices or implementing changes to their compensation plans.