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Expanding in an Italian market, Flex Limited needs to incorporate key elements into its compensation program to make its workforces performance competent and effective. Expanding to Italian location, Flex Limited needs to employ both PCNs and TCNs at overseas locations. PCNs will provide expertise to the way business processes should be organised, while TCNs will use their cultural awareness to help Flex Limited penetrate local market. The task of organizing both PCNs and TCNs to perform well at a workplace requires elaboration of a comprehensive compensation program. This paper hypothesizes that such program should embrace the Going Rate Compensation Approach and a number of allowances to make PCNs and TCNs work effectively.
A Compensation Program
The company will grant housing allowance to its PCNs employees, generous enough to allow them to rent a decent flat, since the cost of renting in Italy is above European average especially in summer months. Depending on the family situation, some PCNs will receive education allowances and spouse assistance. These allowances will allow to cover the cost of PCNs childrens education at private schools, since they will not be admitted in state ones. Spouse assistance will compensate the salary of a working spouse who will have to stay at home when moving to Italy (Dowling et al., 2017). Once a year home leave allowance will be granted to PCNs and their family members since the cost of travel from America to Italy is rather high. PCNs need to keep in touch with the domestic environment to make measured judgements abroad.
Compensation Approach
The company would adopt the Going Rate Compensation Approach for its Italian location. The salaries in Italy are approximately equal to those in the USA which would allow PCNs to live comfortably in that country (Abel, 1976). Moreover, the structure of expenses between the US and Italian citizens is approximately the same. The proposed compensation approach would let PCNs maintain the level of life they are accustomed to provided that their base salary is determined by the salary structure in the country they arrive in. The additional factor for choosing this model is that it will allow to avoid rivalry and envy between PCNs and TCNs that usually arises when the Balance Sheet Approach is used. PCNs and TCNs may concentrate on developing relations of trust and reliability that would be beneficial for the company. Moreover, the approach allows equal representation of PCNs and TCNs, while the Local Plus Approach presupposes power shift to expatriate workers.
The Mechanism to Ensure Competitiveness of the Compensation Structure
To ensure the competitiveness of the compensation structure Flex Limited will work in two fields. First, it will aim to attract talented employees from all over the world to work for the company. These employees will be given posts at Italian location to ensure competitiveness of business. Allowances generated under the Going Rate Compensation Approach will allow to attract the most competent candidates as salaries in Italy are high and people will compete to be assigned to this location (Freeman & Kane, p.252). Secondly, the compensation structure must be compliant with the overall business strategy. To ensure compliance, PCNs and TCNs must blend alike into the corporate culture, share the same values and foster cooperation. The allowances based on Italian base salary will allow to achieve this aim since at the Italian location employees will get equal salaries irrespective of their country of origin. Thus, team spirit and cooperation will be built creating the atmosphere of cooperation and mutual trust.
Legal and Taxation Issues to Consider
The main taxation issue that should be considered for expatiates is the double taxation that should be avoided. In most cases, the US companies insist that the taxes are paid within the parent country, that is to say in the US. A taxation counsellor must be advised on complex taxation issues to avoid double taxes. From the legal perspective, expatriates are subject to the laws of the country that hosts them, for Flex Limited company it will be Italy. National holidays, the duration of vacations and compensation package in case of redundancy must be compliant with the Italian law.
References
Abel, J. F. (1976) Trends in international compensation. Industrial Management, 24-27.
Dowling, P. J., Festing, M., & Engle, A. D., Sr. (2017). International human resource management (7th ed.). Cengage Learning. Web.
Freeman K. A. & Kane J. S. (1995) An alternative approach to expatriate allowances: An international citizen . The International Executive, vol. 37(3), 245-259
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