Multinationals could boost pay with regional compensation packages
If European multinationals implemented compensation packages on a regional rather than country-by-country basis, they could boost the take-home pay of key staff by up to 12% at no cost to themselves in order to boost retention rates.
According to Taxand, which specialises in providing tax advice to multinational companies, by failing to realise the benefits of centralising buying power and not exploiting local tax-efficient compensation arrangements, many organisations and workers are simply losing out.
Sarah Pickering, the firm’s global compensation and equity and employment tax service line leader, said: "The case for creative renumeration has never been stronger. As the job market picks up, companies need to hold on to their talented employees. Yet in the current environment of low bonuses, static annual pay, underwater or unvested stock plan awards, headcount reduction and potential increases in personal tax rates, incentivising staff is a real challenge."
As a result, in today’s global employment marketplace, simply looking at renumeration on a national level was no longer good enough, she added.
Instead multinationals should revisit pay structures to ensure they were efficient, exploring the benefit of salary sacrifice plans that could provide social security savings as well as reduced income tax levels.
Purchasing employee benefits such as medical insurance policies on a regional or global basis could likewise improve their quality or result in cost savings, while providing staff with a wider choice of benefits would result in take-home pay simply going further and providing more disposal income.
Such an approach could be particularly useful in incentivising middle managers, who were often the backbone of organisations but tended to be overlooked when it came to pay and benefits that were all too frequently designed for senior executives.
Pickering said: “Middle managers or the ‘marzipan layer’ can be the lifeblood of an organisation. They include the leaders of tomorrow. They make or break change and growth initiatives on the ground and are often the employee group with the most technical experience and employer investment.”
But although they implemented strategy on behalf of senior executives, they frequently got neither the recognition nor the perks. They were also increasingly facing heavy tax burdens as they started to fall into countries’ highest tax thresholds, but were hard hit when state benefits were reduced or removed.
"Consequently, they are the group who are most likely to move jobs for the benefit of a few thousand Euros in salary increase," Pickering said, adding that the direct and indirect costs to employers of replacing them far outweighed any salary increase.
But she warned that new reward plans were only effective if staff recognised their value. "This goes beyond communication of how the plan works to actually educating employees on wider financial matters. Focusing on middle manager reward policies is a smart forward move for all companies," Pickering said.