A global expansion means you need great talent, but attracting that talent hinges on offering the right compensation package. It's like constructing a building — you can't build upward (i.e., hire an amazing global team) without first laying a strong foundation of fair pay and benefits.
This is where things can get tricky if you're not careful. In 2025, 22% of executives cited the total cost of labor as their most significant risk to business growth. But, not having the right employees in place also poses a growth risk.
You'll need to do some serious homework to build a fair and competitive global compensation strategy that fuels business growth and attracts top performers.
This includes researching salary benchmarks, regional payroll taxes, and local labor laws and learning about exchange rates, cost of living differences, and local benefits expectations in different countries.
Key takeaways:
- Creating a competitive global compensation plan that takes into account factors like base pay, employee benefits, cultural norms, and legal requirements is of key importance.
- Your strategy must reflect local market rates, cost of living, and employee expectations in order to attract top talent.
- Document and share salary information with employees to boost satisfaction and retention while also protecting your business from potential legal risk over any perceived inequity.
Start With a Compensation Philosophy
First, think big picture: what will your compensation philosophy be in order to ensure fair and competitive pay across regions?
Popular approaches to consider are:
- Location-based compensation: Sets salaries based on the average pay or market value for comparable positions in the employee's home country
- Equal pay for equal work: Ensures employees receive the same base salary for each role, regardless of where they live
- Standard of living salaries: Tailors compensation to the local cost of living in each employee's country of residence
Each of these compensation philosophies has pros and cons. For example, a single global pay band by role, regardless of the employee's location, may sound fair and equitable, but it can make it more challenging to attract talent from high-cost areas.
That's why it's key to base your compensation philosophy's impact on hiring and retaining top performers, as well as your business goals and financial health.
Refining Your Policy for Equity, Experience, and Flexibility
Defining your global compensation philosophy must go beyond simply researching competitor rates and industry standards.
You must also consider broader market expectations, like gender pay equity, candidate experience, and salary negotiations.
Global Pay Equity and the Gender Wage Gap
Women are paid less than men across many regions, with the gender pay gap estimated at around 20% globally.
However, in some countries — like Belgium, Denmark, France, Sweden, and Iceland — equal pay for men and women isn't just the expectation; it's the law.
Even in countries where it's not legally required, many companies are committing to pay equity, a value that's increasingly important to today's job seekers and can also give businesses an edge in the competition for top talent.
Candidate Experience and Skilled-Based Hiring
When setting compensation, it's essential to factor in both the candidate's experience and the complexity of the role.
Entry-level candidates may accept lower salary bands, but highly skilled professionals, especially those with in-demand expertise, will expect top-tier pay.
Tailoring salaries to reflect skill level and seniority helps attract the right talent and ensures your offers stay competitive in today's global hiring market.
Negotiation Wiggle Room
Be sure to take into account the fact that there may be some back and forth with potential hires before reaching a mutually agreeable salary and benefits package.
For example, about 30% of U.S. employees negotiate for higher pay after receiving their initial job offer.
In addition to more money, job candidates may also request benefit tweaks, such as more paid days off, meal vouchers, or other perks.
Research Local Market Rates
Now that you have a clear global compensation policy in place, it's time to research local market rates.
Fortunately, a vast amount of data is available in salary databases, government labor reports, and hiring platforms to support your research.
Popular employment platforms, like Payscale or Glassdoor, can help you benchmark a role's:
- Median salary ranges
- Minimum wage requirements
- Typical overtime rates
- Pay raise and performance reward trends
- Remote work salary adjustments
In many cases, you can compare HR-reported compensation and employee-reported data for every country you hire.
Factor in the Cost of Living and Purchasing Power
Government labor statistics and online employment data can help you understand local expectations and common living costs.
Employers should strive to provide a salary that offers their international employees a comfortable standard of living based on the economic factors for their specific region.
For example, a bustling urban city has vastly different compensation norms (and a higher cost of living) than a small rural area, even within the same country.
Companies can further adjust salaries based on:.
- Local cost of living indices, which reflect regional expenses, allow companies to set compensation bands that support a high quality of life and stay competitive.
- Purchasing power parity (PPP) comparisons, which show the relative value of currencies across locations, making establishing fair and consistent pay scales easier.
Many businesses apply this information to tiered compensation bands, categorizing regions into high-cost, mid-cost, and low-cost tiers to adjust salary ranges.
Balancing fairness, local expectations, and internal consistency protects your business from future pay inequities, morale issues, and costly retention problems.
Consider Currency and Exchange Rate Fluctuations
One of the most important early decisions in international compensation is determining what currency to pay your employees in: their local currency or your company's base (home) currency.
Paying in local currency is generally considered best practice. It ensures employees receive a predictable income aligned with their cost of living and reduces the personal risk they face from exchange rate fluctuations. It's also often expected by local authorities and helps avoid potential legal issues in countries with strict labor or tax regulations.
Paying in your base currency may seem simpler operationally, especially for finance teams, but it can create complications. Employees may face unstable or unfavorable conversion rates when accessing their income, which could lead to dissatisfaction, retention issues, or even non-compliance in certain markets.
Once you've chosen the currency, consider how you'll manage exchange rate volatility. Some common strategies include:
- Using a fixed exchange rate: Lock in a set rate that's updated periodically (e.g., quarterly or annually) to give both parties predictability.
- Applying a currency buffer: Add a margin to salaries paid in your base currency to help employees absorb currency fluctuations.
- Hedging for stability: For large teams or high-risk markets, consider financial tools like forward contracts to lock in favorable rates and reduce uncertainty.
Whatever approach you choose, transparency is key. Be clear with employees about how their compensation is structured, how often adjustments will be made, and what protections are in place to shield them from market shifts. That clarity builds trust and helps avoid confusion or frustration down the road.
Take Local Taxes and Employer Contributions into Account
Here's where it can really start to get complicated. Each country has its own set of requirements governing employer-mandated contributions for income taxes, social security contributions, healthcare, pensions, and more.
These employer payments need to be considered when calculating the full cost of an employee's salary.
Failure to comply with tax requirements and other contributions could lead to legal trouble, penalties, and fines. Not only that, these laws and rates change frequently, so it's essential to stay current on any changes to remain compliant.
If you don't have a legal entity in each country where you employ workers — or tax specialists on-staff — you might want to consider partnering with a local payroll/legal support service or an Employer of Record (EOR), like RemoFirst, to help you navigate evolving tax and employment laws.
Include Benefits and Perks in the Equation
Salary is just one part of the equation in attracting and retaining highly skilled global workers. Your benefits package also needs to be competitive, reflect local norms, and meet legal requirements.
Do your research and get advice from local partners to identify mandatory benefits and commonly expected perks. This might include:
- Health insurance
- Paid time off
- Public holidays
- Pension or retirement plans
- 13th-month pay or other types of bonuses/commissions
- Remote work stipends
- Stock options
- Health and wellness programs and incentives
The goal here is to create attractive benefits packages that ensure consistent benefits across all locations and prevent disparities and negative impacts on employee morale.
Document and Communicate Your Pay Structure
Clear documentation and employee communication go a long way. It builds trust, clears up common questions early, and gives you something solid to rely on if any legal or compliance issues come up.
Once you've established your global pay policies, document and share:
- How salaries are calculated and adjusted (e.g., local market rates, cost of living)
- Logic and factors influencing compensation (location, experience, skills)
- Expectations for future changes (performance review cycles, compensation benchmarks).
Of course, you'll have to regularly review and update your compensation policies to ensure they remain competitive as the market evolves.
Finally, encourage employees to provide feedback on policies and come to you with any questions or concerns.
Open communication about pay shows you're committed to fairness and team members' long-term success.
Manage Global Compensation With RemoFirst
Building a fair, equitable, and legal global compensation practice is nuanced and complicated. It's also incredibly important if your goal is to attract and retain the high-caliber employees needed to grow your business.
RemoFirst can provide guidance on global compensation and benefits and help you build a competitive total compensation package to position your business as an in-demand employer.
Our employment law experts will help you navigate evolving labor laws, compliance requirements, currencies, and cultural norms.
Plus, our RemoHealth and RemoHealth Local solutions offer a variety of international private medical insurance options and personalized local health benefits.
Schedule a demo to see how RemoFirst simplifies global hiring, compliance, and compensation in 185+ countries.
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