Deel’s global compensation best practices for finance leaders

Global hiring trends show that organizations are strategically expanding into new markets to access highly skilled yet cost-effective talent pools.

For example, to meet the demand for tech professionals, companies are increasingly turning to countries like India, China, Poland, and Bulgaria. These regions are known for their abundant technical expertise yet offer the advantage of relatively lower salary expectations.

Conversely, some markets are experiencing a surge in salary costs, making it challenging to maintain a competitive edge. This trend is partly fueled by the rise of remote work and the expansion of large technology firms into new locales, leading to a sharp increase in compensation levels. Notable examples include Atlanta and Austin in the United States, as well as Belgium and Ireland, where salaries have increased rapidly.

But as organizations expand their teams globally, finance leaders face a challenge: How do they compensate talent located across countries and continents in a fair and consistent way? The answer: a global compensation strategy.

Let’s explore six best practices when designing a global compensation strategy:

1. Localize pay for different locations (and roles)

Understand geo-differences and avoid oversimplifying your compensation strategy. While paying one rate globally may seem like a straightforward approach, it can result in overpaying employees in some locations and underpaying in others.

Companies should pay for different locations and roles to provide the most competitive salary and attract and retain key talent.

2. Use the cost of labor (not the cost of living)

Use the cost of labor instead of the cost of living to set the global compensation strategy so you pay competitively in a given international market.

Localizing compensation based on the cost of living can be misleading as the correlation between the cost of living and the cost of labor is not always one-to-one.

Use tools like Deel’s Salary Insights to gauge how much workers expect to be paid in your desired locations.

3. Account for currency fluctuations

Not accounting for currency fluctuations can significantly impact salaries and exchange rates and be costly for your organization. Using a rolling average of exchange rates over a specific period can help mitigate the impact of rapid currency fluctuations and improve the accuracy of compensation calculations.

4. Monitor global market growth rates

Emerging markets have a higher growth rate of about 7 to 10%, whereas mature markets grow at a rate of 2 to 4%, according to insights from our Global Hiring Summit.

To ensure your organization offers competitive salaries and retains its talent, monitor global market movement and how markets are expected to change over time. This isn’t a task you can complete just once; it demands ongoing attention to currency exchange rates and global market trends, leveraging the most current information available and constantly applying and adjusting.

Neglecting this critical step can lead to costly oversights. For instance, say you manage a 400-person organization with a global payroll of around $32 million, being 1% over in your global compensation translates to an extra $320,000 in costs annually. Now imagine those extra costs for a 10,000-person organization.

Bear in mind this calculation does not account for the immeasurable costs associated with declining productivity due to the loss of valuable employees to competitors or failure to fill new positions.

Looking for global oversight? Deel’s global HRIS allows you to centralize your people data, offering insights into costs by worker, country, and region through a single, free HR platform. Streamline your reporting, break down data silos, gain insights into worldwide costs, and proactively address expensive errors before they escalate.

5. Use international compliance to set pay parameters

When setting compensation, ensure your organization adheres to local equitable pay guidelines and minimum wage laws, including pay parity and anti-discrimination regulations. Depending on where you hire, there are also different in-country bank account laws, banking currencies, payment schedules, tax withholding, and filing laws to abide by.

Opt for a global payroll platform, like Deel’s, that considers different employment and payroll laws in over 90 countries so you uphold compliance standards wherever you hire.

In addition, you can automate employee and contractor payments, invoice generation, payslips, and taxes and review all your team’s salaries in one place before funding payroll with a click. It doesn’t matter if you pay team members hourly, monthly, or bi-monthly. We’ll calculate what’s due and send you one monthly invoice. Plus, you can integrate your favorite accounting software.

6. Include alternative types of compensation

Compensation isn’t just a question of finance. A great compensation strategy reflects your company’s culture and values while meeting a global workforce’s diverse needs and wants. Consider which types of compensation employees would most benefit from direct, indirect, and non-monetary, depending on their location.

Master global compensation and accounting with Deel

Global compensation strategies not only ensure you acknowledge your team’s value but also meet their diverse needs. They encompass everything from salaries and bonuses to benefits packages and payroll.

With the right policies in place, you can also attract and retain employees from all over the world without affecting your budget for expansion. You’ll find pay practices that reflect each employee’s worth, while avoiding compliance issues or overpaying on salaries.

Deel empowers companies to expand abroad and conquer new markets. We simplify the process of hiring and paying global teams and ensure total compliance with local laws and regulations.

To learn more, check out global accounting for finance managers or book a demo with a product expert today.