INTERNATIONAL DIVERSITY IN REWARD MANAGEMENT Despite globalization and the rise of multinational corporations, there remain distinct national variations in the way that pay is determined. In a number of industrialized countries there remains resistance to the primacy of market comparisons. Instead, pay scales and/or pay arrangements are agreed/determined at industry level, to a considerable extent removing pay as a factor in labor market competition. To this fundamental divide between national approaches can be added different attitudes towards incentive payments, employee attributes that should be rewarded and huge differences in taxation and social security regulation. The extent of the diversity is best illustrated with some examples. The US/UK approaches These approaches are characterized by a high degree of decentralization. Aside from setting a minimum wage and requiring that men and women are treated equally, the state by and large refrains from interfering in pay determination matters. Even in the public sector, while overall budgets are set by government ministers and while they deal with major public policy questions (like public-sector pension arrangements), ministers leave the detailed negotiation of pay packages to local managers or to pay review bodies which are independent of government. In the private sector, trade unions now play only a limited role, management effectively deciding who should be paid what and in what way. Pay is thus set according to what an organization can afford and what the market requires. Individual pay negotiation is now the standard approach. Performance-related pay (PRP) is very common in the private sector and is becoming a great deal more common in the public sector too, while the overall value of occupational pensions has been significantly eroded in order to reduce company exposure to financial risk. Meanwhile executive pay has rocketed upwards, way ahead of the increases seen in other countries. The German approach In Germany there is a good deal more centralization, but pay is largely determined at the industry level, not at governmental level. The majority of workers in Germany have their basic pay set through legally sanctioned, industry-level collective bargaining arrangements. The agreements set out the grading structure for each industry and, in many cases, also determine the job evaluation factors to be used in assigning jobs to grades. Employers are not permitted to undercut agreed minima (they are seen as being basic contractual rights), although they can supplement them with locally agreed discretionary emoluments. Typical discretionary payments vary from 5% in the financial sector to 25% in engineering industries. In larger firms, only the most senior managers are employed on individual contracts – equivalent to 2% of the total workforce. Stock option schemes, however, are a good deal less common in Germany than the UK due to unfavourable tax treatment. Incentive payments are common in Germany. There are many piecework and individual performance-based schemes, as well as government-sponsored profit-sharing arrangements. An attractive feature of German remuneration is the wide existence of *thirteenth-month’ bonus payments in December. The Japanese approach The Japanese system resembles that of Germany in that it comprises industry-level pay scales agreed between firms. It differs, however, in that it is person based rather than job based. Collective bargaining also plays a lesser role as Japanese unions are all enterprise based. Three separate factors determine each individual's pay: 1 the career category 2 age/seniority 3 rank and class. here are five accepted career categories into which employees are allocated. Each has its own pay scales. The five are as follows: general administration scientific/engineer secretarial/office technician/blue collar contingent. Within each category, base pay is determined with reference to age (around 60% of pay) and skill/effort (typically 40%). In a country with traditions of 'lifetime' or long-term employment in one enterprise, seniority is central to reward. Earnings go up with each year of service until the age of 50, after which they decline steadily. The skill-based element operates in a similar way to traditional UK public-sector grade/incremental systems. In Japan, however, progression is discretionary. Seniority plays a part in the skill-based payments too, as there is usually a minimum time to serve in each class before promotion can be gained. Bonus payments are mostly group based and typically equal two months’ pay. The result is a high degree of pay compression and an adherence to the maxim that 'a nail standing too high will be pounded down’. The Scandinavian approach In Norway, Sweden and Finland payment arrangements tend to be very much more centralized than elsewhere, the government playing a decisive role that extends across most industries. Collective agreements that cover salaries, benefits and all other conditions of work are negotiated at national level between trade unions and employers’ associations under the auspices of government agencies. These are typically long-term deals that, once agreed, last three years or more. Government agencies arbitrate when agreement cannot be reached. One result is a high degree of similarity in grading schemes across industries. Another is a relatively low level of social inequality. Top executives in Scandinavian countries are typically paid eleven or twelve times the average wage, whereas in the UK and, especially in the USA, the differential is now typically over fifty times. PRP is very common in Scandinavian countries, but it tends to be team based rather than individual. QUESTION In your estimation which approach to reward management would be best suited in Guyana’s context. Give reasons to justify your answer. How widespread are Performance-related pay packages in Guyana's private sector? Can it bridge the disparity that exists private and public sector wages? Give reasons to support your answer.