1. What is the Purpose of Performance Appraisal? 2. What are the Performance Appraisal Processes and Methods? 3. What is 36o-degree Feedback? 4. What are

1. What is the Purpose of Performance Appraisal?

2. What are the Performance Appraisal Processes and Methods?

3. What is 36o-degree Feedback?

4. What are the Criteria for performance Appraisal of International Employees?

Review Questions

Lecture SevenCompensation System

Prof. Shuming Zhao

Issues

What is compensation?

What are the major elements of salary and benefits?

What should be the main objectives for a multinational firm with regard to its compensation policies?

Why is it important for multinational firms to understand the compensation practices of other countries?

Prof. Shuming Zhao

I. Compensation System

Compensation is the total of all rewards provided to employees in return for their services. Compensation can both be tangible and intangible.

Tangible compensation: direct and indirect

Intangible: The satisfaction that a person receives from the job itself or from the psychological and/or physical environment in which job is performed.

Prof. Shuming Zhao

1. Tangible Compensation

Direct Compensation: Pay and Incentives

Pay: The basic compensation an employee receives, usually as a wage or salary.

Incentives: Compensation that rewards an employee for efforts beyond normal performance expectation.

Prof. Shuming Zhao

Tangible Compensation

Indirect Compensation: Benefit

With indirect compensation, employees receive the tangible value of the rewards without receiving the actual cash.

A benefit is an direct reward, such as social security, health insurance, vacation pay, or retirement pensions, given to an employee or group of employees as a part of organizational membership.

Prof. Shuming Zhao

2. Intangible Compensation

Intangible compensation consists of the satisfaction received from performing meaningful job-related tasks. People have different reasons for working and the most appropriate compensation package depends in large measure on those reasons. When individuals are being stretched financially to provide food, shelter, and clothing for their family, money may well be the most important reward. However, some people work many hours each day, receive relatively little pay, and yet love their work because it is interesting or provides an environment that satisfies other needs.

Prof. Shuming Zhao

Intangible Compensation

Intangible compensation involves the psychological and/or physical environment in which the person works, such as appropriate status symbols, comfortable working conditions, workplace flexibility, flextime, job sharing, congenial co-workers, praise for competing a special project, etc.

Prof. Shuming Zhao

Equity Theory and Fairness

Equity theory suggests that people evaluate the fairness of their situations by comparing them with those of other people. According to the theory, a person (p) compares her own ratio of perceived outcomes O to perceived inputs I to the ratio of a comparison other (o). Just as the following formula shows:

?,,o

o

p

p

IOorI

O

Prof. Shuming Zhao

If p’s ration ( ) is smaller than the comparison other’s ration ( ), under-reward inequity results. If p’s ratio is larger, over-reward inequity results, although evidence suggests that this type of inequity is less likely to occur and less likely to be sustained because p may rationalize the situation by reevaluating her outcomes less favorably or inputs more favorably.

p

p

IO

o

oI

O

Prof. Shuming Zhao

Pay Structure Concepts and Consequences

Pay Structure

Decision Area

Administrative Tool

Focus of Employee Pay Comparisons

Consequences of Equity Perceptions

Pay Level Market Pay Surveys

Job Evaluation

External Equity

Internal Equity

External employee movement; labor costs; employee attitudes

Internal employee movement; cooperation among employees; employee attitude

Job Structure

Prof. Shuming Zhao

Developing Pay Level: Market Pressures

Product-Market Competition

Labor-Market Competition

Prof. Shuming Zhao

Developing Pay Level: Employees As A Resources

Because organizations have to compete in the labor market, they should consider their employees not just as a cost but as a resource in which the organization has invested and from which it expects valuable returns. Although controlling costs has a direct effect on an organization’s ability to compete in the product market, the organization’s competitive position can be compromised if costs are kept low at the expense of employee productivity and quality.

Prof. Shuming Zhao

Deciding What to Pay

The advantage of paying above the market average is the ability to attract and retain the top talent available, which can translate into a highly effective and productive work force. The disadvantage, however, is the added cost.

Prof. Shuming Zhao

The Dilemma of High Pay

Attracting and retaining talent

Adding costs

Prof. Shuming Zhao

Developing A Pay Structure

Market Survey Data

Pay Policy Line

Pay Grades

Prof. Shuming Zhao

Conflicts Between Market Pay Surveys And Job Evaluation

Market Pay Surveys Job Evaluation

Prof. Shuming Zhao

The Importance of Process: Participation

Employee participation in compensation decision making can take many forms. For example, employees may serve on task forces charged with recommending and designing a pay program. They may also be asked to help communicate and explain its rationale. To date, for what are perhaps obvious reasons, employee participation in pay level decisions remains fairly rare.

Prof. Shuming Zhao

Current Challenges: Problems with Job-based Pay Structures

They may encourage bureaucracy.The structure’s hierarchical nature reinforce a top-down decision making and information flow as well as status differentials.The bureaucracy required to generate and update job descriptions and job evaluations can become a barrier to change time and cost.The job-based pay structure may not reward desired behaviors, particularly in a rapidly changing environment where the knowledge, skills, and abilities needed yesterday may not be helpful today and tomorrow.

Prof. Shuming Zhao

Government Regulation of Employee Compensation

Equal Employment Opportunity

Minimum Wage, Overtime, and Prevailing Wage Laws

Prof. Shuming Zhao

How does pay influence individual

employees?

Prof. Shuming Zhao

Reinforcement Theory

E.L. Thorndike’s Law of Effect states that a response followed by a reward is more likely to recur in the future. The implication for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely.

Prof. Shuming Zhao

Expectancy Theory

Expectancy theory emphasizes expected reward, or the effects of incentives. Behaviors can be described as a function of ability and motivation. Motivation is hypothesized to be a function of expectancy, instrumentality, and valence perceptions. Compensation systems differ according to their impact on these motivational components.

Prof. Shuming Zhao

Agency Theory

This theory focuses on the divergent interests and goals of the organization’s stakeholders and the ways that employee compensation can be used to align these interests and goals.Three types of agency costs arise in managerial compensation. First, management may be spending money on things such as perquisites or “empire building”. Second, managers and shareholders may differ in their attitudes toward risk. Third, decision making horizons may differ.

Prof. Shuming Zhao

Merit Pay

The size and frequency of pay increase are determined by two factors. The individual’s performance rating Position in range

Criticisms of traditional merit pay programs W.E. Deming argued that it’s unfair to rate individual

performance because “apparent differences between people arise almost entirely from the system that they work in, not from the people themselves”.

Prof. Shuming Zhao

Individual Incentives

Like merit pay, individual incentives reward individual performance, but with two important differences. Payments are not rolled into base pay Performance is usually measured as physical output

rather than by subjective ratings

Prof. Shuming Zhao

Benefits Programs

Prof. Shuming Zhao

Benefit Programs: Social Insurance

Unemployment Insurance The reform in China

Workers’ compensation Workers suffering work-related injuries or diseases

could receive compensation only by suing for damages. Disability income, medical care, death benefits and

rehabilitative services

Prof. Shuming Zhao

Benefit Programs: Private Group Insurance

Medical Insurance

Disability Insurance

Prof. Shuming Zhao

Retirement

Defined benefit

Defined contribution

Funding, communication, and vesting requirements.

Prof. Shuming Zhao

Employee Benefits by Category and Cost, 1996

Percentage of Payroll

Cost in Dollars

Legally required

Retirement and saving plans

Medical and other insurance

Paid rest periods

Payments for time not worked

Miscellaneous

Totals

8.8%

6.3

10.0

3.7

10.2

2.3

41.3

$3,014

2,144

3,400

1,262

3,476

790

14,086

Prof. Shuming Zhao

II. Three Ps for Compensation

Position-------------Basic Salary

Performance-------Bonus/Rewards

Person-------------Welfare/Benefits

Prof. Shuming Zhao

III. International Compensation and Benefit

Successful management of compensation and benefits requires knowledge of the employment and taxation laws, customs, environment, and employment practices of many foreign countries as well as currency fluctuations, inflation, why and when special allowances must be supplied and which allowances are necessary in what countries.

Prof. Shuming Zhao

International Compensation and Benefit

Because of their high-cost, HR managers spend a great deal of time developing effective compensation and benefit programs for international employees.

The Conference Board Survey:29% of firms reported an expatriate cost of 2-2.9 times salary

50% reported 3-3.9 times salary

18% reported 4-4.9 times salaryThe Conference Board, 1996. Managing Expatriates’ Return: A Research

Report, Report #1148-96-RR, New York.

Prof. Shuming Zhao


A report in Fortune on doing business in China reported that hiring a local Chinese manager with 15 years of experience would cost less than U.S.$70,000.

A U.S. expatriate chief financial officer would cost U.S.$300,000 with the following compensation package.

Richard Tomlinson, 1997. You get what you pay for, Corporate Recruiters in China find, Fortune, April 28, pp218-219.

Prof. Shuming Zhao


Salary $130,000Car and driver $12,000Benefits: Medical $3,000 Pension $13,000 Housing $97,000 Flight Home $10,000 Rest and Relaxation $10,000 Private school for children $25,000Total: $300,000

Prof. Shuming Zhao


Key Components of an Int’l Compensation Program

Base Salary: For expatriates, it is the primary component of a package of allowances, many of which are directly related to basic salary (e.g., foreign service premium, cost-of-living allowance, housing allowance) as well as the basis for in-service benefits and pension contributions.

Foreign Service Inducement/Hardship Premium: 5-40% of the base pay, depending upon the assignment, actual hardship, tax consequences, and length of assignment. In addition, host-country's work week may be longer than that of the home country.

Prof. Shuming Zhao


Allowances: The cost-of-living allowance in the foreign country (e.g., to account for inflation differentials), payments for housing, home leave allowances (trips back the home country each year), education allowances (tuition, language class tuition, enrollment fees, books and suppliers, transportation, room and board, an uniforms), relocation allowances (moving, shipping, and storage charges, temporary living expenses, subsidies regarding appliances or car purchases or sales, down payment, etc. Allowances regarding perquisites (cars, club memberships, servants, etc. ) may also need to be considered (usually for more senior position, but varies according to location). and spouse assistance. (Indexes for Cost of living, see p. 115 and p. 117)

Prof. Shuming Zhao


Benefits: Pension plans, medical coverage, and social security.

Most U.S. PCNs typically remain under their home-country’s benefit plan.

European PCNs and TCNs enjoy portable social security benefits within the European Union.

Multinationals also provide vacations and special leave with families, rest and rehabilitation leave, etc.

Prof. Shuming Zhao

IV. Approaches to International Compensation

Going Rate Approach (market rate approach): the basic salary for int’l transfer is linked to the salary structure in the host country.

Balance Sheet Approach (build-up approach): The approach links the base salary for PCNs and TCNs to the salary structure of the relevant home country, for example, a U.S. executive taking up an int’l position would have his or her compensation package built on the U.S. base-salary level.

Prof. Shuming Zhao

Approaches to International Compensation

Going Rate ApproachBased on local market rates

Relies on survey comparisons----local nationals (HCNs)

----Expatriate of same nationality

----Expatriates of all nationalities

Compensation based on the selected survey comparison

Base pay and benefits may be supplemented by additional payments for low-pay countries

Prof. Shuming Zhao

Approaches to International Compensation (Going Rate Approach)

Advantages

Equality with local nationals

Simplicity

identification with host country

Equity among different nationalities

Disadvantages

Variation between assignments for same employee

Variation between expatriates of same nationality in different countries

Potential re-entry problems

Prof. Shuming Zhao


CEO CompensationCountry (in U.S.$)United States $901,181Hong Kong $672,877Singapore $572,414France $523,511Britain $489,710Australia $476,700Switzerland $465,180Canada $440,886Germany $423,898Malaysia $342,151

Prof. Shuming Zhao


The Balance Sheet ApproachBasic objective is maintenance of home-country living standard, plus financial inducement

Home-country pay and benefits are the foundations of this approach

Adjustments to home package to balance additional expenditure in host country

Financial incentives (expatriate/hardship premium) added to make the package attractive

Most common system in usage by multinational firms

Prof. Shuming Zhao

Approaches to International Compensation (Balance Sheet Approach)

Advantages

Equity

---between assignments

---between expatriates of the same nationality

Facilitates expatriate re-entry

Easy to communicate to employees

Disadvantages

Can result in great disparities

---between expatriates of different nationalities

---between expatriates and local nationals

Can be quite complex to administer

Prof. Shuming Zhao

Approaches to International Compensation (also

see p. 126)

Expatriate Compensation Worksheet(An Australian Expatriate is assigned to a country call New Euphoria in 1998,

COLA Index = 150 and exchange rate =1.5)

Item Amount Paid in A$ Paid in NE$

Base Salary 135,000 67,500 101,250

Coast of living allowance 33,750 50,625

Overseas service premium (20%) 27,000 27,000

Hardship allowance (20%) 27,000 27,000

Housing deduction (7%) -9,450 -9,450

Tax deduction -51,079 -51,079

Total: 162,221 60,971 151,975

Prof. Shuming Zhao

Approaches to International Compensation (Taxation)

Multinationals generally select one of the following approaches to handle international taxation:

Tax Equalization--firms withhold an amount equal to the home country tax obligation of the PCNs, and pay all taxes in the host country.Tax Protection--the employee pays up to the amount of taxes he or she would pay on compensation in the home country. In such a situation, the employee is entitled to any windfall received if total taxes are less in the foreign country than in the home country. (Tax Rates, see p. 121)

Prof. Shuming Zhao

Approaches to International Compensation (Taxation)Corporate Tax Rate on Top Income tax Rates

Retained earnings 1999 1999

U.K. 30.0% U.K. 40.0%

Netherlands 35.0% Germany 2005 44.3%

Germany 2001 38.6% U.S. 45.8%

France 40.0% Italy 46.2%

U.S. 40.8% Spain 48.0%

Italy 41.3% Japan 50.0%

Japan 42.9% Germany 1999 55.5%

Canada 44.6% Sweden 56.0%

Germany 1999 51.8% Netherlands 60.0%

Germany 1998 56.4% France 61.6%

Prof. Shuming Zhao


The top ten most expensive countries in terms of businesscosts in 1997 were: (Reported in The Economist, Jan.1998.)1. Germany 6. The Netherlands2. United States 7. Sweden3. Belgium 8. Australia4. Britain 9. Italy5. France 10. Singapore

Germany is the most expensive country overall because of its very high basic wages, while the second most expensive rank for the United States is in large part because of high executive salaries

Prof. Shuming Zhao

V. Compensation in Multinational Firms

Substantial differences exist in the compensation of executives at the same level in various countries. The results of a survey undertaken in 2000 by Towers Perrin are summarized in the following slides. The survey looked at average compensation for four positions across 26 countries or regions. The figures for CEOs and HR directors include both base compensation and performance-related pay bonuses, but do not include stick options. The figures for accountants and manufacturing employees just refer to base pay.

As we can see from the slides, wide variations exist across countries. The average compensation for a CEO in the U.S. was 1.4 million, compared to $545,260 in Japan and $93,393 in Shanghai. These figures underestimate the true differentices because many U.S. executives earn considerable sums of money from stock option and grants.

Prof. Shuming Zhao

CEO Compensation （ 2000 ） (in US dollar)

Argentina $860,704

Australia 646,316

Belgium 655,390

Brazil 597,454

Canada 742,228

China (Shanghai) 93,393

France 540,260

Germany 421,622

Hong Kong SAR 635,186

Italy 567,685

Japan 545,233

Malaysia 350,558

Mexico 648,695

Netherlands 621,153

New Zealand 258,114

Singapore 621,871

South Africa 406,263

South Korea 194,421

Spain 399,423

Sweden 440,265

Switzerland 448,442

Taiwan 179,486

Thailand 145,173

United Kingdom 719,665

United States 1,403,899

Venezuela 609,097

Prof. Shuming Zhao

HR Director Compensation （ 2000 ）(in US dollar)

Argentina $326,874

Australia 235,316

Belgium 286,222

Brazil 287,683

Canada 188,070


France 224,112

Germany 189,785


Italy 254,138

Japan 235,536

Malaysia 130,771

Mexico 239,028

Netherlands 217,142

New Zealand 111,803

Singapore 239,376

South Africa 179,268

South Korea 109,637

Spain 196,305

Sweden 166,312

Switzerland 102,491

Taiwan 179,486

Thailand 98,120


United States 306,181

Venezuela 272,,212

Prof. Shuming Zhao

Accountant Compensation （ 2000 ）(in US dollar)

Argentina $63,948

Australia 57,129

Belgium 63,883

Brazil 44,605

Canada 44,866


France 69,554

Germany 61,375


Italy 59,388

Japan 59,107

Malaysia 24,522

Mexico 41,582

Netherlands 48,838

New Zealand 38,382

Singapore 51,733

South Africa 43,234

South Korea 41,365

Spain 56,332

Sweden 43,438

Switzerland 66,121

Taiwan 30,652

Thailand 19,175



Venezuela 41,192

Prof. Shuming Zhao

Compensation for top 20 Independent Directors （ Year:2002, Sample numbers: 137 ）

rank

Name of company Location Annual salary （ 10 thousand yuan ）

1 Tianjin Capital EnvironmentalProtection Company Limited Tian Jing 26.50

2 Baoshan Iron ＆ Steel Co., Ltd Shanghai 20.003 SHENZHEN EXPRESSWAY COMPANY LIMITED GuangDo

ng12.27

4 Shenzhen Neptunus Bioengineering Co.,Ltd. GuangDong

10.00

5 Guangzhou Pharmaceutical Company Limited GuangDong

9.52

6 CHINA INTERNATIONAL MARINE CONTAINERS （ GROUP ） CO., LTD.

GuangDong

8.00

7 TSINGHUA TONGFANG CO ．， LTD Beijing 8.008 Hainan Airlines Co ．， Ltd ． Hai Nan 8.009 HUAFANG COMPANY LIMITED BY SHARES ShanDong 8.00

10 Yanzhou Coal Mining Company Limited ShanDong 7.0011 GUANGZHOU SHIPYARD INTERNATIONAL COMPANY LIMITED GuangDo

ng6.54

12 China Fangda Group CO., LTD GuangDong

6.00

13 Shenzhen Yan Tian Port Holdings Co.,Ltd GuangDong

6.00

14 Ｈ unan Ｚ henghong Science and Technology Develop Ｃ o., Ｌ td. Hu Nan 6.00

15 Wuhan Kaidi Electric Power Co.,LTD. Hu Bei 6.0016 Henan Lianhua Gourmet Powerder Co., Ltd. He Nan 6.0017 GANSU RONGHUA INDUSTRY GROUP CO. ， LTD. Gan Su 6.0018 Shenzhen TaiTai Pharmaceutical Company Limited GuangDo

ng6.00

19 ZHEJIANG XINAN CHEMICAL INDUSTRIAL GROUP CO., LTD Zhe Jiang 6.00

20 HUALIAN SUPERMARKET CO.LTD Shanghai 6.00

Prof. Shuming Zhao

Compensation for Top Management in Chinese Listed Firms （ The top 20 ）

Rank Annual salary( 10thousand yuan)

Name of company Location Industry

1 750

Guangdong Kelon Electrical Holding Co.,Ltd Guangdong Manufacturing

2 127.11 Fuyao Class Co.,Ltd Fujian Manufacturing

3 123.33 UFsoft CO., LTD. Beijing IT

4 100 Qindao Doublestar shoe manufacturing Co.,Ltd ShanDong Manufacturing

5 100 .00Lu Thai Textile CO., LTD. Shan Dong Manufacturing

6 100 .00 Da Lian Chuangye CO., LTD. Liaoning Manufacturing

7 93 .00 China World Trade Center Beijing service

8 86 Jiangsu Little Swan CO., LTD. Jiangsu Manufacturing

10 70 Xinxing Ductile Iron Pipes (Group) Co.,Ltd. Hebei Manufacturing

11 61 China Youth Travel CO., LTD. Beijing Multiplebusinesses12 60

CHINA INTERNATIONAL MARINE CONTAINERS (GROUP) CO., LTD. GuangDong Manufacturing

13 60 Powerise CO., LTD. GuangDong IT14 58.33 Dajiang CO., LTD Shanghai Manufacturing15 56.16 ZTE CO., LTD GuangDong IT16 55 Midea Co., Ltd GuangDong Manufacturing

17 55

Inner Mongolia North Hauler Joint Stock Limited Company Inner Mongolia Manufacturing

18 55 Nantian Information Co., Ltd Yunnan IT

19 52.5 China Vanke Co., Ltd GuangDong Real estate

20 51.75 Huagong Tech Co, Ltd Hubei Manufacturing

Prof. Shuming Zhao

Stock Options for top 20 Chairmen of the Board in the Listed Firm rank Name of company Location board chairman Number of

stockHolden

Stock Price atthe end ofyear

（yuan）

Stock price byboard chairman

（yuan）1 Orient Group Hei Longjiang Zhang Hongwei 2,813,899 7.77 21,863,995.23

2 Ningbo Yunsheng Co., Ltd ZheJiang Zhu Yunde 891,000 24.27 21,624,570.00

3 Zhejiang Guangsha Co., Ltd ZheJiang Lou Zhongfu 1,437,345 9.72 13,970,993.404 Wanxiang Qianchao Co., Ltd ZheJiang Lu Guanqiu 679,031 10.58 7,184,147.985 Midea Co., Ltd GuangDong He Hengjian 559,859 10.12 5,665,773.08

6 Dongfang Electronics Co., Ltd ShanDong Shui Yuanbo 739,200 6.04 4,464,768.00

7 Zhejiang Eastern Co., Ltd ZheJiang Liu Linsheng 200,448 21.12 4,233,461.76

8 Youngor Co., Ltd Zhe Jiang Li Rucheng 373,152 11.14 4,156,913.2810 Shenzhen Agricultural products.,Ltd GuangDong Lin Jiahong 308,283 13.16 4,057,004.28

11 Guangdong Meiyan Co., Ltd GuangDong Yang Qinhuan 717,183 4.81 3,449,650.2312 Neusoft Co., Ltd. LiaoNing Liu Jiren 156,130 21.34 3,331,814.2013 Liaoning Cheng Da enterprises Co.Ltd. LiaoNing Shang Shuzi 222,300 14.58 3,241,134.0014 Jiangsu Etern Co., Ltd Jiangsu Gu Yunkui 200,000 12.62 2,524,000.0015 Shenzhen Kaifa Technology Co., Ltd GuangDong Wang Zhi 214,207 11.74 2,514,790.1816 FIYTA Co., Ltd GuangDong Li Zhizheng 124,416 17.83 2,218,337.2817 Zhongda Co., Ltd ZheJiang Cheng Jida 190,125 10 1,901,250.0018 China Vanke Co., Ltd GuangDong Wang Shi 139,559 13.35 1,863,112.6519 Guangzhou Development Industry( Holding ) Co., Ltd GuangDong Yang Dandi 112,320 15.31 1,719,619.2020 Yatai Co., Ltd JiLin Song Shanglong 232,402 7.16 1,663,998.32

Prof. Shuming Zhao

Stock Option for Top 20 General Managers in the Listed Firms

rank Name of company Location CEO Number ofstockHolden

Stock Price at theend of year

（yuan）

Stock price byboard chairman

（yuan）1 Orient Group Hei Longjiang An Ying 1,707,797 7.77 13,269,582.69

2 Shenzhen Kaifa Technology Co., Ltd GuangDong Tan Zhiwen 714,025 11 .74 8,382,653.503 Zhejiang Eastern Co., Ltd ZheJiang Wu Jianhua 190,426 21.12 4,021,797.124 Liaoning Cheng Da enterprises Co.Ltd Liaoning Zhang Dezhong 177,840 14.58 2,592,907.205 Ling Bo Fuda Co., Ltd ZheJiang Xu Laiying 211,954 11.64 2,467,144.56

6 Tinghua Tongfang Co., Ltd Bei Jing Lu Zhicheng 103,623 20.17 2,090,075.91

7 China International Marine Containers (Group) Co., Ltd. ZheJiang Mai Boliang 78,078 26.66 2,081,559.48

8 J iangsu Sanmu Group Co. Jiangsu Cheng Weihui 164,454 12.6 2,072,120.4010 ZTE Co.,Ltd Guangdong Hou Weigui 72,000 23.46 1,689,120.00

11 Shengzhen international Co., Ltd Guangdong Song Shenjun 172,800 9.12 1,575,936.0012 XinJiang Tunhe Co.,Ltd XinJiang Zhang Guo 639,600 21.71 1,388,571.6013 Guangdong Chunhui Co.,Ltd Guangdong Wu Jun 144,000 9.07 1,306,080.0014 Guangzhou Development Industry( Holding ) Co., Ltd GuangDong Liu Haitao 78,200 15.31 1,197,242.0015 Dongfang Electronics Co., Ltd ShanDong Ding Zhenghua 184,019 6.04 1,111,474.7616 Jiangsu Wujiangdelicacy chemical Co., Ltd Jiangsu Yao Jianlin 68,400 16.02 1,095,768.0017 Shanghai Jinling Co. Ltd Shanghai Xu Weiwu 130,127 7.24 942,119.4818 ShanDong HeiBao Co. Ltd ShanDong Shun Xianyou 117,000 7.89 923,130.0019 Shandong Jiufa Edible Fungus Co., Ltd. ShanDong Wang Hongqin 49,920 17.45 871,104.0020 Shengzhen Kangdar Co., Ltd GuangDong Ou Xitao 141,588 6.09 862,270.92

Prof. Shuming Zhao

SURVEY RESULTS OF SALARY FOR KEY POSITIONS IN GUANGZHOU INVESTED FIRMS (2002-03, RMB)

PositionLowestSalary

HighestSalary Average

General Manager 178,629 1,156,498 476,463

Deputy General Manager 187,951 1,046,420 413,462

Marketing Manager 71,080 683,566 312,609

Human Resource Manager 113,202 620,983 212,582

Financial Manager 81,069 362,271 238,737

Manufacturing Manager 36,327 325,095 146,271

Technology Management 42,192 288,019 179,458

Prof. Shuming Zhao

Manufacturing EmployeesCompensation （ 2000 ） (in US dollar)

Argentina $17,884

Australia 29,703

Belgium 36,336

Brazil 10,480

Canada 36,289


France 34,741

Germany 36,934


Italy 29,469

Japan 51,997

Malaysia 7,453

Mexico 14,302

Netherlands 27,892

New Zealand 15,931

Singapore 16,912

South Africa 7,974

South Korea 17,904

Spain 22,746

Sweden 32,564

Switzerland 41,104

Taiwan 11,924

Thailand 6,293



Venezuela 11,221

Prof. Shuming Zhao

International TaxationCorporate Tax Rate on Retain

ed

Earnings 1999 (including state tax)

------------------------------------------

U.K. 30.0%

Netherlands 35.0%

Germany 2001 38.6%

France 40.0%

U.S. 40.8%

Italy 41.3%

Japan 42.9%

Canada 44.6%

Germany 1999 51.8%

Germany 1998 56.4%

Top Income Tax Rates

1999 (including surcharge)

------------------------------------------

U.K. 40.0%

Germany 2005 44.3%

U.S. 45.8%

Italy 46.2%

Spain 48.0%

Japan 50.0%

Germany 1999 55.5%

Sweden 56.0%

Netherlands 60.0%

France 61.6%

Prof. Shuming Zhao

The Top ten most expensive countries in terms of businesscosts in 2003 were: (Reported in The Economist, Jan.2004.)

1. Germany 6. The Netherlands 2. United States 7. Sweden 3. Belgium 8. Australia 4. Britain 9. Italy 5. France 10. Singapore

Germany is the most expensive country overall because of its very high basic wages, while the second most expensive rank for the United States is in large part because of high executive salaries.

Prof. Shuming Zhao

Manufacturing Worker’s Hourly pay (1990 ）

United States $15.45

Australia 13.35

Austria 17.47

Belgium 19.41

Brazil 2.55

Canada 17.31

Denmark 18.05

Finland 20.57

France 15.26

Germany 22.17

Greece 6.72

Hong Kong 3.58

Israel 8.55

Ireland 11.90

Italy 17.18

Japan $14.41

South Korea 4.32

Luxembourg 16.64

Mexico 2.17

Netherlands 18.55

New Zealand 8.35

Norway 22.26

Portugal 4.21

Singapore 4.38

Spain 12.65

Sri Lanka 0.31

Sweden 22.07

Switzerland 21.79

Taiwan 4.42

United Kingdom 13.42

Prof. Shuming Zhao

Vacations

Country Days

----------------------------------

Australia 20

Austria 30

Belgium 20

Canada 10

Finland 20

France 25

Germany 18

Japan 10

Country Days

----------------------------------

Mexico 6

Netherlands 24

Norway 21

Spain 22

Sweden 30

U.K. 22

U.S.A. 10

Prof. Shuming Zhao

Cumulative contribution in years

Age of the unemployed

Monthly payment for first 12 months (yuan)

Monthly payment for next 12 months (yuan)

1 to less than 10 Less than 35 297 280

35 and above324 280

10 to less than 15 Less than 35

35 and above351 281


40 and above378 303


45 and above

405 324


50 and above432 346

30 and above All

Monthly rate of unemployment insurance in Shanghai, 2003

Prof. Shuming Zhao

Discussion

What should be the main objectives for a multinational firm with regard to its compensation policies?

What are the key differences in salary compensation for parent-country nationals, host-country nationals, and third-country national? Do these differences matter?

Prof. Shuming Zhao

Thank You!!!

Documents

1. What is the Purpose of Performance Appraisal? 2. What are the Performance Appraisal Processes and Methods? 3. What is 36o-degree Feedback? 4. What are