BUS 681 Week 6 Final Assignment

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14 Pay and Bene�its Outside the United States

Learning Objectives

When you �inish studying this chapter, you should be able to:

14-1. Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and bene�its outside the United States.

14-2. For North America (Canada and Mexico), summarize key facts about wage and salary, paid time- off bene�its, and protection programs.

14-3. For South America (Brazil), summarize key facts about wage and salary, paid time-off bene�its, and protection programs.

14-4. For Europe (Germany), summarize key facts about wage and salary, paid time-off bene�its, and protection programs.

14-5. For Asia (India and the People’s Republic of China), summarize key facts about wage and salary, paid time-off bene�its, and protection programs.

CHAPTER WARM-UP!

If your professor has assigned this, go to the Assignments section of mymanagementlab.com (http://mymanagementlab.com) to complete the Chapter Warm-Up! and see what you already know. After reading the chapter, you’ll have a chance to take the Chapter Quiz! and see what you’ve learned.

The current state of globalization has resulted in a high level of interconnections between the economies of various parts of the world. U.S. employers will increasingly conduct business with entities in a variety of other countries as former underdeveloped parts of the world experience tremendous economic, trade, and standard of living growth. In addition, the move from traditional manufacturing to knowledge- and service-based employment also means that jobs, as well as markets, are more likely to be dispersed geographically. As the need for employers to interact globally increases, HR management professionals are going to have increased opportunities to develop compensation and bene�its programs for U.S. employees in foreign assignments, as well as for indigenous employees in foreign of�ices of the parent company.

It is essential that compensation professionals know the basic legal employment context and the minimum statutory employment standards of the country where they propose to do business, just as we’ve discussed throughout this book for U.S. employment (e.g., recall the Fair Labor Standards Act of 1938). After that, compensation professionals may consider the norms for competitive pay and bene�its needed to attract the desired talent.

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In this chapter, we will provide a glimpse of the wide variation in compensation and bene�its practices across several regions of the world. We will start off each review with a brief treatment of governmental structure, norms, and historical events that helps shed light on pay and bene�its. For each country, we will peruse statutory minimum wage rates. Next, we will consider such basic bene�its issues as paid time off, protection programs (including retirement and health care), and stand-out bene�its in particular regions. We will note where such protection programs as retirement and health care are required by the government or offered at the discretion of the employer.

In some instances, we will �ind that other countries impose stricter control over terms of compensation than is the case in the U.S. In particular, compensation requirements in other countries may place some drag on the �lexible and entrepreneurial characteristics of small- and medium-sized enterprises (SMEs) that are establishing a global presence early in their life cycles. The Watch It! video describes the global strategy of DLP, Inc., which is an SME in the business of manufacturing catheters and surgical tubing. As you read this chapter, keep in mind the impact compensation requirements in other countries may have on DLP’s competitiveness.

WATCH IT!

If your professor has assigned this, go to the Assignments section of mymanagementlab.com (http://mymanagementlab.com) to complete the video exercise titled Born Global.

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14.1 PERTINENT CONCEPTS FOR QUANTIFYING ECONOMIC ELEMENTS IN THE DISCUSSION OF PAY AND BENEFITS OUTSIDE THE UNITED STATES

14-1 Explain the pertinent concepts for quantifying important economic elements in the discussion of pay and bene�its outside the United States.

When discussing compensation in other countries, it is important to note some of the important concepts and measures. First, the gross domestic product (GDP) (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss182) describes the size of a country’s economy. Size is expressed as the market value of all �inal goods and services produced within the country over a speci�ied period. The GDP is typically calculated by the country’s national statistical agency. GDP per capita (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss183) generally indicates the standard of living within a country: The larger the per capita GDP, presumably the better the standard of living. Table 14-1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec1#ch14tab01) lists GDP per capita for the countries reviewed in this chapter. These �igures represent each nation’s GDP at purchasing power parity (PPP) exchange rates (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss360) . That is, these �igures indicate the worth of all goods and services produced in the country valued at prices prevailing in the United States. This is the measure most economists prefer when looking at per capita welfare and when comparing living conditions or use of resources across countries.

Second, the per capita expenditure on health care (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/bm01#bm01goss329) (the sum of Public Health Expenditure and Private Expenditure on Health) is another important measure. This measure helps compensation professionals understand the standard of health care, addressing an important element of discretionary and legally required bene�its. This �igure will be stated in the discussion of each country’s bene�its.

Third, hourly compensation costs are important as well. We examined hourly compensation costs— wages and salaries and a variety of employee bene�its—in previous chapters. Other countries publish these data, but there are sometimes methodological differences that make cross-country comparisons dif�icult. For many years until 2012, the U.S. Bureau of Labor Statistics provided data that compared the hourly compensation costs in the manufacturing sector within several countries, making it easier to compare costs across countries. Since then, the Conference Board began publishing hourly compensation costs in the manufacturing setting, relying on much of the same methodology used in previous years by the U.S. Bureau of Labor Statistics. These data are reported in Table 14-1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec1#ch14tab01) in U.S. dollars.

TABLE 14-1 Per Capita Expenditures, Labor Force Size, and Hourly Compensation Costs by Country

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Country Per Capita GDP ($)

Labor Force Size (millions)

Hourly Compensation Costs ($)

Country Per Capita GDP ($)

Labor Force Size (millions)

Hourly Compensation Costs ($)

United States of America 58,400 156.0 36.34

Canada 14,500 19.21 36.33

Mexico 17,900 52.9 6.82

Brazil 15,200 110.9 10.69

Germany 44,700 44.70 48.98

India 5,800 502.2 Not Available

People’s Republic of China

12,900 801.6 Not Available

Notes: The per capita GDP is expressed in U.S. dollars adjusted for the PPP exchange rate. Hourly Compensation Costs (U.S. dollars). Source: Based on Per capita GDP and labor force size (2014 estimates): Central Intelligence Agency (2015). The World Factbook. https://www.cia.gov/library/publications/the-world-factbook/index.html (https://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015. Hourly compensation costs (2013 actual data): Conference Board (December 2014). International Comparisons of Hourly Compensation Costs in Manufacturing, 2013. Available: http://www.conference-board.org (http://www.conference-board.org) , accessed April 3, 2015.

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14.2 NORTH AMERICA

14-2 For North America (Canada and Mexico), summarize key facts about wage and salary, paid time- off bene�its, and protection programs.

This section takes a brief glance at the employment relationship and employee bene�its in Mexico and Canada. Both countries and the United States are part of a trade bloc known as NAFTA—the North American Free Trade Agreement. According to the Of�ice of the United States Trade Representative, formed on January 1, 1994, NAFTA called for the elimination of duties and the phasing out of tariffs over a period of 14 years.1 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end1) Trade restrictions were removed under NAFTA from such industries as motor vehicles and automotive parts, computers, textiles, and agriculture. In addition, the treaty also delineated the removal of investment restrictions between the three countries. As a result of supplemental agreements signed in 1993, worker and environmental protection provisions were added.

The labor side of NAFTA is the North American Agreement on Labor Cooperation (NAALC). This was created in order to promote cooperation between trade unions and social organizations in order to champion improved labor conditions.2

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end2) There has been a convergence of labor standards in North America as a result of NAALC. The impact on wages in the three countries has been positive. Real wages have increased since the passage of NAFTA, with Mexico seeing the greatest boost.3 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end3) This section will present a brief overview of the employment relationship in Canada and Mexico and some basic employee bene�its required by law in these countries.

Canada

According to the Central Intelligence Agency’s CIA World Factbook, Canada is a constitutional monarchy that is also a parliamentary democracy and a federation consisting of 10 provinces and 3 territories.4

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end4) With a per capita gross domestic product (GDP) of $44,500.00 and 19.21 million people in the labor force, the Canadian economy is very similar to that of the United States’ market-based economy. Even though Canada has enjoyed a trade surplus and balanced budgets for many years, concern and debate have recently grown over the increasing cost of the publicly funded health care system.

Employment law researchers report that the basic rule of Canadian law holds that labor and employment law fall within the exclusive jurisdiction of the provinces.5

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end5) Thus, both individual and collective employment relationships are controlled at the province level. Federal legislation cannot override provincial laws, even when the industry or employer primarily conducts business overseas (except in the cases where the industries are expressly assigned to federal jurisdiction). The origins of the common law governing individual employment contracts are in the English Statute of Labourers of 1562, which established working hours and wages. This statute was eventually repealed in the early

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nineteenth century, but it became part of the English common law and later became part of the common law governing all the provinces other than Quebec. Quebec has the Civil Code of Quebec, which came into effect in 1866. A modernized version of the Civil Code came into effect on January 1, 1994.

WAGE AND SALARY6

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end6)

Canada does possess a statutory minimum wage law. At the federal level, there is an obligation placed upon provincial governments to establish minimum rates of pay by or under an act of the legislature. The jurisdiction de�ined by province determines the minimum hourly rate. In 2015, the Northwest Territories had the lowest minimum wage rate (i.e., $10.00). The highest rate (i.e., $11.00) was in Nunavut.

PAID TIME OFF BENEFITS

Canadian employment law holds that employees are entitled to between 8 and 9 annual paid holidays as well as 2 weeks’ paid vacation time along with a sum of money as vacation pay (increasing to 3 weeks after 6 years of employment).7

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end7) The amount of vacation pay is equal to 2 percent of an employee’s pay for the preceding year per week of vacation. There are slight variations from province to province. Maternity and paternity leave provisions are coordinated under the Federal Employment Insurance Act. Employees are eligible for a total of 17 weeks’ bene�its during pregnancy and after childbirth. The Canadian government most recently introduced compassionate care leave, which provides 8 weeks of unpaid leave to care for a seriously ill family member. For the purposes of this leave, family members include spouse, common law partner, children, and parents.8 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end8)

PROTECTION BENEFITS

Pensions and Retirement Bene�its

Canada has two state pension plans: one for Quebec residents only and one for the rest of Canada. Outside of Quebec, the plan is referred to as the Canada Pension Plan, and it provides bene�its similar to U.S. Social Security bene�its. Both plans are funded by matching contributions from employers and employees, and both are fully portable upon employment changes, much like 401(k) plans in the United States. In addition to the public plans, many employers provide supplementary pension plans that are regulated by provincial or federal legislation that establishes minimum funding standards; speci�ies the types of investments that the plans may make; and deals with such matters as portability, bene�it vesting, and locking-in contributions. Employers frequently have different plans for executive, managerial, and other employees.

Health and Disability Bene�its

Medical and basic hospital care in Canada is paid for by provincial medical insurance plans with compulsory coverage for all residents and funding revenue derived from both general federal taxation and from provincial taxes, and the system is governed by the Canada Health Act. This act establishes criteria and conditions for health insurance plans that must be met by provinces and territories in order for them to receive full federal cash transfers in support of health.9

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(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end9) Even though public health plans normally do not provide employed persons with prescription drugs except while they are hospitalized, additional bene�its are provided by private supplementary insurance through employers, including dental and vision care. Employers also provide long- and short-term disability bene�its for sickness or injury as part of a bene�its package. These programs are governed by federal and provincial law. Canada’s per capita expenditure on health (the sum of Public Health Expenditure and Private Expenditure on Health) based on the country’s PPP exchange rate was $4,675.90 in 2012.10

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end10)

Mexico

Mexico is a federal republic,11

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end11) and Mexican labor law is based on the Constitution of the United States of Mexico, adopted in January 1917.12

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end12) The CIA World Factbook reports that Mexico’s labor force was nearly 52.9 million people and its per capita GDP was $17,900.00 in 2014.13 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end13) Its free-market economy is composed of a mix of new and old industry as well as agriculture, which are both increasingly becoming dominated by the private sector. The “Labor and Social Security” article of the constitution is still in effect.14

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end14) Employment relationships in Mexico fall under the Federal Labor Law, which was last revised in January 1997 and clearly de�ines the terms worker and employer for the purpose of individual employment. Some of the employee bene�its ensured under federal jurisdiction in Mexico will be discussed shortly.

WAGE AND SALARY

The Mexican government requires that two minimum wage rates be applied. The �irst, general minimum wage, applies to all workers, and the amount depends on the region of the country – Zone A or Zone B. For instance, the minimum wage in Geographic Area A was 70.10 pesos per day in 2015, but only $66.45 in Zone B.

The second is the occupational minimum wages that are higher than the general minimum wages. Similar to the U.S. General Schedule (Chapter 3 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch03#ch03) ), occupations that require greater skill, knowledge, and experience are compensated at higher rates. For example, a sales clerk employed in a pharmacy had a minimum wage of 84.35 pesos per day while a graphic journalist had a minimum wage of 210.05 pesos per day.

PAID TIME OFF BENEFITS

Mexican employment laws stipulate certain paid time off bene�its for all employees, as reported in publications on international employment laws.15

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end15) Workers are entitled to paid time off during public holidays, and workers required to work during a mandatory holiday are entitled to double pay. Female employees are entitled to maternity leave (i.e., 6 weeks’ leave prior to giving birth and 6 weeks’ leave after birth on full salary). Maternity leave can also be extended with half

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pay for as long as necessary and does not affect seniority rights. Employees are entitled to 6 vacation days after being employed for 1 year and to 2 more days for each subsequent year, up to a maximum of 12 days. As of the 5th year, the worker is entitled to 14 days’ vacation and for each additional group of 5 years 2 more vacation days are added. Employers must pay workers a vacation premium equivalent to 25 percent of the salary earned during scheduled vacation days; vacations must be taken on the date indicated by the employer, within the 6 months following the end of the work year.

PROTECTION BENEFITS

Social Security

Social Security programs in Mexico are administered by the Mexican Social Security Institute, which protects employees in the matters of occupational accidents and illnesses, maternity, sicknesses, incapacitation, old age, retirement, survivor pensions, day care for children of insured workers, and social services.16 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end16) The system is �inanced by contributions from workers, employers, and the government, with contributions based on salary levels, and with workers earning minimum salary exempt from making contributions, whereas employers bear the bulk of the contributions to the different insurance funds.17

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end17)

The bene�its for employees are laid out as follows.18

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end18) Workers with at least 52 weeks’ worth of payments into the system who withdraw are entitled to continue making voluntary payments. Should they return to salaried employment again, they may return to the system and maintain all bene�its, which may be in cash or in kind. Cash bene�its take the form of transfer payments in the early stages of illness or incapacitation, depending on the medical condition and its effects on work and pensions. In-kind bene�its take the form of medical attention, including surgery and medicines, hospitalization services, and so forth.

Pensions and Retirement Bene�its

The U.S. Social Security Administration (SSA) Of�ice of Policy reports that effective July 1, 1997, all workers must join the mandatory individual account system, slowly replacing the former social insurance system.19 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end19) At retirement, employees covered by the social insurance system before 1997 can choose to receive bene�its from either the social insurance system or from the mandatory individual account system.

Health Bene�its

Medical services are normally provided directly to patients (including old-age pensioners covered by the 1997 law) through the health facilities of the Mexican Social Security Institute. Bene�its include general and specialist care, surgery, maternity care, hospitalization or care in a convalescent home, medicines, laboratory services, dental care, and appliances; they are payable for 52 weeks but may in some cases be extended to 104 weeks.20 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end20) Mexico’s per capita expenditure on health at the country’s PPP exchange rate was $106.90 in 2012.21

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end21)

Other Bene�its

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A national system of worker housing exists, paid for by employer contributions in the form of payroll tax �ixed at 5 percent, and helps workers obtain suf�icient credit for the acquisition of houses.22

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end22) Workers not employed after age 50 are entitled to receive the full balance of contributions made in their name to the housing fund.

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14.3 SOUTH AMERICA

14-3 For South America (Brazil), summarize key facts about wage and salary, paid time-off bene�its, and protection programs.

According to the International Monetary Fund’s World Economic Outlook Database, Brazil, Argentina, Colombia, and Chile are the largest economies in South America.23

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end23) Venezuela and Peru are experiencing economic development as well. On the other hand, Argentina, Chile, and Uruguay have the best human development index (HDI—a comparative measure of life expectancy, literacy, and standard of living measured by the United Nations),24

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end24) and Venezuela has large oil reserves that have turned the nation into an important player in world trade. The biggest trade bloc in South America used to be Mercosur, or the Southern Common Market, which was composed of Argentina, Brazil, Paraguay, Uruguay, and Venezuela as the main members and Bolivia, Chile, Colombia, Ecuador, and Peru as associate states.25

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end25) The second-biggest trade bloc was the Andean Community of Nations, made up of Bolivia, Colombia, Ecuador, Peru, Venezuela, and Chile.26 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end26) These two trade blocs merged as of a declaration signed on December 8, 2004, at the Third South American Summit, and they formed one large trade bloc known as the South American Community of Nations, which plans to model itself on the European Union.27

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end27) This section will take a brief look at one of the largest economies in South America, Brazil.

Brazil

The CIA World Factbook reports that Brazil is a federal republic with a workforce of 110.9 million and a per capita GDP of $15,200.00 in 2014.28

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end28) The Consolidation of Labor Laws (Consolidacao das Leis do Trabalho) accords many employee bene�its the status of fundamental constitutional rights, and in general the employment relationship in Brazil is highly regulated by statute. For example, Brazilian law states that any and all bene�its habitually granted by the employer, whether expressly or tacitly, are considered part of the employee’s salary for all legal purposes and cannot be abolished. The status of employment contracts is based on the country’s legal principle of continuity. This principle applies to all employment contracts, written and oral.

WAGE AND SALARY

Brazil does impose a minimum wage. In accordance with the Federal Constitution, the minimum wage rate is nationally uniform and set by law. The minimum wage is �ixed by a provisional measure, namely an act of the executive having the force of law, in accordance with Article 62 of the Federal Constitution

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and placed before Congress for conversion into law. In 2015, this monthly minimum wage was 788 R$ (Reais).

PROTECTION BENEFITS

Social Security

The social security system that went into effect in 1991 details various bene�its for workers in Brazil.29

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end29) Comprehensive social security bene�its are provided by law to all workers regarding retirement for illness, old age, or length of service; death bene�it pensions; assistance during imprisonment of worker; savings fund; social services; professional rehabilitation assistance; work accident payments; maternity leave payments; family salary support; accident insurance; and sick leave bene�its.

Pensions

The U.S. SSA Of�ice of Policy reports that social insurance in Brazil is provided to persons employed in industry, commerce, agriculture, domestic servants, some categories of casual workers, elected civil servants, and the self-employed.30

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end30) There is also voluntary coverage for students, housewives, the unemployed, and other categories, as well as a special system for public-sector employees and military personnel. The monthly bene�it is equal to 70 percent of average earnings plus 1 percent of average earnings for each year of contributions, up to a maximum of 100 percent. Employees contribute 8 to 11 percent of gross earnings based on earnings level. Voluntary contributors and members of cooperatives contribute 20 percent of declared earnings. These contributions also �inance sickness and maternity bene�its and family allowances. In general, employers are required to contribute 20 percent of payroll.

Health Bene�its

In Brazil, medical services are provided directly to patients in rural and urban areas through the Uni�ied Health System, and they include such bene�its as general, specialist, maternity, and dental care; hospitalization; medicines (some cost sharing is required); and necessary transportation.31

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end31) Brazil’s per capita expenditure on health in 2012 based on the country’s PPP exchange rate was $1,108.70.32

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end32)

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14.4 EUROPE

14-4 For Europe (Germany), summarize key facts about wage and salary, paid time-off bene�its, and protection programs.

The European Union (EU) is a unique international organization that aims at becoming an economic superpower, while still retaining such quintessential European practices as high levels of employment, social welfare protection, and strong trade unions.33

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end33) Even though the EU has its own legal powers and performs executive, legislative, and judicial functions like any other governing body, it has limited authority in the area of labor and employment laws. Although the EU does not attempt to harmonize the employment laws of member states, under the laws of all member states employers must provide employees with a written document about the terms of the employment contract. The concept of “employment at will” does not exist in the EU as it does in the United States. The EU makes use of Directives and Community Legislations to ensure that some minimum standards are adopted by member states. All member states either have speci�ic legislation or unfair dismissal or general civil code provisions that apply to termination of employment contracts.

The EU Web site reports that community labor law was designed with the aim of ensuring that the creation of the single market did not result in a lowering of labor standards or distortions in competition.34 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end34) It has also been increasingly called upon, however, to play a key role in making it easier for the EU to adapt to evolving forms of work organization. On the basis of Article 137 of the treaty, the Community shall support and complement the activities of the member states in the area of social policy. In particular, it de�ines minimum requirements at the EU level in the �ields of working and employment conditions and with regard to the information and consultation of workers. Improving living and working conditions in member states depends on national legislation, but also to a large extent on agreements concluded by the social partners at all levels (i.e., country, sector, and company). This section will brie�ly present some of the basic employee bene�its practices in the EU member state of Germany.

Germany

Germany is a federal republic with the �ifth largest economy in the world as indicated by a per capita GDP of $44,700.00, according to the CIA World Factbook.35

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end35) The German labor force has about 44.76 million workers. The integration of the former East German economy is a strain on the overall economy of uni�ied Germany, and unemployment rates have been very high. Germany has recently been pushing such labor market reforms as increasing the retirement age and increasing female workforce participation. There have been increasing concerns about the aging workforce and high unemployment bankrupting the Social Security system, but for now Germany has managed to bring the de�icit to within the EU debt limit. Germany’s employment laws provide considerable voice to labor and job security to employees; the German Civil Code provides numerous statutes that deal with individual

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employment as well as collective agreements.36

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end36)

WAGE AND SALARY

Minimum wage in Germany is established through the collective bargaining process. In Germany, there are two types of collective agreements. First, association agreements are made between trade unions and employers’ associations. Second, company agreements are made between trade unions and individual employers. An extension of either type of agreement to other sectors or employers may be granted upon request of at least one party to the collective agreement.

As an example, the agreement for the metalworking industry in Baden-Württemberg has been selected because it concluded a new pay framework agreement (ERA-Eckentgelt) in 2003, and in February 2004, concluded a collective agreement �ixing the projected percentage increases in minimum wage for the next 26 months. The German government does not mandate a minimum wage, except for construction workers, electrical workers, janitors, roofers, painters, and letter carriers, set by collective bargaining agreements in other sectors of the economy and enforceable by law.

PAID TIME OFF BENEFITS37

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end37)

Employees cannot be required to work on of�icial holidays, which range from 10 holidays per year in northern Germany to 13 in southern Germany. The statutory minimum vacation has been set at 24 working days (or 4 weeks because Saturdays are counted). Younger workers have a right to a vacation of 25–30 working days; disabled workers have an additional 5 days of vacation. There is minimum 6-month employment eligibility for vacation. Under the terms of the Maternity Leave Law, time away from work as a result of maternity leave or other limits on work by pregnant women and mothers must be counted as time worked for the purpose of determining entitlement to vacation time. Employees may take 5 days annually or 10 days every 2 years (under individual state level statutes) as paid holidays for continuing education purposes at only state-approved institutions. The employee retains a job if he is drafted for military or called for military exercises with a suspended employment relationship. The employee should receive regular pay during illness for a period of 6 weeks.

Expectant mothers can take 6 weeks’ leave before the due date and 8 weeks after giving birth. During this time, the employee must be paid at least their average salary or wages calculated on the basis of the last 13 weeks before commencement of leave. An employee can request up to 3 years of child-rearing leave. Employers must guarantee return to the same job following completion of this leave. Any payments for child-rearing leave are made solely by the national health authority.

PROTECTION BENEFITS

Pensions38 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end38)

Germany has a statutory pension system analogous to the Social Security system in the United States. In addition, employers offer the company pension plan and a tax-favored investment plan. Employees have three different sources for their pension bene�its: statutory pension insurance, company pension plans, and private life insurance.

Health Insurance

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German laws stipulate guidelines for minimal health welfare of workers.39

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end39) For blue-collar workers (and some white-collar workers), mandatory state health insurance premiums are borne 50 percent by the insured and 50 percent by the employer. The employer is required to collect the employees’ contributions and to pay the entire amount to the appropriate collector. Employees whose income exceeds a certain amount can opt out of the state plan and purchase private health insurance. In such cases, employees may request that the employer’s health insurance contribution be included in their salary. Germany’s per capita expenditure on health insurance in 2012 based on the country’s PPP exchange rate was $4,617.0040

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end40)

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14.5 ASIA

14-5 For Asia (India and the People’s Republic of China), summarize key facts about wage and salary, paid time-off bene�its, and protection programs.

In 2015, China was the largest economy in Asia, followed by India and Japan.41

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end41) Asia has several trade blocs, including Asia-Paci�ic Economic Cooperation, Asia-Europe Economic Meeting, Association of Southeast Asian Nations, and South Asian Association for Regional Cooperation. Given the wide variation and diversity in the world’s largest and most populous continent, however, there is no unifying economic body like the EU or NAFTA that represents all the countries of Asia. This section will examine a representative sample of the relatively more developed and developing economies in Asia: India and China. A bloc of countries that is not examined here, but that nonetheless deserves mention because considerable jobs are being outsourced there, are those in Southeast Asia: Thailand, Vietnam, Singapore, Malaysia, Philippines, Cambodia, and Laos. These economies are seeing a current in�lux of foreign investment, although they are not close to the countries discussed here in terms of annual growth rates.

India

According to the CIA World Factbook, India is a democratic federal republic with a diverse economy ranging from traditional farming to high-technology industries.42

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end42) India’s labor force is quite large with 502.2 million individuals with a per capita GDP of $5,800.00. The Indian economy, though steadily growing at close to 5 percent annual rate, is plagued with income disparity and developmental challenges similar to China. More than half of India’s output is created with less than one-quarter of its labor force, and services are the major source of economic growth. Strong economic growth combined with easy consumer credit and a real estate boom is fueling in�lation concerns, and the huge and growing population poses fundamental social, economic, and environmental problems. Basic constitutional legislation governs the employment relationship for all employees, ensuring equality of opportunity to public employment and prohibition of child labor.

The Directive Principle of State Policy has statutes that affect various aspects of the employment relationship (e.g., working conditions and participation in management).43

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end43) Some of the key employee bene�its provided by employers in India are provident fund, gratuity (bonus), pension (i.e., either de�ined bene�it or de�ined contribution), housing, car, loans, life insurance protection for dependents, health and disability bene�its, medical bene�its for employees and their families, and leave encashment.44

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end44) The Employees’ Provident Fund Organization is one of the world’s largest Social Security programs with more than 35 million members. Gratuities apply to most employees in India, and these are funded through employer contributions totaling 4.5 percent of payroll.45

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end45)

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There are wide variations between the public and private sectors, with the Ministry of Labour and labor laws governing employment relationships in the public sector and with more employer discretion allowed in the private sector. In addition, all blue-collar employees and factory workers are governed under existing labor laws.

WAGE AND SALARY.

Minimum wage is �ixed by an authority dual system. Minimum wage rates are determined by the government for certain sectors, and a collective agreement determines others. Minimum wage rates may be set in accordance with the Minimum Wages Act 1948 for occupations that are largely nonunionized or have little bargaining power. This act applies throughout India, including the provinces of Jammu and Kashmir. Schedules 1 and 2 of the act set forth the occupations for which applicable central and regional governments may set minimum wage rates. The central government sets minimum wages for 45 different occupations, including agricultural work, construction, road maintenance work, mine work, railway work, and stone breaking or crushing work. In addition, states have set minimum wages for 1,232 different occupations in their respective regions. Minimum wage rates set apply only to those scheduled occupations that have more than 1,000 employees working in the applicable state. For example, in Delhi, the minimum wage rate ranged between 348 and 461 rupees per day in 2015.46

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end46) The wage rate varies by the level of job skill and industry.

PAID TIME OFF BENEFITS47

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end47)

Leave is usually calculated for each year based on the number of days worked in the previous year. A worker is entitled to 12 days of time off for every 240 hours worked. There is no statutory provision for holidays, or paternity leave, but maternity leave is allowed in the form of paid time off and possible medical bonus.

PROTECTION BENEFITS

Pensions48 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end48)

First and current laws regarding pensions were passed in 1952 (i.e., employees’ provident funds), with amendments in 1972 (i.e., payment of gratuity), 1976 (i.e., employees’ deposit-linked insurance), 1995 (i.e., employees’ pension scheme), and 1995 (i.e., national social assistance program). Pension bene�its include provident fund with survivor (i.e., deposit-linked) insurance and a pension fund, a gratuity scheme for industrial workers, and a social assistance system. In 2004, a voluntary old-age, disability, and survivors’ bene�its scheme was enacted. This program is part of the Unorganized Sector Social Security Scheme for employees and self-employed persons ages 36–50 with monthly earnings of 6,500 rupees or less but without mandatory coverage, and was introduced as a pilot program in 50 districts. Contributions are income related and �lat rate. Coverage includes employees, including casual, part-time, and daily wage workers and those employed through contractors, with monthly earnings of 6,500 rupees or less working in establishments with a minimum of 20 employees in one of the 182 categories of covered industry (the establishment remains covered even if the number of employees falls below 20).

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Employees covered by equivalent occupational private plans may contract out. Voluntary coverage exists for employees of covered establishments with monthly earnings of more than 6,500 rupees, with the agreement of the employer and for establishments with less than 20 employees if the employer and a majority of the employees agree to contribute. Provident fund contributions include 12 percent of basic wages (10 percent of basic wages in �ive speci�ied categories of industry) in covered establishments with less than 20 employees and some other speci�ic cases. The maximum monthly earnings for contribution purposes are 6,500 rupees (1 USD = 46.30 rupees).

Health Bene�its

SSA reports that state governments arrange for the provision of medical care on behalf of the Employees’ State Insurance Corporation.49

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end49) Services are provided in different states through social insurance dispensaries and hospitals, state government services, or private doctors under contract. Bene�its include outpatient treatment, specialist consultations, hospitalization, surgery and obstetric care, imaging and laboratory services, transportation, and the free supply of medications, dressings, arti�icial limbs, aids, and appliances. The duration of bene�its is from 3 months to 1 year, according to the insured’s contribution record. India’s per capita expenditure on health based on the country’s PPP exchange rate was $156.90 in 2012.50

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end50)

People’s Republic of China

The People’s Republic of China (PRC), as reported by the CIA World Factbook, is a communist state characterized by a fast-growing economy that has shifted over the past couple of decades from a centrally planned system to a more market-oriented one.51

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end51) With a labor force of 801.6 million people and a per capita GDP of $12,900.00, PRC has been experiencing continuously high annual GDP growth at around 7.5 percent. Even though the purchasing power parity of PRC has become one of the top in the world, the lower per capita GDP is an indication of income disparity within various strata of society. One of the key challenges for the government has been to sustain adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the workforce.

The PRC Labor Law was established in 1995, resulting in a break from the traditional “iron rice bowl” system of employment, with a shift from state-owned enterprises to private ones, a move that has given rise to new employment relationship issues.52

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end52) Under the older welfare system, the workforce was considered the property of the state, and such bene�its as housing, medical, and retirement schemes were payable directly by the state-owned enterprises to the employees. Since the introduction of the PRC Labor Law, the employment relationship is now de�ined by individual contracts.53 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end53)

WAGE AND SALARY

According to China’s Labor Act, 1994, the state possesses the responsibility to implement a system of guaranteed minimum wages. There is no national minimum wage rate in China; instead, minimum wage

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rates are set by region. Separate standards are stipulated by provincial, regional, and municipal peoples’ governments for their respective region and reported to the State Council for consent. The provisions concerning minimum wages apply to enterprises, private nonenterprise entities, individual industrial and commercial households with employees (the employing entities), and the laborers who have formed a labor relationship with them. The minimum wage rate varies by region. In 2014, the monthly minimum wage was highest in Shanghai at 1,820 yuan, and lowest in Guangxi Province at 830 yuan. The minimum wage has increased signi�icantly in recent years, in part, to reduce social inequality and to boost domestic consumption (i.e., those within China purchasing goods and services originating within China). Some companies have expressed concerns that continued increases in the minimum wage threaten the long-term viability of the company, particularly now that China’s economic growth is less than it was in previous years.54 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end54)

PAID TIME OFF BENEFITS55

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end55)

The length of an employer-approved medical treatment period generally depends on employee age and period of service and can range from 3 to 24 months. During this period, the salary paid to the employee may not be less than 80 percent of the local minimum wage. Employees who have worked for 1 to 10 years are entitled to paid annual leave of 5 days. Employees who have worked 10 to 20 years are entitled to paid annual leave of 10 days, and those with more than 20 years experience are entitled to 15 days. Employees receive time off for 11 public holidays each year. Employees who have worked for more than 1 year are entitled to “home leave” if they do not live in the same place as their spouse or parents. Employees earn normal wages during this period, and employers are obligated to pay all travel expenses for employees visiting their spouse and for unmarried employees visiting their parents. Women are entitled to no less than 90 days of maternity leave starting 15 days prior to birth.

PROTECTION BENEFITS

Pensions

The Of�ice of Policy of the SSA reports that there has been a new law to decouple the employment relationship from the social insurance system, setting up a uni�ied basic pension system.56

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end56) The system now has social insurance and mandatory individual accounts, and provincial and city or county social insurance agencies and employers do adapt central government guidelines to local conditions. Coverage includes employees in urban enterprises and urban institutions managed as enterprises and the urban self- employed. In some provinces, coverage for the urban self-employed is voluntary. (Urban enterprises comprise all state-owned enterprises, regardless of their location.) Old-age provision in rural areas is based mainly on family support and through community and state �inancial support. Pilot schemes in the form of individual accounts, supported at the town and village level and subject to preferential support by the state, operate in some rural areas. Employees of government and communist party organizations, and of cultural, educational, and scienti�ic institutions (except for institutions �inanced off-budget), are covered under a government-funded, employer-administered system. Enterprise-based pension systems cover some employees (including the self-employed) in cities.

An employee contribution to mandatory individual accounts is 8 percent of gross insured earnings. (The contribution rate is higher in some provinces.) The minimum earnings for employee contribution and bene�it purposes are equal to 60 percent of the local average wage for the previous year. The maximum

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earnings for employee contribution and bene�it purposes vary, but they may be as much as 300 percent of the local average wage for the previous year. Employer contribution to mandatory individual accounts is up to 20 percent of insured payroll based on local regulations. The contribution is taken from the total contribution made to basic pension insurance. Central and local government subsidies are provided to city and council retirement pension pools as needed.

Health Insurance57 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end57)

There is a uni�ied medical insurance system with all employers and workers participating in this system. Employers contribute 6 percent of payroll to the system, whereas employees contribute 2 percent of their salary. Health insurance is based on Basic Medical Insurance Fund consisting of a Pooled Fund and Personal Accounts. Employees’ contributions go directly to their personal accounts and 30 percent of employer contributions are paid into this account. Covered workers receive medical bene�its at a chosen accredited hospital or clinic on a fee-for-service basis. The individual account is used to �inance medical bene�its only, up to a maximum equal to 10 percent of the local average annual wage. The social insurance fund reimburses the cost of the medical bene�it from 10 to 400 percent of the local average annual wage, according to the schedule. Medical treatment in high-grade hospitals results in lower percentage reimbursements, and vice versa. Reimbursement for payments beyond 400 percent of the local average annual wage must be covered by private insurance or public supplementary schemes. Contract workers receive the same bene�its as permanent workers. Per capita expenditure on health insurance based on the country’s PPP exchange rate was $480.00 in 2012.58

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14lev1sec10#ch14end58)

COMPENSATION IN ACTION

With companies operating seamlessly across borders, employees will come to expect you (their line managers and HR managers) to respond to their compensation and bene�its needs accordingly. You will need to carefully educate managers who have supervisory responsibility for employees in other parts of the world. Because these two parties operate under different laws and norms, the expectations of the employment exchange can be radically different. While it isn’t the expectation that managers know the details of employment law in every country around the world, it will be your responsibility to equip them with the resources necessary to provide educated answers to questions the employees may raise, and to do so with sensitivity to the perspective and expectations of those employees who are many time zones away.

Action checklist for line managers and HR—seamless and sensitive strategies for a global workforce

HR takes the lead

Be familiar with the laws and norms of all countries wherein there are client group operations; read reports on these countries, deal with employment experts specializing in these areas, and talk with other HR professionals who are native to the location. Educate line managers about the pertinent high-level particulars of these laws.

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As the company seeks to expand into emerging markets wherein minimal business has been conducted in the past, proactively seek out information on employment laws, events of historical signi�icance, societal values, and general employee expectations.

Identify areas of difference that could potentially cause con�lict between line mangers in the United States and their employees who are natives of the locales in which they work (e.g., paid leave in France).

Line managers take the lead

Be a visible presence in areas of the world where there are direct reports (set a predictable schedule that allows you to travel to these locations consistently). This presence will ensure better awareness of—and exposure to—compensation and bene�its laws that may be radically different from those in the United States.

Work with HR to provide a packet of information that can be shared with other managers. This packet would include speci�ics that should be taken into serious consideration as other line managers work with employees in certain countries. HR could elaborate on this packet by turning it into various training sessions for managing employees across the globe.

END OF CHAPTER REVIEW

MyManagementLab Go to mymanagementlab.com (http://mymanagementlab.com) to complete the problems marked with this icon .

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Summary

Learning Objective 1: The pertinent concepts for quantifying important elements in the discussion of pay and bene�its outside the United States include gross domestic product (GDP), GDP per capita, purchasing power parity exchange rate, and per capita expenditures on health care.

Learning Objective 2: There are many similarities and differences in wage and salary, paid time off bene�its, and protection programs between Canada and Mexico. For example, minimum wage rates vary by geographic regions in both countries. In Mexico, certain occupations have minimum wage rates assigned to them that also vary by geographic region.

Learning Objective 3: Among the compensation and employee bene�its structures in Brazil, the minimum wage rate is uniform and set by law.

Learning Objective 4: Among the compensation and employee bene�its structures in Germany, the minimum wage rate is set through the collective bargaining process.

Learning Objective 5: There are many similarities and differences in wage and salary, paid time-off bene�its, and protection programs between India and China. For example, in India, minimum wage is set by collective bargaining where unions are dominant or set by the government law for occupations with little bargaining power, such as agricultural workers. In China, there are several minimum wage rates based on geographic location. These rates are set by local and regional governments. In recent years, China has increased the minimum wage rates dramatically to reduce social inequality and to boost domestic consumption.

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Key Terms gross domestic product (GDP) 326

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14#page_326) GDP per capita 326 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14#page_326) purchasing power parity exchange rate (PPP) 326

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14#page_326) per capita expenditure on health care 326

(http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch14#page_326)

MyManagementLab CHAPTER QUIZ! If your professor has assigned this, go to the Assignments section of mymanagementlab.com (http://mymanagementlab.com) to complete the Chapter Quiz! and see what you’ve learned.

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Discussion Questions 14-1. Discuss the main differences between the minimum pay regulations in the United States

(Chapter 2 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch02#ch02) ) and one other country’s practices discussed in this chapter. How do these differences affect companies’ ability to compete with other companies worldwide?

14-2. Discuss the main differences between retirement systems in the United States (taking into account legally required and discretionary programs) and one other country discussed in this chapter. Does it appear that the costs of retirement programs are creating burdens for competitive advantage?

14-3. Discuss the main differences between paid time-off practices in the United States and one other country discussed in this chapter.

14-4. Discuss the main differences between health care systems in the United States (Chapter 10 (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch10#ch10) ) and one other country discussed in this chapter. Does it appear that the costs of health care programs are creating burdens for competitive advantage?

14-5. Describe the purchasing power exchange rate and indicate how it is helpful to compensation professionals whose work spans multiple countries.

CASE North American Expansion for Threads Apparel

An additional Supplemental Case can be found on MyManagementLab.

As Heather Johnson, CEO of Threads Apparel, prepares for the next board of directors meeting, the company’s expansion plans weigh heavily on her mind. Threads Apparel manufactures women’s ready- to-wear clothing for several large chain department stores. The company has experienced tremendous growth over the past 15 years and is now positioned to grow even more as it has just secured a contract with a major department store that has locations throughout North America.

Threads’s reputation for producing high-quality clothing is based, in part, on its human resource management practices. It has a talented staff that is committed to consistently meeting its quality standards. In addition to effective management practices, Threads provides competitive compensation and bene�its to its nearly 1,500 employees, and, as a result, the company experiences a relatively low turnover rate.

In order to meet the increased production requirements of the new contract, Threads will need to open a new manufacturing facility. The company currently operates 10 manufacturing facilities in 7 different states. As it considers a location for the new facility, Heather plans to recommend moving beyond the borders of the United States to ease the distribution of its products throughout North America. In addition to its new contract, NAFTA has allowed it to expand the distribution of its products into Mexico and Canada through several smaller stores. Therefore, opening its new facility in Mexico or Canada makes sense due to its expanding markets in these countries. It has located property options in both

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Mexico and Canada and must now begin discussions on which country it should select for its �irst international facility.

The board of directors will be making a decision on where to locate the new plant based on Heather’s recommendation. The board is in agreement with Heather on opening its next plant outside of the United States. At this point, it is looking for a recommendation from Heather on whether it should expand to Mexico or Canada, and it is also looking for data to support her recommendation. In addition to many location considerations, such as the availability of transportation and local tax laws, Heather must also understand the labor markets within Canada and Mexico in order to make her decision. Heather has set up a meeting with the director of human resources at Threads to gather information on labor-related considerations for the new facility.

Questions:

14-6. What are some labor-related factors that Threads should consider when comparing Mexico and Canada?

14-7. What are some labor-related factors that would favor Canada as the location of the new facility? Or Mexico, for that matter?

Crunch the Numbers! Comparing the Rates of Change in GDP Per Capita for Select Countries

An additional Crunch the Numbers! exercise can be found on mymanagementlab.com (http://mymanagementlab.com) .

The following table contains GDP per capita for 5 countries over a 10-year period between 2002 and 2011. You want to know the rate of change in GDP within countries for speci�ic time periods.

GDP per capita

Converted to U.S. Dollars Using 2011 PPPs (2011 U.S. dollars)

Year United States Australia Singapore Denmark Italy

2002 45,418 36,256 42,860 40,239 33,305

2003 46,137 36,963 45,490 40,289 32,979

2004 47,307 38,017 49,038 41,111 33,255

2005 48,312 38,677 51,429 41,996 33,351

2006 49,130 39,169 54,212 43,276 33,900

2007 49,571 40,357 56,606 43,774 34,261

2008 48,951 40,644 54,586 43,177 33,612

PPPs = purchasing power parities Source: U.S. Bureau of Labor Statistics, Division of International Labor Comparisons, November 7, 2012.

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Converted to U.S. Dollars Using 2011 PPPs (2011 U.S. dollars)

Year United States Australia Singapore Denmark Italy

2009 47,041 40,447 52,445 40,441 31,543

2010 47,772 40,910 59,131 40,782 32,050

2011 48,282 41,340 60,742 40,930 32,100 PPPs = purchasing power parities Source: U.S. Bureau of Labor Statistics, Division of International Labor Comparisons, November 7, 2012.

Questions:

14-8. What is the 5-year change in GDP per capita (2002–2006) for (a) the United States, (b) Australia, (c) Singapore, (d) Denmark, and (e) Italy?

14-9. What is the 5-year change in GDP per capita (2007–2011) for (a) the United States, (b) Australia, (c) Singapore, (d) Denmark, and (e) Italy?

14-10. State whether the rate of change for the more recent 5-year period (2007–2011) was lower than or higher than the rate of change for the earlier 5-year period (2002–2006) in each country: (a) the United States, (b) Australia, (c) Singapore, (d) Denmark, and (e) Italy.

MyManagementLab Go to mymanagementlab.com (http://mymanagementlab.com) for Auto-graded writing questions as well as the following

Assisted-graded writing questions:

14-11. Why is it important for HR and compensation professionals to learn about compensation practices in other parts of the world? Discuss.

14-12. Which factor do you think is most important when deciding whether to establish business operations in another country? Explain your rationale.

14-13. MyManagementLab Only – comprehensive writing assignment for this chapter.

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Endnotes 1. Of�ice of the U.S. Trade Representative (2013). North American Free Trade Agreement (NAFTA). www.ustr.gov/Trade_Agreements/Regional/NAFTA/Section_Index.html (http://www.ustr.gov/Trade_Agreements/Regional/NAFTA/Section_Index.html) , accessed June 6, 2013.

2. Worldtradelaw.net (2013). NAFTA and Related Legal Instruments. www.worldtradelaw.net/nafta/ (http://www.worldtradelaw.net/nafta/) , accessed March 17, 2013.

3. Caliendo, & Parro, F. (2012, revised December 2014). Estimates of the Trade and Welfare Effects of NAFTA (working paper 18508). Cambridge, MA: National Bureau of Economic Research.

4. Central Intelligence Agency (2015). The World Factbook. www.cia.gov/library/publications/the- world-factbook/index.html (http://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

5. Heenan, R. L., & Brady, T. E. F. (2003). In Keller, W. L. & Darby. T. J. (Eds.), International Labor and Employment Laws, 2nd ed., Vol. I, pp. 21-2–21-6.

6. Information in this chapter about minimum wage policy was found on the International Labour Organization Web site. (2013). ILO Database on Conditions of Work and Employment Laws. ILO, Geneva. Wages and Income. Available: www.ilo.org/dyn/travail (http://www.ilo.org/dyn/travail) , accessed March 17, 2013.

7. Government of Canada. Vacation and General Holidays. Available: http://www.labour.gc.ca/eng/standards_equity/st/holiday.shtml (http://www.labour.gc.ca/eng/standards_equity/st/holiday.shtml) , accessed April 16, 2015.

8. Ibid. 9. Health Canada. Canada’s Health Care System. Available: http://www.hc-sc.gc.ca/hcs- sss/pubs/system-regime/2011-hcs-sss/index-eng.php (http://www.hc-sc.gc.ca/hcs-sss/pubs/system- regime/2011-hcs-sss/index-eng.php) , accessed March 2, 2015.

10. World Health Organization (2015). Canada. Available: www.who.int/countries/can/en/ (http://www.who.int/countries/can/en/) , accessed April 5, 2015.

11. Central Intelligence Agency (2015). The World Factbook. www.cia.gov/library/publications/the- world-factbook/index.html (http://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

12. de Buen Lozano, N., & de Buen Unna, C. (2003). In Keller, W. L. & Darby, T. J. (Eds.), International Labor and Employment Laws, 2nd ed., Vol. I, p. 22–1.

13. World Health Organization (2015). Mexico. Available: www.cia.gov/library/publications/the-world- factbook/geos/mx.html (http://www.cia.gov/library/publications/the-world-factbook/geos/mx.html) , accessed April 5, 2015.

14. de Buen Lozano & de Buen Unna, International Labor, p. 22–1. 15. Ibid. pp. 22–60. 16. Ibid. pp. 22–67. 17. Ibid. p. 22-68. 18. Ibid. 19. U.S. Social Security Administration (2015). Social Security Programs throughout the World: The

Americas, 2011. Available: www.socialsecurity.gov/policy/docs/progdesc/ssptw/2010-

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2011/americas/mexico.html (http://www.socialsecurity.gov/policy/docs/progdesc/ssptw/2010- 2011/americas/mexico.html) , accessed April 1, 2015.

20. Women’s Guide to Work and Pregnancy in Mexico. Available: http://fr.naalc.org/migrant/english/pdf/mgmexwpr_en.pdf (http://fr.naalc.org/migrant/english/pdf/mgmexwpr_en.pdf) , accessed March 15, 2015.

21. World Health Organization (2015). Mexico. Available: www.who.int/countries/mex/en/ (http://www.who.int/countries/mex/en/) , accessed April 5, 2015.

22. Instituto del Fondo Nacional de la Vivienda para los Trabajadores. Available: http://www.infonavit.org.mx/ (http://www.infonavit.org.mx/) , accessed March 31, 2015.

23. International Monetary Fund (2014) World Economic Outlook Database. Available: www.imf.org/external/pubs/ft/weo/2014/02/weodata/weoselgr.aspx (http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weoselgr.aspx) , accessed April 1, 2015.

24. Human Development Reports (2015). Human Development Index and its Components. Available: http://hdr.undp.org/en/reports/global/hdr2015/chapters/en/ (http://hdr.undp.org/en/reports/global/hdr2015/chapters/en/) , accessed April 16, 2015.

25. Bilaterals.org (http://Bilaterals.org) (2013). North & South America. Available: www.bilaterals.org/spip.php?rubrique7 (http://www.bilaterals.org/spip.php?rubrique7) , accessed January 31, 2015.

26. Communidad Andina. www.comunidadandina.org/endex.htm (http://www.comunidadandina.org/endex.htm) , accessed March 30, 2015.

27. BBC News (2004). S American Launches Trading Bloc. Available: news.bbc.co.uk/2/hi/business/4079505.stm, accessed August 31, 2013.

28. Central Intelligence Agency (2015). The World Factbook. www.cia.gov/library/publications/the- world-factbook/index.html (http://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

29. U.S. Social Security Administration (2015). Social Security Programs throughout the World: The Americas, 2011. Available: www.ssa.gov/policy/docs/progdesc/ssptw/2010- 2011/americas/brazil.html (http://www.ssa.gov/policy/docs/progdesc/ssptw/2010- 2011/americas/brazil.html) , accessed April 1, 2015.

30. Ibid. 31. Ibid. 32. World Health Organization (2015). Brazil. Available: www.who.int/countries/bra/en/

(http://www.who.int/countries/bra/en/) , accessed April 5, 2015. 33. Kenner, J. (2003). In Keller, W. L., & Darby, T. J. (Eds.), International Labor and Employment Laws, 2nd

ed., Vol. I, pp. 1-1–1-2. 34. Europa (2015). Labour Law. Available: http://ec.europa.eu/social/main.jsp?catId=157

(http://ec.europa.eu/social/main.jsp?catId=157) , accessed April 16, 2015. 35. Central Intelligence Agency (2015). The World Factbook.

https://www.cia.gov/library/publications/the-world-factbook/index.html (https://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

36. Lutringer, R., & Dichter, M. S. (2003). In Keller, W. L., & Darby, T. J. (Eds.), International Labor and Employment Laws, 2nd ed., Vol. I, pp. 4-4–4-5.

37. Ibid. pp. 4-86–4-91. 38. Ibid. pp. 4–99.

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39. Ibid. pp. 4–103. 40. World Health Organization (2015). Germany. Available: www.who.int/countries/deu/en/

(http://www.who.int/countries/deu/en/) , accessed April 5, 2015. 41. Central Intelligence Agency (2015). The World Factbook.

https://www.cia.gov/library/publications/the-world-factbook/index.html (https://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

42. Central Intelligence Agency (2015). The World Factbook. https://www.cia.gov/library/publications/the-world-factbook/index.html (https://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

43. Singhania, R. (2003). In Keller, W. L., & Darby, T. J. (Eds.), International Labor and Employment Laws, 2nd ed., Vol. II, pp. 24-10–24-13.

44. The Associated Chambers of Commerce and Industry of India (2013). Recent Events. Available: http://www.assocham.org/events/recent/event (http://www.assocham.org/events/recent/event) , accessed March 17, 2013.

45. U.S. Social Security Administration (2015). Social Security Programs throughout the World: Asia and the Paci�ic, 2012. Available: www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/india.html (http://www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/india.html) , accessed April 1, 2015.

46. Paycheck.in (2015). Minimum Wages in India. Available: www.paycheck.in/main/salary/minimum- wages/delhi/minimum-wage-in-delhi-w-e-f-april-1-2015-to-september-30-2015 (http://www.paycheck.in/main/salary/minimum-wages/delhi/minimum-wage-in-delhi-w-e-f-april-1-2015-to- september-30-2015) ., accessed April 3, 2015.

47. International Labour Organization. Working Conditions Laws Database. Available: www.ilo.org/dyn/travail/travmain.home (http://www.ilo.org/dyn/travail/travmain.home) , accessed April 3, 2015.

48. U.S. Social Security Administration (2015). Social Security Programs throughout the World: Asia and the Paci�ic, 2012. Available: www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/india.html (http://www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/india.html) , accessed April 1, 2015.

49. Ibid. 50. World Health Organization (2015). India. Available: www.who.int/countries/ind/en/

(http://www.who.int/countries/ind/en/) , accessed April 5, 2015. 51. Central Intelligence Agency (2015). The World Factbook. www.cia.gov/library/publications/the-

world-factbook/index.html (http://www.cia.gov/library/publications/the-world-factbook/index.html) , accessed April 16, 2015.

52. Lauffs, A. W., et al. (2003). In Keller, W. L., & Darby, T. J. (Eds.), International Labor and Employment Laws, 2nd ed., Vol. I, pp. 31–35.

53. Ibid. 54. Hamlin, K., & Xiaoqing, P. (2014). China wages policy back�ires as costs prompt sock-city blues.

BloombergBusiness (November 19). Available: www.bloomberg.com (http://www.bloomberg.com) , accessed January 10, 2015.

55. International Labour Organization. Working Conditions Laws Database. Available: www.ilo.org/dyn/travail/travmain.home (http://www.ilo.org/dyn/travail/travmain.home) , accessed April 3, 2015.

56. U.S. Social Security Administration (2015). Social Security Programs throughout the World: Asia and the Paci�ic, 2012. Available: www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/india.html

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(http://www.ssa.gov/policy/docs/progdesc/ssptw/2012-2013/asia/india.html) , accessed April 1, 2015. 57. Ibid. 58. World Health Organization (2015). China. Available: www.who.int/countries/chn/en/

(http://www.who.int/countries/chn/en/) , accessed April 5, 2015.

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EPILOGUE

Chapter 15 CHALLENGES FACING COMPENSATION PROFESSIONALS (http://content.thuzelearning.com/books/Martocchio.7916.16.1/sections/ch15#ch15)