Differential payment is not just a business tactics but a whole some strategy developed by new international human resource management for multinational corporations. Yet, the reality of pay differentials among the international staff does not normally lead to grievances among them. Multinational corporations usually stick to a number of principles of international compensation strategies in order to overcome the ill-effects of pay differentials. The present study is an effort in delineating the mechanism of pay differentials followed by multinational corporations and its effect over the employees from different national environments. The practices of multinational corporations aim to get rid of the resentments and motivational issues pertaining to pay differentials among the international staff would be examined in detail and with theoretical rigour.
There is no consensus among the theorists of international compensation strategies over the question of the correct approach to the understanding of pay differentials, related grievances and appropriate compensation strategies (Scullion and Linehan, 2005). Rather than adhering dogmatically to a single approach, the paper tries to synthesise the wisdom each approach in understanding and defining the subject-issue. The paper would primarily give a clear picture of the existing practices of international compensation and multinational common and theoretically validated reactions for addressing the possible and real negative effects of pay differentials among the international staff. The issue of performance management, especially the difficulty of neutral performance appraisal would be examined with special emphasis. Moreover, the paper would be a comprehensive and introductory appraisal of a complex issue which is an important matter of debate in the present business world.
Pay Differentials and Compensation Strategies of Multinational Companies
International compensation as a concept encompasses the issues and concerns regarding the defining aspects of international compensation, the determining factors of international compensation strategy, reforming compensation along with international transfer within MNCs, and disparities in international compensation (Dowling and Welch, 2004). Performance appraisal is vital in performance management as a core human resource management activity. Revealing the importance of compensation strategy in the practices of multinational companies, Fenwick defines the compensation system of an organisation as "the usual means by which employee rewards are planned and administrated" ( 2004, p. 308).
Compensation strategy is increasingly becoming integral to the conduct of organisational strategy as globalisation of market became a reality with an unprecedented pace and intensity (Tayeb, 2005). It is important to not that no distant corner of the world is out of the reach of the twenty first century globalised market. For Fenwick, international compensation is "the provision of monetary and non-monetary rewards, including base salary, benefits, perquisites, long- and short-term incentives, valued by employees in accordance with their relative contributions to MNC performance"( 2004, p. 308). The very structure of organisation itself has become transformed in great deal to get adapted with