Legal Limits to Harmonization

April 10, 2006
Multinationals have made huge strides in establishing global compensation and performance management systems with similar salary structures and evaluation criteria for all employees. "It is bad human resources policy to discriminate among similarly situated employees based on arbitrary factors, and in today’s global workplace, ‘home country’ increasingly is becoming an arbitrary factor," says Donald C. Dowling Jr., international labor and employment counsel for Proskauer Rose in New York City.

   The collaborative nature of knowledge work makes it even more important to establish consistent systems. "With projects and work teams now spanning international borders, it makes less sense to apply different policies and practices for employees who function as co-workers even through they may work in different countries," Dowling notes.

   "Obviously, there are differences in the labor markets and employment laws, so there will always be major differences in the amounts that employees are paid and the benefits they receive, but the trend is toward harmonizing plans unless there is a business case for using different plans," Dowling says. "Large multinationals are far along in the process."

   Still, detailed labor laws and regulations abroad set limits on harmonization.

   Dowling warns that U.S.-based workforce management executives tend to underestimate the complexity of foreign labor laws. "U.S. laws in other areas—for example, environmental laws—are usually far more complex than in other countries," he says. "But with labor law, the situation flips. Labor laws abroad are far more complex than in the United States."

   Ongoing globalization and the attempt to establish global compensation and performance management systems require a new multijurisdictional approach to labor law that transcends reliance on local counsel in each corporate location. The largest U.S.-based multinationals have developed in-house international HR legal expertise, according to Dowling. "The same talent is now evolving in law firms," he says. "These multi-jurisdiction practitioners can work with a network of local attorneys to resolve both international and local legal issues."

Main indexes for measuring the flexibility of labor laws, with higher values indicating greater rigidity on a scale of 0 to 100. (The greater the amount of regulation, the higher degree of difficulty of the following tasks.)
 Difficulty of hiringDifficulty of changing work hoursDifficulty of firingFiring costs
(in weeks of pay)
Russian Federation0602017
S. Korea33209079
Note: Based on full-time nonunion (unless mandatory), nonexecutive male who is not a member of a protected minority group and who works at a manufacturing firm with 200 employees.
Source: World Bank

Workforce Management, April 10, 2006, p. 23 -- Subscribe Now!