International

Human
Resources
Key Concept
• Introduction International Human Resources
• Approach to Human Resources
• Compensation
• Cases Study
Human Resources and IR
Firm View:
Internationalization is key for the survival of firms. Internationalization of
a firm involves an internationalization of all the functional areas of the
firm, of which international human resource management (IHRM) is one
of the most relevant.

Politics and Government View:

HR is a component of economic scale for State to gain national
income, human development, technological modernization
through Transfer of Technology
Cases of Siemens
German electronics company Siemens has production activities in
nearly 190 countries and generates 85 percent of sales outside of the
country in 1990. Therefore, 68 percent of its employees are placed
outside Germany. Siemens has a need for local employees who can
bring the company closer to the market.
 IHRM
The process of producing, allocating and effectively utilizing human
resources in an international business

• Needs for firm to response the internationalization process of

business
• Globalization forced HRM to have international orientation
• Effectiveness for utilizing services of people at both the corporate
office and at the foreign country operations
Main Challenges in IHRM
• High failure rates • Different Labor Laws
• Currency fluctuation • Different Political Climate
• Personal life e.g taxation, • Different stage of technological
housing, children edu, health. advancement
• Speed Information flow to • Different values and attitudes
support knowledge and e.g. time, achievement, risk
innovation taking
• Language (E.g. Spoken, • Educational level
Written) • Social organizations
 MAJOR FACTOR OF IHRM

Cultural
Factors

International Economic
Human Resource Systems
Management

Legal and
Industrial
Relations
Factors
 Boarder Perspective
• Pay issues
Different countries, different currencies
Gender based
• Health Insurance for employees & their families
• Nepotism common in small businesses in Asia Pacific Region
• Promotions based on seniority or merit
Approach to IHRM

There are three category of employees can be hired

Parent Country National (PCNs)
Host Country National (HCNs)
Third Country National (TCNs)
 PCNs HCNs TCNs
Adv. Adv.
Adv.
• Familiarity with home • Familiarity with situation
office, goals, practices in host-country • Salary & Benefit
• Lower hiring costs requirements lower
• Organizational
• Characterized as special
• Market experience • High understanding
skills & experiences • No language barrier market opportunity
Dis.
Dis. Dis.
• Difficulty for effective
• Difficulty adapting • Political challenge
control
• High Cost • Communication problems • Sensitivity to
• Compensation differences • No opportunity for home national of specific
• Family adjustment country nationals to gain
international experience
country
problems
• Limited career • Adaptation problem
Approach to HR
Questions: If the company goes international, what type of employees do
they need to hire? Employees from the home country
(expatriates), or local employees? How will we choose whether
to send expatriates or use local employees?

How can we know how HR practices are conducted in other

countries? Is the recruitment and selection process the same in
the country or countries the company wants to operate in?

How do we manage knowledge across geographical and cultural

distances?
Effectivity every organizations are depending on their human resources

Human Resources are based on:

Workers Needs Training and development Organizational Policy

Skill, Capabilities, and utilization for human resources motivation, discipline, compensation
Quantities of human and Transfer of Technology
resources
Ethnocentric Country A Country B
• Workers selection based on nationality. Global Firm Local Firm
• Home workers hold key positions in local
firm and try to adapt language and socio-
Home Workers Home Workers
cultural in host country.
holding Key Position
• Effectivity for global firm to control local
firm
 Polycentric
Country A Country B
• To employ local workers based on their Global Firm Local Firm
capabilities and skills.
• Local workers is considered to have an
Home Workers Host Workers/
opportunity to capture the market.
• Local workers hold key positions in local firm in Local Workers
holding Key Position
their own country.
 Approach to HR
Regiocentric Country A Country B as regional operations

• Workers selection based on regional Global Firm Regional Firm

operations.
• The ability of global firm to employ Home Workers Local Workers
workers around their production/ holding Key Position
distribution operations.
• Regional workers is consider form Regional Workers
their operations from country C
holding marketing

Regional Workers
from country D
holding distribution
 Approach to HR

Geocentric Country A Country B

• Workers come from any country based on Global Firm Regional Firm
their skills and capabilities.
• Global integration human resources system Home Workers Regional Workers
• global company but identifies the needs of from country C
local companies marketing skill

Regional Workers
from country D
distribution skill

Regional Workers
from country B
production skill
Compensation Component
Salary
Housing Allowance
Living Cost Allowance

Allowance Education Allowance

(Tunjangan)
Differential Tax Allowance

Transportation and Displacement Allowance

Bonuses:
motivating the workers and developing their capabilities
Labor Market: China Strategy
China has the world’s largest labor market even though its working age
population is shrinking. In 1990’s China promoting their cheap labor, its
attract global firm expand their operations in China. The government is
championing support for small and medium enterprises (SME)
through tax cuts, lowering social insurance costs, as well as other benefits
to improve overall confidence in the economy.

‘The Policy allow government establishing distribution of local workforce mechanism. This’
mechanism accelerates the exchange process between global companies and local industries.
workers gain experience and capabilities in global industries distributed to local industries for the
process of accelerating the transfer of technology.
Service Industry in India
India has become strong economic growth along with China in the past
few years, but India heading the jobless growth. Meanwhile the
population has increasing.
The phenomenon people try to find job in other country. To reduce
unemployment India accelerating their capability to exporting service
sector job. Global firm allowed India workers to work in their country
by specialized e.i costumers service job. As result, the Indian economy
is dominated by the services sector, which accounted for 53.7 percent
in 2016-17.